Have you ever wondered why claims for patients with dual coverage seem to bounce back more often than others? Well, the answer is incorrectly interpreting the Coordination of Benefits (COB). But what is it? The COB in medical billing is a standardized process that insurance payers use to determine the sequence of payment responsibilities when a patient is covered by more than one health plan.
The COB determines which payer is the “primary payer” (pays first) and which is the “secondary payer” (pays the remaining eligible balance). The basic idea behind this is to ensure that when multiple payers are involved, the combined payment does not exceed the original 100% reimbursement amount.
That’s just the basic definition. So, let’s look at the concept of COB in healthcare in more detail.
Purpose of COB in Medical Billing
Just think, if there is no structured way of coordination between healthcare providers and insurance payers, the providers will inevitably bill multiple insurers for the full amount. This will lead to claim denials and overpayments.
The core purpose of COB in medical billing is to establish a clear hierarchy of liability. This hierarchy prevents the “pay and chase” scenario where a payer disburses funds only to demand them back months later upon discovering another active policy. Furthermore, accurate COB processes are the primary defense against the CO-22 denial code.
COB Rules & Regulations
How does COB in medical billing decide which payer is the primary and which is secondary? Well, there are certain rules that govern this decision. These rules are established by the National Association of Insurance Commissioners (NAIC) and federal laws. Here are some rules:
Private Insurance Rules (Commercial Plans)
When a patient has two commercial plans (for example, one from their employer and one from a spouse), the following standard rules apply:
- The Subscriber Rule: The plan where the patient is the subscriber (the policyholder) is primary. The plan where the patient is a dependent (such as a spouse’s plan) is secondary.
- The Birthday Rule: For dependent children covered by both parents, the “Birthday Rule” applies. The plan of the parent whose birthday falls earlier in the calendar year (month and day only, not year) is the primary payer. If both parents share the same birthday, the plan that has been in effect longer is primary.
- Custody Rules: In cases of divorce or separation, a court decree typically dictates which parent is responsible for healthcare coverage. If no decree exists, the custodial parent’s plan is usually primary.
Medicare COB Rules
COB in healthcare is complex, but Medicare’s rules make it even more challenging to deal with. What you have to understand is that Medicare is not always the primary payer. Its primary status is dependent on a lot of factors, like the patient’s age, employment status, and the size of the employer. Here are some rules that you need to know:
- Working Aged (65+): If the patient is 65 or older and covered by a Group Health Plan (GHP) through current employment (theirs or a spouse’s), and the employer has 20 or more employees, the GHP is primary, and Medicare is secondary. If the employer has fewer than 20 employees, Medicare is usually primary.
- Disability: For beneficiaries under 65 with a disability, if the employer has 100 or more employees, the GHP is primary.
- End-Stage Renal Disease (ESRD): There is a 30-month coordination period for ESRD patients. During this time, the group health plan is primary. After 30 months, Medicare becomes the primary payer.
Applicable Scenarios for COB in Medical Billing
Learning the theory is one thing, but to practically apply these rules in real-life scenarios is hard, even for experienced billers and coders. To better explain things, let’s look at a couple of real-world examples of how COB in medical billing works:
Scenario A
Suppose a pediatric patient is brought to the hospital by his parents. The patient is treated, but how will the billing department bill the services? Well, let’s look at the rules. The father was born on November 15, 1985, and the mother was born on February 20, 1990. Now, despite the father being older, the mother’s birthday comes earlier in the calendar than the father’s. So, when it is time to check for the coordination of benefits, based on the birthday rule, the mother’s insurance will be considered primary here. If the practice bills the father’s plan first, the claim will trigger a CO-22 denial.
Scenario B
A 68-year-old patient has Medicare Part A and B, but continues to work full-time for a large technology firm with 500 employees. She also has a commercial plan through this employer. Because the employer has more than 20 employees, her commercial plan is primary. Medicare is the secondary payer. The practice must bill the commercial carrier first. Otherwise, Medicare will reject the claim under the Medicare Secondary Payer (MSP) rules.
Challenges in COB for Providers
While the coordination of benefits in medical billing seems like a very structured and rules-based system, it is not without its flaws. Here’s what we mean by this:
The primary challenge is data integrity. Research by independent parties shows that 65% of people struggle and often completely don’t understand what their health insurance covers. Also, patients do not realize that they have multiple active policies, or they forget to report that a spouse’s policy has changed. They may present a card that is no longer primary, leading the front desk to enter incorrect data. When the claim is eventually submitted, the payer’s automated system checks against a national database, sees the other coverage, and issues a denial.
Denials aren’t the main problem here. Reworking the denied claims is the real bottleneck. Do you know that reworking and resubmitting a denied claim can cost about $25 for practices and a whopping $181 for hospitals?
Final Thoughts on COB in Healthcare Billing
Coordination of benefits in healthcare is a rule-based mechanism that helps providers differentiate and select the correct primary and secondary insurance payers. However, for the provider, it requires vigilance. The rules governing COB in medical billing are rigid, and the tolerance for error is low.
Medical billing, however, is a very complex job, and even the most experienced billers and coders make mistakes. That’s why it is better to get professional help. You can acquire medical billing and coding services from specialized third-party billing companies. The solutions offered by these companies are not only affordable but also translate to much better results than you can achieve on your own.
