15.4 WHEN AND HOW COORDINATION OF BENEFITS (COB) APPLIES
For the purposes of Coordination of Benefits, the word “plan” refers to any group or nongroup health care policy, HMO, contract or plan, whether insured or self-insured, that provides benefits payable on account of expenses incurred by the Participant or that provides services to the Participant.
Many families that have more than one family member working are covered by more than one health care plan.
Advise the Administrative Office if you have other insurance. If you don’t notify the Administrative Office of other insurance, they will be unable to coordinate benefits; this could result in loss of benefits or an overpayment on your claim that you must repay to the Trust. If the other coverage terminates, please notify the Administrative Office and provide them with the date of termination.
Coordination of Benefits generally operates so that one of the plans (called the primary plan) will pay its benefits first, without considering whether the other plan may cover some expenses. The other plan, (called the secondary plan) may then pay additional benefits. In no event will the combined benefits of the primary and secondary plans exceed 100% of the allowable Expenses incurred. Sometimes, the combined benefits that are paid will be less than total allowable Expenses.
Which Plan Pays First – Order of Benefit Determination Rules
Group plans determine the sequence in which they pay benefits, or which plan pays first, by applying uniform “order of benefit determination” rules in a specific sequence. This Plan uses the order of benefit determination rules established by the National Association of Insurance Commissioners (NAIC) and which are commonly used by insured and self-insured plans.
Any group plan that does not use these same rules always pays its benefits first. If the first rule does not establish a sequence or order of benefits, the next rule is applied, and so on, until an order of benefits is established. The rules are:
Rule 1: Employee/Dependent
The plan that covers a person as an employee, member or subscriber (that is, other than as a dependent) pays first (is the “primary plan”). The plan that covers that same person as a dependent pays second (is the “secondary plan”).
Rule 2: Dependent Child Covered Under More Than One Plan
The plan that covers the parent whose Birthday falls earlier in the calendar year pays first; and the plan that covers the parent whose Birthday falls later in the calendar year pays second, if:
- the parents are married or are living together; or
- a court decree awards joint custody without specifying that one parent has the responsibility to provide health care coverage for the child or states that both parents are jointly responsible to provide coverage.
If the above “Birthday Rule” applies and both parents have the same Birthday, the plan that has covered one of the parents for a longer period of time pays first, and the other plan pays second.
If the specific terms of a court decree state that one parent is responsible for the child’s health care expenses or health care coverage, and the plan of that parent has actual knowledge of the terms of that court decree, that plan pays first. If the parent with financial responsibility has no coverage for the child’s health care services or expenses, but that parent’s current spouse does, the plan of the spouse of the parent with financial responsibility pays first.
If the parents are not married or are separated (whether or not they ever were married), or are divorced, and there is no court decree allocating responsibility for the child’s health care services or expenses, the order of benefits is:
- The plan of the custodial parent pays first;
- The plan of the spouse of the custodial parent pays second;
- The plan of the non-custodial parent pays third; and then
- The plan of the spouse of the non-custodial parent pays last.
The word “Birthday” refers only to the month and day in a calendar year; not the year in which the person was born.
For a dependent child covered under more than one plan of individuals who are not the parents of the child, the order of benefits should be determined above as if the individuals were the parents.
The term “custodial parent” refers to the parent awarded custody by a court decree or, in the absence of a court decree, the parent with who the child resides more than one-half of the time, excluding any temporary visitation.
Rule 3: Active/Laid-Off or Retired Employee. This rule applies only when the two plans cover the same individual as the employee (for example, when a person who has coverage as a laid-off or retired employee also has coverage as an active employee of a new employer).
The plan that covers either as an active employee (that is, an employee who is neither laid-off nor retired), or as that active employee’s dependent, pays first; and the plan that covers the same person as a laid-off or retired employee, or as that laid-off or retired employee’s dependent, pays second.
If the other plan does not have this rule, and if, as a result, the plans do not agree on the order of benefits, this rule is ignored.
This rule does not apply if Rule 1 above applies.
Rule 4: Continuation Coverage. This rule applies when an individual is covered under COBRA (or continuation coverage under the state equivalent of COBRA if COBRA does not apply) under one plan and as an active employee under another.
If a person whose coverage is provided under a right of continuation under federal or state law is also covered under another plan, the plan that covers the person as an employee, retiree, member or subscriber (or as that person’s dependent) pays first, and the plan providing continuation coverage to that same person pays second.
If the other plan does not have this rule, and if, as a result the plans do not agree on the order of benefits, this rule is ignored.
This rule does not apply if Rule 1 above applies.
Rule 5: Longer/Shorter Length of Coverage
If none of the four previous rules determines the order of benefits, the plan that covered the person for the longer period of time pays first; and the plan that covered the person for the shorter period of time pays second. In the case of two or more plans offered in succession by the same entity or organization, the plans are treated as one if the person was eligible for coverage under the second plan within 24 hours after the first plan ended.
The start of a new plan does not include a change:
- in the amount or scope of a plan’s benefits;
- in the entity that pays, provides or administers the plan; or
- from one type of plan to another (such as from a single employer plan to a multiple employer plan).
The length of time a person was first covered under a plan is measured from the date the person was first covered under that plan. If that date is not readily available, the date the person first became a member of the group will be used to determine the length of time that person was covered under the plan presently in force.
Rule 6: When No Rule Determines the Primary Plan.
It is extremely rare when the order of benefit determination rules do not establish an order of benefits, but it does occur. This is the final fallback rule that applies when all other rules fail to establish an order of benefits. If none of the previous rules determines which plan pays first, each plan will pay an equal share of the expenses incurred by the Participant. However, this plan will not pay more than it would have paid if it would have been the primary plan.