What does the term 'coordination of benefits' mean?

The term 'coordination of benefits' refers specifically to the process used to determine which of two or more insurance plans will pay for a given medical expense when an individual is covered by multiple health insurance policies. This situation often arises with dependents covered under both parents' plans or when an individual is covered under their employer's plan as well as a spouse's plan.

The primary aim of coordinating benefits is to prevent overpayment and ensure that the total insurance coverage does not exceed 100% of the medical bills. The system establishes which plan is primary (pays first) and which is secondary (pays after the primary coverage has been applied), thereby clarifying responsibilities and streamlining the payment process.

Understanding this process is crucial for both providers and patients to facilitate timely and accurate reimbursement for healthcare services while ensuring compliance with policy provisions.