What does coordination of benefits refer to?

Coordination of benefits is a process that comes into play when an individual has coverage from more than one insurance plan. This process ensures that the total benefits provided by all insurance plans do not exceed the total cost of the healthcare services. Essentially, it helps to determine which insurance policy is the primary payer and which one is secondary. The primary payer will cover the initial costs of care, while the secondary payer may cover some or all of the remaining costs, depending on the terms of the policies involved.

This system is important because it helps individuals maximize their benefits and avoid having claims incorrectly paid or processed in a way that leads to an overpayment. It also helps insurers manage risk and control costs associated with overlapping coverages, making it a crucial aspect of health insurance management.