What role does coordination of benefits play in insurance?

Coordination of benefits plays a crucial role in ensuring that when an individual has more than one insurance plan, claims are processed accurately and fairly. This concept prevents overpayment for services and ensures that the insured individual receives the correct benefits according to the order of their insurance coverage.

When two or more health insurance policies are in effect for a single individual, coordination of benefits is used to determine which policy is primary and which is secondary. The primary insurance pays first, and the secondary may pay for remaining eligible expenses. This system helps to maximize the coverage benefits individuals can receive, while also minimizing the potential for waste and disputes over who should pay a claim.

The other options, while related to healthcare, do not accurately describe the specific function of coordination of benefits. For instance, streamlining healthcare records or establishing provider networks does not directly pertain to how benefits from multiple insurance plans are coordinated and processed. Meanwhile, organizing treatment plans for patients falls outside the scope of insurance claims management.