Most people are not aware that there are laws that govern Coordination of benefits. In my experience, most consumers think they can just pick which Insurance carrier that they want to be primary. For example, a spouse on a plan may also carry his/her own coverage through their employer. However, that policy may have a higher out of pocket maximum, so they do not use that particular carrier. The same is true for a family policy. In a situation where dependent children are covered under two policies, the one that has the “better” benefits is typically the one that is utilized. In both situations, choosing your primary carrier is not an option. Most carriers have adopted the standard NAIC rules of coordination of benefits. A spouse on a policy who has their own coverage through their employer must use that coverage first. In the case of dependent children with dual coverage, the parent with the earliest birth month in the year will be the primary carrier. These are the top two NAIC rules that are commonly misunderstood and not followed.
The same beliefs are seen when Medicare is involved. A person with Medicare may believe that if they have a group insurance policy, regardless of employment status, that the group insurance carrier will be primary. Medicare rules are governed by Federal Law. Unlike commercial carriers where you can choose to adopt the NAIC guidelines, if Medicare is involved, the carrier has to apply the Medicare rules. The most common misconception with those who have Medicare based on Age or Disability entitlement is that if they are actively working, their group insurance will be the primary carrier. In this instance, primacy is determined by the size of the employer, not the working status. This is just one of the many Medicare rules that is not always followed.
Often, it is not the insured’s fault that claims are not coordinated properly. An employee may go to the hospital or their physician and present both insurance cards in good faith. However, the billing department for the provider does not bill the correct carrier first. Provider billing departments may not always know the correct rules to follow and will bill based on what the patient tells them.
Each of these situations and many more will be uncovered during a comprehensive claims audit.
