Coordination of benefits (COB) in medical billing is the way billers decide which health insurance plan pays first on a patient’s claim. In a case where an individual has more than one insurance policy, COB in medical billing determines which plan becomes the primary payer and which one becomes secondary. This article is an in-depth overview of which insurance plan pays for the medical services, primary or secondary. All the rules attached to the coordination of benefits are discussed in detail.
What is coordination of benefits?
To understand this concept, consider a patient that has more than one health insurance plan. The question arises: who pays what? The clarification is provided by the coordination of benefits which determines which health plan is the primary payer and which one is the secondary. This helps to avoid overpayment and accurate claim processing to avoid the claim rejections. Let’s take the primary vs secondary insurance discussion further.
How Does Coordination of Benefits Work?
As already discussed, COB works when the patient has more than one health plan. Mostly, it happens when there are other health plans involved, like their employer’s plan, spouse’s health plan, Medicare, COBRA (Consolidated Omnibus Budget Reconciliation Act), workers; compensation, or dependent coverage under both parents. There are various situations in which there is a need to decide which is the primary insurance and which is secondary. Once the primary insurance is determined, it processes the claim first and pays the share of the coverage amount. Afterwards, the secondary payer reviews the claim and pays the balance whatever is covered in the limits.
Coordination of Benefits Rules
Why do these COB rules exist? This is the first concern before moving further. If there is no differentiation between the payers when more than one are involved for payment, the plans together could pay more than the claim is worth. To avoid duplicate payments, COB rules exist. There are certain rules related to the coordination of benefits. The birthday rule is the one which is seen most often.
The Birthday Rule for Dependent Children
This rule is commonly discussed when it comes to determination of the primary insurance payer. It happens in a scenario where a child is covered under both the parents’ insurance. Which parent’s insurance will be the primary insurance in this case? Here the birthday rule insurance comes into play. The rule states that the insurance plan of the parent whose birthday comes first in the calendar year is the primary insurance plan.
| Birthday rule insurance scenario | Primary for the child |
|---|---|
| Parents married/living together; Dad born March 3, Mom born January 20 | Mom’s plan (earlier in the calendar year; year ignored) |
| Same birthday | Plan that has covered that parent longer |
| Divorced, decree assigns coverage to one parent | That parent’s plan (if the plan knows of the decree) |
| Divorced, decree makes both responsible, or joint custody with no allocation | Birthday rule |
| Divorced, no decree | Custodial parent → custodial parent’s spouse → non-custodial parent → non-custodial parent’s spouse |
Medicare Secondary Payer Rules
Medicare Secondary Payer is a rule Congress has written and the CMS enforces this rule. The important thing that matters is where the other coverage comes from and how big the employer is. This rule was initiated for cost-shifting which means that if the patient’s other plan comes from a current job at a large enough employer, that plan carries the claim first and Medicare comes after it. The employer size determines which payer becomes primary. The working-aged rule, disability rule, and the ESRD rule are some of the rules that determine who is the primary payer and which one is secondary. The coverage from past employment goes behind Medicare. COBRA is a continuation of an employer plan after the job ends. Medicare pays first in this case as the patient is 65+ or disabled on COBRA. The table shows some scenarios:
| Patient situation | Other coverage | Primary | Secondary |
|---|---|---|---|
| 65+, working, employer GHP, employer under 20 employees | GHP (Group Health Plan) | Medicare | GHP |
| 65+, working (or spouse working), employer GHP, employer ≥ 20 employees | GHP | GHP | Medicare |
| Under 65, disabled, GHP via current employment, employer ≥ 100 employees | Large GHP | GHP | Medicare |
| ESRD, GHP or COBRA | GHP / COBRA | GHP / COBRA for the 30-month coordination period | Medicare, then Medicare primary after 30 months |
| 65+ or disabled (non-ESRD), COBRA | COBRA | Medicare | COBRA |
| 65+, retiree plan | Retiree coverage | Medicare | Retiree plan |
| Job-related illness or injury | Workers’ compensation | WC (for related services) | Medicare (conditional in some cases) |
| Accident with no-fault or liability coverage | No-fault / liability | No-fault / liability | Medicare |
CO 22 Denial Code: Cause and Fix
What is CO 22 denial code? CARC stands for Claim Adjustment Reason Code and the number 22 is the reason behind the denial. CO means Contractual Obligation. The code reads: “This care may be covered by another payer per coordination of benefits.” What is important to know here? CO 22 is not a coverage decision. The payer has checked its own record of the patient’s other coverage. The payer found that someone else is supposed to pay first.
Let’s assume a scenario where a 67-year-old comes to the clinic, hands over her Medicare card. The front desk makes Medicare the primary insurance and the claim is submitted. It comes back as CO 22. The record of Medicare shows that her husband is still employed at a 350-person company and she is on his insurance plan. In this case, the practice never asked this and the claim never gets paid.
Another scenario can be assumed to understand the cob denial code. A 70-year-old who retired a year ago. Now, the retiree plan is secondary in this case. Medicare becomes the primary insurance here. BCRC (Benefits Coordination & Recovery Center) record shows that the old employer plan as primary. But why? Because no one told the BCRC that he has retired. Medicare denies the claim by CO 22. In this scenario, the claim is right but the records are not updated. Once the BCRC is called and the record is updated, the claim can be resubmitted.
| What the record shows | What to do |
|---|---|
| Medicare’s MSP (Medicare Secondary Payer) record is wrong (other coverage ended) | Patient contacts the BCRC / MSP Contractor to update; resubmit once the record changes |
| Medicare was primary on the date of service | Resubmit with corrected MSP information |
| Medicare is secondary | Bill the primary; then submit to Medicare with the primary’s payment or denial data |
| Commercial plan returns CARC 22 | Member updates COB with the plan; rebill when the plan’s record is current |
Crossover Claims: When Medicare Forwards the Claim
To understand a crossover claim, let’s start from COBA (Coordination of Benefits Agreement). Medicare does not pay the whole amount, Part B pays its share of its approved amount after the deductible. The remaining part and the deductible are the patient’s part. Many Medicare patients have secondary insurance to cover this gap. For covering the part, there are three common kinds of policy: Medigap policy, a retiree plan, and a state Medicaid agency.
The second payer cannot start the work from the original bill. It needs the details from Medicare: what was allowed? What was paid? What was left for the patient? In the past, the biller waited for Medicare’s remittance and then sent a second claim to the secondary payer. Crossover solved this problem. Medicare’s claim system passes the paid claim to the second payer. The second payer starts the work from it. Here comes the COBA, a standard contract between the BCRC and an insurer. All this arrangement happens under an agreement.
What if Medicare is the secondary payer? What happens to the crossover claim? Crossover only moves forward from Medicare. Where Medicare is secondary to a large employer’s group plan, there is no crossover into Medicare. The group plan of the employer does not forward the claim. The table shows an explanation of some scenarios:
| Situation | Crossover? | Provider action |
|---|---|---|
| Medicare primary, Medigap with COBA | Yes | None; watch for the secondary remittance |
| Medicare primary, Medicaid (state agency on COBA) | Yes, in most states | None; confirm with the state if no remittance arrives |
| Medicare primary, supplemental plan without COBA | No | Bill the secondary with the Medicare remittance |
| Medicare primary, remittance shows no forwarding message | No (or failed) | Bill the secondary manually |
| Medicare secondary (GHP primary) | No crossover into Medicare | Bill GHP first; then Medicare with GHP’s payment data |
COB Checks Before the Claim Goes Out
The section has a table below that contains all the scenarios that can happen. Every claim denial in this article was decided at the front desk and it was weeks before the claim existed. It can be said that the order in COB medical billing is set before the claim is created. The front desk can ask about the spouse’s job to avoid CO 22 denial code. The birthday-rule error was much easier to avoid if the front desk added the child’s second plan. Here are some checks that can help avoid the errors.
| Check | When | Prevents |
|---|---|---|
| COB / MSP questionnaire completed and dated | Registration; re-ask on any coverage change | CO 22; wrong-payer rejections |
| Eligibility response read for other-coverage / MSP flags | Every visit | Billing Medicare primary when a group plan is primary |
| Employer size recorded for 65+ and disabled patients with a group plan | Registration | Wrong MSP order |
| Accident / work-injury questions answered | Registration; any injury visit | Injury claims sent to the health plan |
| Dependent child: both parents’ birthdays and custody status on file | Registration | Birthday rule errors |
| Primary EOB/ERA attached or referenced on the secondary claim | Secondary submission | Secondary denial for missing primary data |
| Remittance checked for the crossover message | After Medicare pays | Duplicate secondary claims, or no secondary claim at all |
COB Comes Down to One Question at Registration
COB in medical billing is decided before the claim is created as we have mentioned earlier. All the questions lead to one important question: who pays first? The answer lies in the record and what it says about the patient’s other coverage. MedCare MSO’s denial management services are meant to rework CO 22 denials, Medicare Secondary Payer (MSP) record corrections through the BCRC, and the crossover claims follow up. The medical claim is correct if all the relevant questions are asked at the registration.
