What is meant by "coordination of benefits"?

"Coordination of benefits" refers to the process used in health insurance to ensure that when an individual is covered by multiple insurance plans, the total benefits paid do not exceed the total costs incurred. This mechanism is crucial in situations where a person has coverage through more than one policy, such as through both an employer's insurance and a spouse's plan.

The primary purpose of this system is to prevent overpayment and to regulate the claims process among insurers. By establishing how benefits will be shared among the different plans, coordination of benefits effectively outlines the order in which the insurance policies will pay. This is essential because it ensures that the patient receives appropriate coverage while also helping to manage overall healthcare costs.

Understanding coordination of benefits is important for both consumers and insurance professionals because it affects how claims are processed and can impact out-of-pocket expenses for the insured. This concept ensures that patients maximize their insurance coverage without resulting in excess payments beyond the medical expense incurred.