Section
2. Purpose and Applicability.
A.
The purpose of this regulation is to:
(1)
Permit, but not require, plans to include a coordination of benefits (COB)
provision;
(2) Establish an order
in which plans pay their claims;
(3) Provide the authority for the orderly
transfer of information needed to pay claims promptly;
(4) Reduce duplication of benefits by
permitting a reduction of the benefits paid by a plan when the plan, pursuant
to rules established by this regulation, does not have to pay its benefits
first;
(5) Reduce claims payment
delays; and
(6) Make all contracts
that contain a COB provision consistent with this regulation.
Section 3. Definitions.
The following words and terms, when used in this regulation,
shall have the following meanings unless the context clearly indicates
otherwise:
A. Allowable Expenses
(1) "Allowable Expense" means the necessary,
reasonable and customary item of expense for health care when the item of
expense is covered at least in part under any of the plans involved, except
where a statute requires a different definition.
(2) Notwithstanding the above definition,
items of expense under coverages such as dental care, vision care, prescription
drug or hearing aid programs may be excluded from the definition of Allowable
Expense. A plan which provides benefits only for any such items of expense may
limit its definition of Allowable Expenses to like items of expense.
(3) When a plan provides benefits in the form
of service, the reasonable cash value of each service will be considered as
both an Allowable Expense and a benefit paid.
(4) The difference between the cost of a
private hospital room and the cost of a semi-private hospital room is not
considered an Allowable Expense under the above definition unless the patient's
stay in a private hospital room is medically necessary in terms of generally
accepted medical practice.
(5) When
COB is restricted in its use to specific coverage in a contract (for example,
major medical or dental), the definition of "Allowable Expense" must include
the corresponding expenses or services to which COB applies.
(6) When benefits are reduced under a Primary
Plan because a covered person does not comply with the plan provisions, the
amount of such reduction will not be considered an Allowable Expense. Examples
of such provisions are those related to second surgical opinions,
precertification of admissions or services, and preferred provider
arrangements.
(a) Only benefit reductions
based upon provisions similar in purpose to those described above and which are
contained in the Primary Plan may be excluded from Allowable
Expenses.
(b) This provision shall
not be used by a Secondary Plan to refuse to pay benefits because an HMO member
has elected to have health care services provided by a non-HMO provider and the
HMO, pursuant to its contract, is not obligated to pay for providing those
services.
NOTE: This Paragraph (6) is not intended to allow a Secondary
Plan to exclude expenses that are applied towards the satisfaction of the
deductible, copayments or coinsurance amounts required by the Primary Plan,
except for the benefit reductions expressly described in this paragraph.
B. Claim
A request that benefits of a plan be provided or paid is a claim.
The benefits claimed may be in the form of:
(1) Services (including supplies);
(2) Payment for all or a portion of the
expenses incurred;
(3) A
combination of (1) and (2) above; or
(4) An indemnification.
C. Claim Determination Period
This is the period of time, which must not be less than twelve
consecutive months, over which Allowable Expenses are compared with total
benefits payable in the absence of COB, to determine whether overinsurance
exists and how much each plan will pay or provide.
(1) The Claim Determination Period is usually
a calendar year, but a plan may use some other period of time that fits the
coverage of the group contract. A person may be covered by a plan during a
portion of a Claim Determination Period if that person's coverage starts or
ends during the Claim Determination Period.
(2) As each claim is submitted, each plan is
to determine its liability and pay or provide benefits based upon Allowable
Expenses incurred to that point in the Claim Determination Period. But that
determination is subject to adjustment as later Allowable Expenses are incurred
in the same Claim Determination Period.
D. Coordination of Benefits
This is a provision establishing an order in which plans pay
their claims.
E. Hospital
Indemnity Benefits
These are benefits not related to expenses incurred. The term
does not include reimbursement-type benefits even if they are designed or
administered to give the insured the right to elect indemnity-type benefits at
the time of claim.
F. Plan
"Plan" means a form of coverage with which coordination is
allowed. The definition of plan in the group contract must state the types of
coverage which will be considered in applying the COB provision of that
contract. The right to include a type of coverage is limited by the rest of
this definition.
(1) The definition
shown in the Model COB Provision, attached to this regulation as Appendix A, is
an example of what may be used. Any definition that satisfies this subsection
may be used.
(2) This regulation
uses the term "plan." However, a group contract may, instead, use "program" or
some other term.
(3) Plan may
include:
(a) Group insurance and group
subscriber contracts;
(b) Uninsured
arrangements of group coverage;
(c)
Group coverage through HMOs and other prepayment, group practice and individual
practice plans;
(d) The amount by
which group hospital indemnity benefits exceed $100 per day;
(e) The medical benefits coverage in group
and individual automobile "no fault" and traditional automobile "fault" type
contracts; and
(f) Medicare or
other governmental benefits, except as provided in (4)(h) below and except as
mandated by federal law. That part of the definition of plan may be limited to
the hospital, medical and surgical benefits of the governmental
program.
(4) Plan shall
not include:
(a) Individual or family
insurance contracts;
(b) Individual
or family subscriber contracts;
(c)
Individual or family coverage through Health Maintenance Organizations
(HMOs);
(d) Individual or family
coverage under other prepayment, group practice and individual practice
plans;
(e) Group hospital indemnity
benefits of $100.00 per day or less;
(f) Blanket insurance contracts;
(g) Franchise insurance contracts;
and
(h) A State plan under
Medicaid, and shall not include a law or plan when, by law, its benefits are in
excess of those of any private insurance plan or other non-governmental
plan.
G.
Primary Plan
A Primary Plan is a plan whose benefits for a person's health
care coverage must be determined without taking the existence of any other plan
into consideration. A plan is a Primary Plan if either of the following
conditions is true:
(1) The plan
either has no order of benefit determination rules, or it has rules which
differ from those permitted by this regulation. There may be more than one
Primary Plan; or
(2) All plans
which cover the person use the order of benefit determination rules required by
this regulation, and under those rules the plan determines its benefits
first.
H. Secondary Plan
A Secondary Plan is a plan which is not a Primary Plan. If a
person is covered by more than one Secondary Plan, the order of benefit
determination rules of this regulation decide the order in which their benefits
are determined in relation to each other.The benefits of each Secondary Plan
may take into consideration the benefits of the Primary Plan or plans and the
benefits of any other plan which, under the rules of this regulation, has its
benefits determined before those of that Secondary Plan.
I. This Plan
In a COB provision, this term refers to the part of the group
contract providing the health care benefits to which the COB provision applies
and which may be reduced because of the benefits of other plans. Any other part
of the group contract providing health care benefits is separate from This
Plan. A group contract may apply one COB provision to certain of its benefits
(such as dental benefits), coordinating only with like benefits, and may apply
other separate COB provisions to coordinate other benefits.
Section 4. Model COB
Contract Provision.
A. General
Appendix A contains a model COB provision for use in group
contracts. That use is subject to the provisions of B and C below and to the
provisions of Section 5.
B.
Flexibility
A group contract's COB provision does not have to use the words
and format shown at Appendix A. Changes may be made to fit the language and
style of the rest of the group contract or to reflect the difference among
plans which provide services, which pay benefits for expenses incurred, and
which indemnify. No other substantive changes are allowed.
C. Prohibited Coordination and Benefit Design
(1) A group contract may not reduce benefits
on the basis that:
(a) Another plan
exists;
(b) A person is or could
have been covered under another plan, except with respect to Part B of
Medicare; or
(c) A person has
elected an option under another plan providing a lower level of benefits than
another option which could have been elected.
(2) No contract may contain a provision that
its benefits are "excess" or "always secondary" to any plan as defined in this
regulation, except in accord with the rules permitted by this
regulation.
Section
5. Rules for Coordination of Benefits; Order of Benefits.
A. General
The general order of benefits is as follows:
(1) The Primary Plan must pay or provide its
benefits as if the Secondary Plan or Plans did not exist. A Plan that does not
include a coordination of benefits provision may not take the benefits of
another Plan as defined in Section 3 Definitions into account when it
determines its benefits. There is one exception: a contract holder's coverage
that is designed to supplement a part of a basic package of benefits may
provide that the supplementary coverage shall be excess to any other parts of
the plan provided by the contract holder.
(2) A Secondary Plan may take the benefits of
another plan into account only when, under these rules, it is Secondary to that
other plan.
(3) The benefits of the
plan which covers the person as an employee, member or subscriber (that is,
other than as a dependent) are determined before those of the plan which covers
the person as a dependent.
B. Dependent Child/Parents Not Separated or
Divorced
The rules for the order of benefits for a dependent child when
the parents are not separated or divorced are as follows:
(1) The benefits of the plan of the parent
whose birthday falls earlier in a year are determined before those of the plan
of the parent whose birthday falls later in that year;
(2) If both parents have the same birthday,
the benefits of the plan which covered the parent longer are determined before
those of the plan which covered the other parent for a shorter period of
time;
(3) The word "birthday"
refers only to month and day in a calendar year, not the year in which the
person was born;
(4) If the other
plan does not have the rule described in B(1), (2) and (3) above, but instead
has a rule based upon the gender of the parent; and if, as a result, the plans
do not agree on the order of benefits, the rule based upon the gender of the
parent will determine the order of benefits.
C. Dependent Child/Separated or Divorced
Parents
If two or more plans cover a person as a dependent child of
divorced or separated parents, benefits for the child are determined in this
order:
(1) First, the plan of the
parent with custody of the child;
(2) Then, the plan of the spouse of the
parent with the custody of the child; and
(3) Finally, the plan of the parent not
having custody of the child.
(4) If
the specific terms of a court decree state that one of the parents is
responsible for the health care expenses of the child, and the entity obligated
to pay or provide the benefits of the plan of that parent has actual knowledge
of those terms, the benefits of that plan are determined first. The plan of the
other parent shall be the Secondary Plan. This paragraph does not apply with
respect to any Claim Determination Period or plan year during which any
benefits are actually paid or provided before the entity has that actual
knowledge.
(5) If the specific
terms of a court decree state that the parents shall share joint custody,
without stating that one of the parents is responsible for the health care
expenses of the child, the plans covering the child shall follow the order of
benefit determination rules outlined in Section 5B, Dependent Child/Parents Not
Separated or Divorced.
D. Active/Inactive Employee
The benefits of a plan which covers a person as an employee who
is neither laid off nor retired (or as that employee's dependent) are
determined before those of a plan which covers that person as a laid off or
retired employee (or as that employee's dependent). If the other plan does not
have this rule; and if, as a result, the plans do not agree on the order of
benefits, this rule is ignored.
E. Longer/Shorter Length of Coverage
If none of the above rules determines the order of benefits, the
benefits of the plan which covered an employee, member o subscriber longer are
determined before those of the plan which covered that person for the shorter
term.
(1) To determine the length of
time a person has been covered under a plan, two plans shall be treated as one
if the claimant was eligible under the second within 24 hours after the first
ended.
(2) The start of a new plan
does not include:
(a) A change in the amount
or scope of a plan's benefits;
(b)
A change in the entity which pays, provides or administers the plan's benefits;
or
(c) A change from one type of
plan to another (such as, from a single employer plan to that of a multiple
employer plan).
(3) The
claimant's length of time covered under a plan is measured from the claimant's
first date of coverage under that plan. If that date is not readily available,
the date the claimant first became a member of the group shall be used as the
date from which to determine the length of time the claimant's coverage under
the present plan has been in force.
Section 6. Procedure to be followed by
Secondary Plan Total Allowable Expenses.
A.
When it is determined, pursuant to Section
5, that this Plan is a Secondary Plan, it
may reduce its benefits so that the total benefits paid or provided by all
plans during a Claim Determination Period are not more than total Allowable
Expenses. The amount by which the Secondary Plan's benefits have been reduced
shall be used by the Secondary Plan to pay Allowable Expenses, not otherwise
paid, which were incurred during the Claim Determination Period by the person
for whom the claim is made. As each claim is submitted, the Secondary Plan
determines its obligation to pay for Allowable Expenses based on all claims
which were submitted up to that point in time during the Claim Determination
Period.
B. The benefits of the
Secondary Plan will be reduced when the sum of the benefits that would be
payable for the Allowable Expenses under the Secondary Plan in the absence of
this COB provision and the benefits that would be payable for the Allowable
Expenses under the other Plans, in the absence of provisions with a purpose
like that of this COB provision, whether or not claim is made, exceeds those
Allowable Expenses in a Claim Determination Period. In that case, the benefits
of the Secondary Plan will be reduced so that they and the benefits payable
under the other plans do not total more than those Allowable Expenses.
(1) When the benefits of this Plan are
reduced as described above, each benefit is reduced in proportion. It is then
charged against any applicable benefit limit of this Plan.
(2) Paragraph B(1) above may be omitted if
the plan provides only one benefit, or may be altered to suit the coverage
provided.
Section
7. Miscellaneous Provisions.
A.
Reasonable Cash Values of Services
A Secondary Plan which provides benefits in the form of services
may recover the reasonable cash value of providing the services from the
Primary Plan, to the extent that benefits for the services are covered by the
Primary Plan and have not already been paid or provided by the Primary Plan.
Nothing in this provision shall be interpreted to require a plan to reimburse a
covered person in cash for the value of services provided by a plan which
provides benefits in the form of services.
B. Excess and Other Nonconforming Provisions
(1) Some plans have order of benefit
determination rules not consistent with this regulation which declare that the
plan's coverage is "excess" to all others, or "always secondary." This occurs
because certain plans may not be subject to insurance regulation, or because
some group contracts have not yet been conformed with this regulation pursuant
to Section 2.
(2) A plan with order
of benefit determination rules which comply with this regulation (Complying
Plan) may coordinate its benefits with a plan which is "excess" or "always
secondary" or which uses order of benefit determination rules which are
inconsistent with those contained in this regulation (Noncomplying Plan) on the
following basis:
(a) If the Complying Plan is
the Primary Plan, it shall pay or provide its benefits on a primary
basis;
(b) If the Complying Plan is
the Secondary Plan, it shall, nevertheless, pay or provide its benefits first,
but the amount of the benefits payable shall be determined as if the Complying
Plan were the Secondary Plan. In such a situation, such payment shall be the
limit of the Complying Plan's liability; and
(c) If the Noncomplying Plan does not provide
the information needed by the Complying Plan to determine its benefits within a
reasonable time after it is requested to do so, the Complying Plan shall assume
that the benefits of the Noncomplying Plan are identical to its own, and shall
pay its benefits accordingly. However, the Complying Plan must adjust any
payments it makes based on such assumption whenever information becomes
available as to the actual benefits of the Noncomplying Plan.
(3) If the Noncomplying Plan
reduces its benefits so that the employee, subscriber, or member receives less
in benefits than he or she would have received had the Complying Plan paid or
provided its benefits as the Secondary Plan and the Noncomplying Plan paid or
provided its benefits as the Primary Plan, and governing State law allows the
right of subrogation set forth below, then the Complying Plan shall advance to
or on behalf of the employee, subscriber or member an amount equal to such
difference.
However, in no event shall the Complying Plan advance more than
the Complying Plan would have paid had it been the Primary Plan less any amount
it previously paid. In consideration of such advance, the Complying Plan shall
be subrogated to all rights of the employee, subscriber or member against the
Noncomplying Plan. Such advance by the Complying Plan shall also be without
prejudice to any claim it may have against the Noncomplying Plan in the absence
of such subrogation.
C. Allowable Expense. A term such as "usual
and customary," "usual and prevailing," or "reasonable and customary," may be
substituted for the term "necessary, reasonable and customary." Terms such as
"medical care" or "dental care" may be substituted for "health care" to
describe the coverages to which the COB provisions apply.
D. Subrogation. The COB concept clearly
differs from that of subrogation. Provisions for one may be included in health
care benefits contracts without compelling the inclusion or exclusion of the
other.
Section 8.
Effective Date; Existing Contracts.
A. This
regulation is applicable to every group contract which provides health care
benefits and which is issued on or after the effective date of this regulation,
which shall be ninety (90) days after final publication in the State
Register.
B. A group contract which
provides health care benefits and was issued before the effective date of this
regulation shall be brought into compliance with this regulation by the later
of:
(1) The next anniversary date or renewal
date of the group contract; or
(2)
The expiration of any applicable collectively bargained contract pursuant to
which it was written.
APPENDIX A. MODEL COB PROVISIONS
COORDINATION OF THE GROUP CONTRACT'S BENEFITS WITH OTHER
BENEFITS
I. APPLICABILITY
A. This Coordination of Benefits ("COB")
provision applies to This Plan when an employee or the employee's covered
dependent has health care coverage under more than one Plan. "Plan" and "This
Plan" are defined below.
B. If this
COB provision applies, the order of benefit determination rules should be
looked at first. Those rules determine whether the benefits of This Plan are
determined before or after those of another plan. The benefits of This Plan:
(1) Shall not be reduced when, under the
order of benefit determination rules, This Plan determines its benefits before
another plan; but
(2) May be
reduced when, under the order of benefits determination rules, another plan
determines its benefits first. The above reduction is described in Section IV
"Effect on the Benefits of This Plan."
II. DEFINITIONS
A. "Plan" is any of these which provides
benefits or services for, or because of, medical or dental care or treatment:
(1) Group insurance coverage, whether insured
or uninsured. This includes prepayment, group practice or individual practice
coverage.
(2) Coverage under a
governmental plan, or coverage required or provided by law. This does not
include a state plan under Medicaid (Title XIX, Grants to States for Medical
Assistance Programs, of the United States Social Security Act, as amended from
time to time).
Each contract or other arrangement for coverage under
(1) or
(2) is a separate plan. Also, if an
arrangement has two parts and COB rules apply only to one of the two, each of
the parts is a separate plan.
B. "This Plan" is the part of the group
contract that provides benefits for health care expenses.
C. "Primary Plan/Secondary Plan": The order
of benefit determination rules state whether This Plan is a Primary Plan or
Secondary Plan as to another plan covering the person.
When This Plan is a Primary Plan, its benefits are determined
before those of the other plan and without considering the other plan's
benefits.
When This Plan is a Secondary Plan, its benefits are determined
after those of the other plan and may be reduced because of the other plan's
benefits.
When there are more than two plans covering the person, This Plan
may be a Primary Plan as to one or more other plans, and may be a Secondary
Plan as to a different plan or plans.
D. "Allowable Expense" means a necessary,
reasonable and customary item of expense for health care, when the item of
expense is covered at least in part by one or more plans covering the person
for whom the claim is made.
The difference between the cost of a private hospital room and
the cost of a semi-private hospital room is not considered an Allowable Expense
under the above definition unless the patient's stay in a private hospital room
is medically necessary either in terms of generally accepted medical practice,
or as specifically defined in the plan.
When a plan provides benefits in the form of services, the
reasonable cash value of each service rendered will be considered both an
Allowable Expense and a benefit paid.
NOTE: When benefits are reduced under a Primary Plan because a
covered person does not comply with the plan provisions, the amount of such
reduction will not be considered an Allowable Expense. Examples of such
provisions are those related to second surgical opinions, precertification of
admissions or services, and preferred provider arrangements.
E. "Claim Determination Period" means a
calendar year. However, it does not include any part of a year during which a
person has no coverage under This Plan, or any part of a year before the date
this COB provision or a similar provision takes effect.
III. ORDER OF BENEFIT DETERMINATION RULES
A. General. When there is a basis for a claim
under This Plan and another plan, This Plan is a Secondary Plan which has its
benefits determined after those of the other plan, unless:
(1) The other plan has rules coordinating its
benefits with those of This Plan; and
(2) Both those rules and This Plan's rules,
in Subsection B below, require that This Plan's benefits be determined before
those of the other plan.
B. Rules. This Plan determines its order of
benefits using the first of the following rules which applies:
(1) Non-Dependent/Dependent. The benefits of
the plan which covers the person as an employee, member or subscriber (that is,
other than as a dependent) are determined before those of the plan which covers
the person as a dependent.
(2)
Dependent Child/Parents Not Separated or Divorced. Except as stated in
Paragraph (B)(3) below, when This Plan and another plan cover the same child as
a dependent of different persons, called "parents":
(a) The benefits of the plan of the parent
whose birthday falls earlier in a year are determined before those of the plan
of the parent whose birthday falls later in that year; but
(b) If both parents have the same birthday,
the benefits of the plan which covered a parent longer are determined before
those of the plan which covered the other parent for a shorter period of time.
However, if the other plan does not have the rule described in
(a) immediately above, but instead has a rule based upon the gender of the
parent, and if, as a result, the plans do not agree on the order of benefits,
the rule in the other plan will determine the order of benefits.
(3) Dependent
Child/Separated or Divorced Parents. If two or more plans cover a person as a
dependent child of divorced or separated parents, benefits for the child are
determined in this order:
(a) First, the plan
of the parent with custody of the child;
(b) Then, the plan of the spouse of the
parent with the custody of the child; and
(c) Finally, the plan of the parent not
having custody of the child.
However, if the specific terms of a court decree state that one
of the parents is responsible for the health care expenses of the child, and
the entity obligated to pay or provide the benefits of the plan of that parent
has actual knowledge of those terms, the benefits of that plan are determined
first. The plan of the other parent shall be the Secondary Plan. This paragraph
does not apply with respect to any Claim Determination Period or Plan year
during which any benefits are actually paid or provided before the entity has
that actual knowledge.
(4) Joint Custody. If the specific terms of a
court decree state that the parents shall share joint custody, without stating
that one of the parents is responsible for the health care expenses of the
child, the plans covering the child shall follow the order of benefit
determination rules outlined in Paragraph III B(2).
(5) Active/Inactive Employee. The benefits of
a plan which covers a person as an employee who is neither laid off nor retired
(or as that employee's dependent) are determined before those of a plan which
covers that person as a laid off or retired employee (or as that employee's
dependent). If the other plan does not have this rule, and if, as a result, the
plans do not agree on the order of benefits, this Rule (5) is
ignored.
(6) Longer/Shorter Length
of Coverage. If none of the above rules determines the order of benefits, the
benefits of the plan which covered an employee, member or subscriber longer are
determined before those of the Plan which covered that person for the shorter
term.
IV.
EFFECT ON THE BENEFITS OF THIS PLAN
A. When
This Section Applies. This Section IV applies when, in accordance with Section
III "Order of Benefit Determination Rules," This Plan is a Secondary Plan as to
one or more other plans. In that event the benefits of This Plan may be reduced
under this section. Such other plan or plans are referred to as "the other
plans" in B immediately below.
B.
Reduction in this Plan's Benefits. The benefits of This Plan will be reduced
when the sum of:
(1) The benefits that would
be payable for the Allowable Expense under This Plan in the absence of this COB
provision; and
(2) The benefits
that would be payable for the Allowable Expenses under the other plans, in the
absence of provisions with a purpose like that of this COB provision, whether
or not claim is made, exceeds those Allowable Expenses in a Claim Determination
Period. In that case, the benefits of This Plan will be reduced so that they
and the benefits payable under the other plans do not total more than those
Allowable Expenses.
When the benefits of This Plan are reduced as described above,
each benefit is reduced in proportion. It is then charged against any
applicable benefit limit of This Plan.
V. RIGHT TO RECEIVE AND RELEASE NEEDED
INFORMATION.
Certain facts are needed to apply these COB rules. [Insurer] has
the right to decide which facts it needs. It may get needed facts from or give
them to any other organization or person. [Insurer] need not tell, or get the
consent of, any person to do this. Each person claiming benefits under This
Plan must give [Insurer] any facts it needs to pay the claim.
VI. FACILITY OF PAYMENT
A payment made under another plan may include an amount which
should have been paid under This Plan. If it does, [Insurer] may pay that
amount to the organization which made that payment. That amount will then be
treated as though it were a benefit paid under This Plan. [Insurer] will not
have to pay that amount again. The term "payment made" includes providing
benefits in the form of services, in which case "payment made" means reasonable
cash value of the benefits provided in the form of services.
VII. RIGHT OF RECOVERY
If the amount of the payments made by [Insurer] is more than it
should have paid under this COB provision, it may recover the excess from one
or more of:
A. The persons it has paid
or for whom it has paid;
B.
Insurance companies; or
C. Other
organizations.
The "amount of the payments made" includes the reasonable cash
value of any benefits provided in the form of services.
