An agent is explaining the coordination of benefits (COB) provision in a group health insurance plan to an employee in California. What is the primary purpose of the COB provision?
- ATo determine the order in which individual and group policies pay benefits.
- BTo prevent an insured from collecting more than 100% of actual medical expenses from multiple group plans.
- CTo allow insureds to choose their preferred provider network.
- DTo ensure that all medical expenses are covered, regardless of the policy limits.
Show answer & explanationAnswer & explanation
Correct answer: B. To prevent an insured from collecting more than 100% of actual medical expenses from multiple group plans.
The primary purpose of the Coordination of Benefits (COB) provision is to prevent overinsurance, ensuring that when an individual is covered by more than one group health plan, the total benefits paid by all plans do not exceed 100% of the actual medical expenses incurred.
Why the other options are wrong
- A. While COB rules do determine the order of payment (primary vs. secondary), the underlying purpose of this order is to prevent overinsurance, not just to establish an order.
- C. This relates to PPO/HMO options, not COB.
- D. COB does not guarantee 100% coverage, but rather limits total payments to 100% of expenses, subject to policy limits.
Coordination of Benefits (COB)
A provision in group health insurance policies that prevents overinsurance by ensuring that when an individual is covered by two or more group plans, the combined benefits do not exceed 100% of the actual medical expenses.
- Applies when an individual has multiple group health plans.
- Establishes primary and secondary payer rules.
- Prevents individuals from collecting more than 100% of expenses.
- Reduces moral hazard and healthcare costs.
Memory trick: COB is like a 'Financial Referee' for multiple plans, making sure you 'Don't Get Rich' from being sick, only 'Covered'.