Legal Definitions - COB clause

COB clause stands for Coordination-of-Benefits clause.

A Coordination-of-Benefits (COB) clause is a standard provision found in many health insurance policies. Its primary purpose is to prevent an individual from receiving more than 100% of the actual cost of medical services when they are covered by more than one health insurance plan. Essentially, it establishes rules for how multiple insurance policies will work together to pay for healthcare expenses, ensuring that the total amount paid by all insurers combined does not exceed the actual medical bill.

Here are some examples of how a COB clause might apply:

• Example 1: Spousal Coverage

  Imagine Maria works for Company A and has health insurance through her employer. Her husband, David, works for Company B and also has health insurance, and Maria is covered as a dependent on David's plan as well. If Maria needs a medical procedure that costs $15,000, her own insurance (Company A's plan) would typically be considered primary. After Company A pays its portion (e.g., $12,000), the remaining eligible balance might then be covered by David's insurance (Company B's plan) as the secondary payer. The COB clause ensures that between both plans, Maria does not receive more than the $15,000 total cost of the procedure, preventing her from being reimbursed for more than the actual expense.

• Example 2: Child of Divorced Parents

  Consider a child, Alex, whose parents, Sarah and Tom, are divorced. Alex is covered by both Sarah's health insurance plan and Tom's health insurance plan. When Alex visits the dentist for a cavity filling, the COB clause would determine which parent's insurance is primary and which is secondary. Often, this is decided by the "birthday rule," where the parent whose birthday falls earlier in the calendar year (regardless of age) has the primary plan. The COB clause ensures that the dentist's bill is paid appropriately by both insurers without overpaying the provider or the family.

• Example 3: Dual Employer Coverage

  Liam works two jobs, both of which offer him health insurance coverage. He decides to enroll in both plans because they offer different networks of doctors. If Liam experiences a sudden illness and incurs significant medical bills, the COB clause in both policies will come into play. One plan will be designated as primary (often based on factors like length of coverage or employer size), paying its share first. The other plan will then act as secondary, covering eligible remaining costs up to the total amount of the bill. The COB clause prevents Liam from receiving a total reimbursement that exceeds the actual cost of his medical treatment.