ASC RCM Quick Tips: Understanding Coordination of Benefits
By Angela Mattioda, Vice President of Revenue Cycle Management Services
Coordination of benefits (COB) applies to any patient who has more than one insurance policy. The intention of the COB is to determine which of the patient's policies will be the primary insurance, secondary insurance, and sometimes tertiary insurance.
The order of the COB is typically identified by the plan policies and insurance law. Rules include the following:
- The primary insurance policy provider will always process the claim first.
- If a patient is insured through their employer and they are the subscriber but also have a policy through their spouse, the policy in which they are the subscriber would be considered the primary insurance and coverage through their spouse as a dependent would be considered the secondary.
- If a patient has Medicaid and a commercial policy, the commercial policy will always be the primary and Medicaid will be the secondary.
- For patients with Medicaid and Tricare, these insurance payers will never pay first for services that Medicare covers. They only pay after Medicare, employer group health plans, and/or Medicare supplement insurance (i.e., Medigap) have paid.
- If the patient is the subscriber of two different plans, the primary will be assigned to the policy that has been effective the longest.
- The “birthday rule” determines COB when children are listed as dependents on two parents’ health plans. Under the birthday rule, the health plan of the parent whose birthday comes first in the calendar year is designated as the primary plan.
If a patient has Medicare and another insurance policy, there are several factors ASCs should know that will help them determine the primary insurance.
- If a patient has a retiree insurance (insurance from a former employer), Medicare pays first.
- If a patient is 65 or older, has a group health plan coverage based on their or their spouse's current employment, and the employer has 20 or more employees, you’re the patient's group health plan is the primary insurance.
- If a patient is 65 or older, has a group health plan coverage based on their or their spouse's current employment, and the employer has fewer than 20 employees, Medicare pays first.
- If a patient is under 65 and has a disability, has group health plan coverage based on their or a family member's current employment, and the employer has 100 or more employees, you’re their group health plan is the primary insurance.
- If a patient under 65 and has a disability, has group health plan coverage based on their or a family member's current employment, and the employer has fewer than 100 employees, Medicare pays first.
Here a few important facts when Medicare is involved:
- The expected payment will equal the contracted fee for the insurance that pays first (primary payer).
- The one that pays second (secondary payer) only pays if there are costs the first payer didn't cover up to the lower of primary or secondary payer’s liability.
- The secondary payer (which could be Medicare) might not pay all the uncovered costs.
- If Medicare is the primary payer and the patient's employer is the secondary payer, the patient will need to join Medicare Part B before their employer insurance will pay for the Part B services.
These types of insurances usually pay first for services related to the specific procedure and related reason.
- No-fault insurance (including automobile insurance)
- Liability (including self-insurance plans and automobile insurance)
- Workers' compensation
If the patient has Medicare, the COB is typically included in the eligibility insurance verification information.
Note: If patients have questions about their COB, refer them to Medicare at 800-633-4227. You can also provide them with the Medicare publication, “Medicare and Other Health Benefits: Your Guide to Who Pays First," which is accessible here.
Understanding How a COB Works in an ASC
When a patient has a scheduled procedure, it's important to understand their COB to determine if the primary and/or secondary insurance will be considered in or out-of-network. Note that the claim processing is always driven by the primary payer.
Let's review an example of a patient undergoing a knee arthroscopy who has in-network primary insurance and out-of-network secondary insurance. The primary insurance allows $2,500 toward the claim and applies $500 to the unmet deductible, with the patient responsible for 20% of the coinsurance. The $500 unmet deductible and the $400 coinsurance will then be billed to the secondary insurance. Since the secondary is out-of-network, it's likely the insurance's reasonable and customary allowance will be above the in-network allowance. Oftentimes, this means the out-of-network secondary insurance will cover the full amount of the deductible and coinsurance. However, if the secondary insurance plan still has a deductible and coinsurance that must be met, the remaining balance of the $900 would likely be billed to the patient.
Now let's look at the reverse situation, with an out-of-network policy as the primary insurance. This scenario will pay exactly as it's laid out in the plan documents. The out-of-network insurance provider could process claims for procedures in an ASC at a reasonable and customary rate, the payment could be a percentage of the Medicare fee schedule, or the plan could be a max-per-day policy that only allows up to $350 a day. The payer will need to have an allowable amount and apply any unmet deductible and the coinsurance to the patient responsibility. The payer will also have a disallowed amount, which will be the difference between the full billed charges and allowed amount. The secondary insurance provider will not consider the disallowed amount in its processing. There is also a risk that the secondary insurance provider will not cover anything if the primary payment or fee schedule is higher than the allowed amount of the in-network secondary policy.
Depending on the procedure, the primary or secondary insurance company may request that the patient complete a COB questionnaire. The insurance may want to confirm if there is more than one policy. The insurance company may also want to confirm, depending on the procedure/diagnosis, if the procedure is accident related. In such situations, the patient must complete these forms before the claim will be adjudicated.The key takeaway for ASCs: It's very important to understand the insurance coverage for all insurance plans and confirm that the procedures being performed are covered as well as if the procedures will be considered in or out-of-network.