COB in A Nutshell

Coordination of benefits (COB) is an extremely complicated part of insurance administration. Our customer support team consistently receives questions regarding COB, reminding us that most, if not all, dental practices find the process of navigating through COB to be a daunting task.

Coordination of benefits occurs when a patient is covered by more than one dental benefit plan. When this is the case, various questions arise. In what order should claims be filed? How much will the various plans pay and how much will the patient be responsible to pay? Once all parties have paid their respective portion of the bill, what will be the required write-off?

To further complicate the COB issue, patients often have a misconception about the way payments are handled when they are covered by multiple plans. Many patients believe that being covered by more than one plan ensures that their insurance companies will pay the entire dental bill and the patient will not owe anything. When a patient learns that there is a balance to pay, dental staff have to explain why a payment is required. This can be a difficult conversation, especially when the patient firmly believes that the  practice should absorb the remaining costs.

Order of Coverage – The Basics

With COB, the first step in billing for dental procedures is to determine which plan is the primary plan. This is not always easy. While the National Association of Insurance Commissioners (NAIC) has published various guidelines for determining the order of benefits, these guidelines are not law. Each state has the option of creating its own COB laws; however, self-funded plans follow federal law (ERISA), not state law. While most plans follow some version of the NAIC guidelines, there can be many variations for determining the order of benefits.

Despite the many variations you may encounter, here are some basic guidelines that the majority of plans follow. While there are exceptions to these rules, you can generally use the following as a guideline:

• Employee vs. Dependent: The plan that covers the patient as an employee (or subscriber) is primary to the plan that covers the patient as a dependent.
• Current Employment vs. Prior Employment: The plan that covers the patient as an active employee is primary to the plan that covers the patient as a terminated employee. Note: This typically includes COBRA and retiree coverage.
• Coverage by Multiple Active Employers: The plan that has covered the employee for the longest period of time is primary.
• Dependent Children: For patients with parents who are married or have joint custody, the birthday rule usually applies. This means that the parent whose birthday is earliest in the calendar year (without regard to age) is primary. For children with divorced parents, the court-ordered divorce decree will determine the order of coverage.
• Medical vs. Dental Plan: When medical benefits are available for treatment performed by a dentist, the medical plan is typically primary to the dental plan.

Payer Reimbursements

Once you have determined which plan is primary, send a claim to that payer first. After the explanation of benefits (EOB) is received from the primary payer, file a claim with the secondary payer and include a copy of the primary plan’s EOB. Always submit your full, usual fee for every procedure listed on the dental claim. This holds true whether you are filing a claim to the primary or secondary payer. Furthermore, when multiple plans are involved, do not take any write-offs after the primary claim is received. Always wait until all payers have processed and paid the claim before taking any write-offs.

Anticipating the total amount that the practice will be able to collect from multiple payers can be difficult. The primary payer is required to pay the claim as it would any other claim, without regard to any secondary coverage. However, the secondary payer will consider the primary’s reimbursement before providing payment. This is to prevent the duplication of benefits, or situations when both payers provide full reimbursement for the same procedure.

Generally speaking, the secondary payer will pay an amount that, when added to the primary payer’s reimbursement, equals what that payer would have paid had it been primary. Depending on its COB guidelines, the secondary payer may coordinate up to the primary plan’s fee, the secondary plan’s fee, or the practice’s full submitted fee.

Here are a few examples of what you may encounter:

The primary payer’s allowable fee for the procedure is $300. The secondary payer’s allowable fee is $200. The secondary payer may only coordinate up to $200, because that is its allowable fee. Therefore, the practice may receive $300 from the primary payer and $0 from the secondary.

Contrarily, let us assume that the primary payer’s allowable fee for the procedure is only $200, while the secondary payer’s allowable fee is $300. In this case, the secondary payer may coordinate up to $300, its allowable fee. Here, the practice may receive $200 from the primary payer and $100 from the secondary, for a total of $300.

Finally, let us assume that the primary payer’s allowable fee for the procedure is $200, the secondary payer’s allowable fee is $300, and the practice’s full fee is $500. The secondary payer may coordinate up to the $500 practice fee. In this instance, the practice may receive its full fee of $500 by collecting $200 from the primary payer and $300 from the secondary, for a total of $500.

Billing the Patient

Once we know how much the payers are going to reimburse, how do we determine the patient’s responsibility? When paid in full by multiple plans, the dentist may collect up to the practice’s full fee as submitted on the claim form. However, if the submitted fee is not fully reimbursed by the plans, the patient receives the benefit of the lowest contracted fee, regardless of whether that contracted fee is the primary or secondary’s fee. Therefore, the patient’s responsibility is the lowest contracted fee, less the total of all payments received from all plans.

For example, a patient receives a crown. The practice’s full fee is $1,000. However, the lowest contracted fee for a crown is $800. The primary plan pays $500. The secondary plan coordinates up to its allowable fee of $700, reimbursing the practice an additional $200. The practice has now received a total of $700 from the two plans. Since the lowest contracted fee is $800, the practice may balance bill the patient for an additional $100. The practice must then write off the remaining $200 balance.

On the other hand, assume that the lowest contracted fee for that crown is $600. The primary plan pays $500 and the secondary reimburses the practice an additional $200, totaling $700 from the two plans. Since the lowest contracted fee, and patient responsibility, is $600, the practice may not balance bill the patient since the patient receives the benefit of the lowest contracted fee. The patient’s remaining balance of $300 is written off.

Calculating the Write-off

One of the most painful parts of COB is calculating the write-off. Keep in mind that the write-off information provided on the primary EOB is seldom accurate when multiple plans are involved. This is why you should never post any write-offs until all plans have paid. If you follow the EOB or post write-offs before all plans have paid, the patient may end up with an erroneous credit balance.

In general, the required write-off is the difference between (A) the greater of the lowest contracted fee or the total of all payer reimbursements and (B) the practice’s full fee, as reported on the claim form.

As an example, let us assume that the practice’s full fee for a crown is $1,000 and the lowest contracted fee is $800. The primary pays $500 and the secondary pays $200. The patient is responsible for an additional $100 (as previously explained). The practice has now collected $800 for the procedure, but its full fee is $1,000. Therefore, the practice must write off $200.

Summary

When filing dental claims for patients with multiple dental benefit plans, extra time and attention are required. Follow these steps to make sure that you are billing appropriately and calculating patient responsibility and write-offs accurately.

1. Determine which plan is primary. See general rules previously discussed.
2. Submit a claim to the primary plan. Always submit the provider’s full fee.
3. Post the primary’s payment. Post the payment to the patient’s account, but do not post any write-offs based on the primary EOB.
4. Submit a claim to the secondary plan. Always submit the provider’s full fee and attach a copy of the primary EOB to the secondary claim.
5. Post the secondary’s payment.
6. Calculate patient responsibility. The patient is responsible for the difference between the lowest contracted fee and the total received from all plans. If the total paid by multiple payers is more than the lowest contracted fee, the patient’s responsibility is zero.
7. Calculate the required write-off. The secondary plan’s COB guidelines determine how much the provider will ultimately be paid. The practice may receive more than its lowest contracted fee, but may not receive more than its full fee. If the practice collects more than the lowest contracted fee but less than its full fee, then the practice must write off the difference between the total collected from the payers and its full, submitted fee. If the total paid by multiple plans exceeds the provider’s full fee, then the secondary plan must be notified of the excess payment received.