What is the purpose of a coordination of benefits (COB) provision in group health insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
COB is designed so that when an insured is covered under two or more group health plans, for example through their own job and a spouse's plan, the plans coordinate so that combined benefits do not exceed actual covered expenses. Standard COB rules identify a primary plan, which pays first, and a secondary plan, which pays the remaining covered amounts up to 100 percent of the allowable expense. This prevents duplication of benefits and keeps premiums lower for everyone in the group, because the insurer can price the plan knowing that double recovery is impossible.
Why the other options are wrong
- B) Double payment would violate the indemnity principle; preventing the insured from profiting through overlapping group coverage is precisely what COB is designed to do.
- C) COB does not force the insured to drop any existing coverage; it coordinates payments among the plans the insured already has.
- D) The secondary plan does not absorb all claim costs; it pays only the difference between what the primary plan paid and the allowable expense, up to 100 percent of that expense.
Memory hook
COB = two plans, one bill, no double-dipping. Primary pays first, secondary fills the gap up to 100 percent.