What is the Coordination-of-Benefits Clause and Why It Matters

Definition & Meaning

A coordination-of-benefits clause is a provision found in insurance contracts. It ensures that the total amount paid for medical and hospital care does not exceed the total benefits available from all insurance sources. When a person is covered by more than one health insurance plan, the benefits from all plans are limited to 100% of the actual medical charges incurred, after any deductibles have been met. This clause is particularly relevant for families with two working adults, as it helps manage costs and prevents individuals from receiving more coverage than their medical expenses.

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Real-world examples

Here are a couple of examples of abatement:

Example 1: A person has two health insurance plans: Plan A and Plan B. If their total medical expenses amount to $1,000 and they have a $200 deductible for each plan, after meeting the deductibles, the total benefits from both plans will cover the $1,000, but not exceed it.

Example 2: A family with two working parents both covered by separate employer health plans may find that the coordination-of-benefits clause limits their total reimbursement to the actual medical costs incurred, preventing them from receiving double payments for the same expenses. (hypothetical example)

State-by-state differences

Examples of state differences (not exhaustive):

State Coordination Rules
California Allows for coordination of benefits but requires clear disclosure in plans.
New York Requires that coordination clauses comply with state insurance regulations.
Texas Has specific rules regarding the order of payment between plans.

This is not a complete list. State laws vary and users should consult local rules for specific guidance.

Comparison with related terms

Term Definition
Subrogation Clause A provision that allows an insurer to pursue a third party for reimbursement after paying a claim.
Exclusion Clause A provision that outlines specific situations or conditions under which coverage is not provided.
Deductible The amount a policyholder must pay out-of-pocket before the insurance coverage kicks in.

What to do if this term applies to you

If you find yourself in a situation where a coordination-of-benefits clause applies, consider the following steps:

  • Review your insurance policies to understand the specific terms and conditions of the coordination-of-benefits clause.
  • Keep detailed records of all medical expenses and insurance claims.
  • Consult with your insurance provider for clarification on how benefits will be coordinated.
  • If needed, explore US Legal Forms for templates that can assist you in managing your claims.
  • For complex situations, consider seeking advice from a legal professional.

Quick facts

  • Typical coverage limit: 100% of actual medical charges
  • Common use: Health insurance policies
  • Primary purpose: Cost management and preventing overpayment

Key takeaways

Frequently asked questions

It is a provision in insurance contracts that limits total benefits to the actual medical expenses incurred when multiple insurance plans are involved.