Additional Provisions
Beyond the mandatory and optional uniform provisions, health insurance policies contain additional provisions that govern how the policy operates and coordinates with other coverage.
Coordination of Benefits (COB)
Coordination of Benefits prevents "double-dipping" when an insured is covered by multiple health plans:
Purpose of COB
| Goal | Description |
|---|---|
| Prevent over-insurance | Total benefits don't exceed actual expenses |
| Determine payment order | Primary vs. secondary plan |
| Coordinate coverage | Plans work together fairly |
Order of Benefit Determination
When determining which plan pays first:
| Rule | Primary Plan |
|---|---|
| Employee's own plan | Person's plan through own employment is primary |
| Dependent coverage | Own plan primary, spouse's plan secondary |
| Birthday Rule (children) | Parent with earlier birthday (month/day) is primary |
| Gender Rule (if applicable) | Father's plan primary (now rarely used) |
| Active vs. COBRA | Active employment plan is primary |
| Longer coverage | Plan covering person longer is primary |
Birthday Rule Example
Scenario: Child covered under both parents' plans
- Mother's birthday: March 15
- Father's birthday: September 22
- Primary plan: Mother's (earlier birthday in calendar year)
Note: The Birthday Rule uses month and day only, not year of birth.
How COB Works
Example:
- Medical bill: $1,000
- Primary plan pays: $800 (80% coinsurance)
- Secondary plan: Pays up to remaining $200
- Patient pays: $0 (or remaining balance after both plans)
Non-Duplication vs. Maintenance of Benefits
| Approach | Description |
|---|---|
| Non-duplication | Secondary pays nothing if primary covered the full amount |
| Maintenance of benefits | Secondary pays what it would have paid as primary, minus primary payment |
Subrogation
Subrogation allows the insurer to recover payments from a third party responsible for the insured's loss:
How Subrogation Works
- Insured is injured by a third party's negligence
- Insurance pays the insured's medical claims
- Insurance "steps into shoes" of insured
- Insurance recovers payments from negligent third party
- Insured may receive remaining settlement funds
Example
- Situation: Insured injured in car accident caused by another driver
- Medical bills: $50,000 (paid by health insurer)
- Settlement from at-fault driver: $100,000
- Subrogation: Health insurer recovers $50,000 from settlement
- Insured receives: $50,000 (remaining amount)
Subrogation Rights
| Right | Description |
|---|---|
| Right of recovery | Insurer can pursue third party |
| Insured cooperation | Must assist insurer in recovery |
| Settlement prohibition | Insured cannot settle without insurer consent |
Preauthorization Requirements
Many health plans require preauthorization (prior authorization) for certain services:
Services Requiring Preauthorization
| Service Type | Examples |
|---|---|
| Hospital admissions | Non-emergency inpatient stays |
| Surgical procedures | Elective surgeries |
| Specialty care | Certain specialist visits |
| Diagnostic imaging | MRI, CT scans, PET scans |
| Prescription drugs | Specialty or high-cost medications |
| Durable medical equipment | Wheelchairs, CPAP machines |
Preauthorization Process
| Step | Action |
|---|---|
| 1 | Provider submits request to insurer |
| 2 | Insurer reviews medical necessity |
| 3 | Approval, denial, or request for information |
| 4 | Provider notifies patient of decision |
Consequences of No Preauthorization
| Outcome | Effect |
|---|---|
| Claim denial | Insurer may refuse to pay |
| Reduced benefits | May pay at lower rate |
| Patient responsibility | Insured pays full cost |
Continuation Provisions
Several laws provide for continuation of coverage after certain events:
COBRA Continuation
| Feature | Details |
|---|---|
| Applies to | Employers with 20+ employees |
| Qualifying events | Job loss, reduced hours, divorce, death |
| Duration | 18 months (36 for divorce/death) |
| Premium | Up to 102% of full premium |
| Coverage | Same coverage as active employees |
State Continuation (Mini-COBRA)
| Feature | Details |
|---|---|
| Applies to | Small employers (under 20 employees) |
| Requirements | Vary by state |
| Duration | Often 6-18 months |
Conversion Privilege
| Feature | Details |
|---|---|
| Right | Convert group coverage to individual policy |
| Evidence of insurability | Not required |
| Premium | Based on individual rates (may be higher) |
| Coverage | May differ from group coverage |
Free Look Period
New policyholders have a right to review and return the policy:
| Feature | Details |
|---|---|
| Duration | Typically 10-30 days (varies by state) |
| Right | Return policy for full premium refund |
| No questions asked | Cannot be denied |
| Clock starts | From policy delivery |
Assignment
Assignment allows the insured to transfer rights under the policy:
Medical Expense Assignment
| Feature | Details |
|---|---|
| Common use | Assign benefits to healthcare provider |
| Effect | Provider paid directly by insurer |
| Insurer consent | May or may not be required |
Disability Income Assignment
| Feature | Details |
|---|---|
| Limitations | Generally cannot assign income benefits |
| Exception | May assign to creditors with consent |
| Reason | Benefits intended for insured's support |
Common Exclusions
Health insurance policies typically exclude:
| Exclusion | Reason |
|---|---|
| Pre-existing conditions | Not in ACA plans; may apply to others |
| Cosmetic surgery | Not medically necessary |
| Experimental treatments | Unproven effectiveness |
| War and military action | Uninsurable risk |
| Self-inflicted injuries | Moral hazard |
| Workers' compensation injuries | Covered elsewhere |
| Aviation (non-commercial) | High risk |
| Hazardous activities | High risk |
Summary: Policy Provision Categories
| Category | Purpose | Examples |
|---|---|---|
| Mandatory | Protect insured | Grace period, proof of loss, reinstatement |
| Optional | Protect insurer | Change of occupation, intoxicants |
| Coordination | Prevent over-insurance | COB, subrogation |
| Administrative | Policy operation | Preauthorization, assignment |
| Continuation | Maintain coverage | COBRA, conversion |
Under the Birthday Rule for coordination of benefits, which parent's plan is primary for a dependent child if the mother's birthday is July 10 and the father's birthday is April 5?
What is the purpose of subrogation in health insurance?
An employee loses their job at a company with 50 employees. Under COBRA, how long can they continue their group health coverage?