Coordinating benefits: It’s one of the easiest areas of benefits management to mess up, and one of the of costliest to correct after the fact.
If an employee or dependent is eligible to collect benefits from two or more plans (e.g., your disability plan and one from a spouse’s employer), which plan pays first?
Answer: It depends on what’s written in the plan document. Usually, if a plan contains no coordination-of-benefits provision, it pays first.
Who goes first?
Most benefit plan documents contain some sort of coordination-of-benefits procedures. Even so, there are common loopholes to watch out for. Three hot spots to check:
- Be sure that your benefit plan documents require any outside plans to attach the original Explanation of Benefits from the primary payer when your company’s plan is balanced billed for a medical claim.
- Is there a statement that says only the amount actually paid by each plan, will be charged against the maximum benefit?
- Check if there’s an order of benefits determination that spells out which plan pays first for an employee’s child if the worker is divorced from his or her spouse.
Likewise, if your firm offers domestic partner coverage, make sure there’s a coordination-of-benefits statement for dependent and non-dependent partners.
Heavy cost of mistakes
Coordination-of-benefits errors can easily run up your premiums if left unchecked. In one extreme example, a Fortune 500 company’s health plan wound up paying a needless $5 million worth of claims that should’ve been paid in full or in part by other plans.
Add in indirect costs such as added administrative time, late payment interest and additional TPA contact call center expenses, the final cost was closer to $12 million.
Even if you’re unaware of a coordination-of-benefits problem with any of your plans, it pays to do a periodic self-audit. Three steps:
- Gather all payment schedule materials related to your plans into
a binder, including renewal letters from vendors.
- Check the plan document against the payment schedule used by Payroll or your PTA.
- Update any outdated schedules or benefit descriptions.
Reminder: If you don’t have a formal plan document, your contract with the vendor legally serves as “control document” for the plan.