Definition
Duplication of Benefits is a situation in health insurance where an individual is covered by two or more policies for the same insured loss. In these instances, each policy pays its proportionate share of the loss, or one policy acts as the primary coverage while the other serves as secondary coverage.
This ensures that the insured party does not receive overlapping benefits that exceed the actual loss incurred.
Examples
-
Scenario 1: Employer and Private Insurance
- An individual might have health insurance through their employer and an additional private health insurance policy. In the case of a medical claim, the employer’s insurance could act as the primary policy, while the private insurance becomes secondary, covering costs not covered by the primary policy.
-
Scenario 2: Coordination of Benefits
- A married couple may both have their own health insurance plans that cover each other as dependents. In case of a medical expense, the insurer of the person receiving treatment becomes the primary policy, and the other spouse’s policy will provide secondary coverage.
Frequently Asked Questions (FAQs)
1. What determines which policy is primary and which is secondary?
The coordination of benefits rules typically determine the order. The policyholder’s own insurance usually serves as primary, while any dependent coverage or additional policies usually serve as secondary.
2. Can I receive full reimbursement from both policies?
No, duplication of benefits means that policies will coordinate to ensure the total benefit does not exceed the actual incurred expenses. Usually, the primary policy pays first and the secondary policy covers remaining eligible costs.
3. What if both policies claim to be primary?
If both insurance companies claim to be primary, you will need to refer to the coordination of benefits section in each policy. This usually involves resolving the issue with both insurers to determine the correct order of responsibility.
4. Are there cases where duplication of benefits is not allowed?
Yes, there are specific insurance policies and situations where duplication of benefits is excluded, mainly to prevent over-insurance and fraudulent claims.
5. How does duplication of benefits affect deductibles?
The primary policy might require the insured to satisfy its deductible first. The secondary policy can then cover some or all of the out-of-pocket costs remaining after the primary policy’s benefits have been utilized.
-
Coordination of Benefits (COB)
- A provision used to determine the order of payments and ensure that the combined payment from all policies does not exceed the total allowable medical expenses.
-
Primary Coverage
- The insurance policy that provides the initial response and payment for a claim.
-
Secondary Coverage
- The insurance policy that provides additional coverage after the primary policy has paid its share.
Online References
Suggested Books for Further Studies
- Health Insurance and Managed Care: What They Are and How They Work by Peter R. Kongstvedt
- Insurance Handbook for the Medical Office by Marilyn Fordney
- Essentials of Managed Health Care by Peter Reid Kongstvedt
Fundamentals of Duplication of Benefits: Insurance Basics Quiz
### What is the primary intent of duplication of benefits in health insurance?
- [ ] To provide more insurance coverage than needed
- [x] To coordinate payments for the same insured loss
- [ ] To ensure full reimbursement for any past medical expenses
- [ ] To easily substitute one insurance policy for another
> **Explanation:** The primary intent of duplication of benefits is to coordinate payments to ensure that the combined benefit payments for a single insured loss do not exceed the actual expense incurred.
### What term is used to describe how different policies determine payment responsibilities?
- [x] Coordination of Benefits
- [ ] Insurance Binding
- [ ] Premium Splitting
- [ ] Coverage Alignment
> **Explanation:** Coordination of Benefits (COB) is the term used to describe how different policies manage their payment responsibilities for overlapping coverage to ensure total compensation does not exceed expenses.
### Which policy typically pays first in a duplication of benefits scenario?
- [ ] The one with the higher premium
- [x] The primary policy
- [ ] The one selected by the insured
- [ ] The secondary policy
> **Explanation:** The primary policy usually pays first in a duplication of benefits scenario to cover eligible expenses, with the secondary policy covering remaining costs afterward.
### If two policies claim to be primary, what should an insured person consult?
- [ ] Their lawyer
- [x] The coordination of benefits sections in both policies
- [ ] An insurance broker
- [ ] Their employer's HR department
> **Explanation:** The insured person should consult the coordination of benefits section in both policies to resolve the issue and determine the correct order of responsibility.
### Which of the following is a consideration often excluded in policies to avoid duplication of benefits?
- [ ] Routine Check-ups
- [ ] Fraudulent Claims
- [ ] Chronic Diseases
- [x] Over-insurance
> **Explanation:** Policies often include provisions to exclude duplication of benefits to prevent over-insurance, ensuring the compensation does not excessively exceed the actual loss.
### Who may need to satisfy a deductible first in a duplication of benefits scenario?
- [ ] The secondary policyholder
- [ ] Either policyholder
- [x] The primary policyholder
- [ ] The insurance provider
> **Explanation:** The primary policyholder usually needs to satisfy their deductible before the primary insurance pays out, with the secondary policy covering potential remaining out-of-pocket costs.
### What is the role of secondary coverage in duplication of benefits?
- [ ] To completely replace primary coverage
- [x] To offer additional coverage after the primary policy pays
- [ ] To avoid primary policy deductibles
- [ ] To lower primary policy premiums
> **Explanation:** Secondary coverage provides additional coverage after the primary policy has paid its share of eligible costs, further minimizing out-of-pocket expenses for the insured.
### Can the insured person make a profit from duplication of benefits?
- [x] No
- [ ] Yes, but only under specific circumstances
- [ ] Yes, always
- [ ] Only if both policies agree
> **Explanation:** The insured person cannot make a profit from duplication of benefits because the combined payments from the policies do not exceed the actual loss incurred by the insured.
### Which entity generally dictates the rules for determining primary and secondary policies?
- [x] Insurance companies
- [ ] Policyholders
- [ ] Employers
- [ ] State regulations
> **Explanation:** Insurance companies generally dictate the rules for determining which policy is primary and which is secondary through coordination of benefits guidelines.
### Duplication of benefits ensures which of the following for insured individuals?
- [ ] They receive more money than the incurred loss
- [x] Insurance payments do not exceed the actual loss
- [ ] They avoid paying any deductibles
- [ ] They receive faster claim settlements
> **Explanation:** Duplication of benefits ensures that the total insurance payment does not exceed the actual loss incurred by the insured, keeping the compensation fair and proportionate.
By understanding duplication of benefits in health insurance, policyholders can maximize their coverage effectively while ensuring claims are properly coordinated between multiple policies.
