Who Pays Primary, Secondary, or Tertiary for Medical Claims

Understanding Coordination of Benefits

Coordination of benefits (COB) is a term used when a patient has two or more health insurance plans. Certain rules apply to determine which health insurance plan pays primary (first), secondary (second) or tertiary (third). There are several guidelines to determine in what order the medical office must bill each health insurance plan:

Dependent/Nondependent Rule

Dependents
Hero Images/Getty Images

The Dependent/Nondependent Rule applies to the health insurance plan subscriber and the subscriber's spouse. The primary payer is the health insurance plan that covers the patient as an employee, subscriber or member. The secondary payer is the health insurance plan that covers the patient as a dependent.

Birthday Rule

Coordination of Benefits
Betsie Van der Meer/Getty Images

The birthday rule applies to dependent children if the parents are married, not separated, or have a joint custody order that does not specify health coverage responsibility. The birthday rule states the primary payer is determined by the parent whose birthday falls first within the calendar year. In the event that both parents have the same birthday, the health insurance plan that has provided coverage longer is the primary payer.

Custody Rule

Custody Rule
Bjarte Rettedal/Getty Images

The Custody Rule applies to dependent children of divorced or separated parents without a divorce decree. The order of insurance payers follows this order:

  1. The custodial parent
  2. The spouse of the custodial parent
  3. The non-custodial parent
  4. The spouse of the non-custodial parent

In the event that there is a divorce decree, the health insurance plan of the parent who is assigned by the courts to carry health insurance coverage for the child is the primary payer.

Subscriber Rule

Subscriber Rule
PhotoAlto/Frederic Cirou/Getty Images

The Subscriber Rule determines:

  1. When the subscriber has an active health insurance plan and a COBRA (Consolidated Omnibus Budget Reconciliation Act) plan, the active health insurance plan is the primary payer.
  2. When the subscriber or the subscriber's spouse has an active health insurance plan and a COBRA plan, the subscriber's health insurance plan is the primary payer.
  3. When the subscriber has an active health insurance plan and an inactive health insurance plan, the active health insurance plan is the primary payer.
  4. When the subscriber has two active health insurance plans, the health insurance plan that has been active the longest is the primary payer.

Medicare Secondary Payer

Medicare Secondary Payer
Jose Luis Pelaez Inc/Getty Images

Medicare Secondary Payer or MSP refers to Medicare benefits when Medicare is not the primary insurance. Medicare requires all health care providers to know how to determine when Medicare is the primary or secondary insurance for their Medicare patients. Medicare is primary when the patient is:

  1. 65 or older and has a small group health plan through their own current employer or through their spouse's current employer
  2. 65 or older with insurance through a retirement plan
  3. Disabled and has a small group health plan through their own current employer or through their spouse's current employer

In instances that the primary insurance denies the claim, Medicare may pay only in certain situations.

Third Party Liability Insurance

Third Party Liability
Blend_Images/Getty Images

For accident-related services, the following third party liability insurance should always be filed as primary:

  1. Motor Vehicle or Auto Insurance including no fault, policy or Med Pay
  2. Worker's Compensation Insurance
  3. Home Owner's Insurance
  4. Malpractice Insurance
  5. Business Liability Insurance

Medicaid - The Payer of Last Resort

Medicaid
David Sacks/Getty Images

Medicaid is always the payer of last resort. This simply means that Medicaid always pays last where other health insurance plans are present. Recipients are required to keep Medicaid informed of any health insurance information. Providers are also responsible for notifying Medicaid of third party insurance they find out about as well as informing Medicaid of any third party payments they receive on behalf of the recipient.

Continue Reading