South Carolina Insurance Practice Exam

What is the purpose of the Coordination of Benefits provision in group accident and health plans?

1. To limit coverage to one plan only

2. To increase the total coverage amount

3. To avoid overpayment of claims

4. To simplify the claims process

The correct answer is: To avoid overpayment of claims

The Coordination of Benefits (COB) provision is designed specifically to avoid the overpayment of claims in situations where an individual is covered by more than one insurance plan. When a member is eligible for benefits from multiple insurance policies, the COB provision dictates how those benefits should be coordinated between the insurers. This system ensures that the total benefits paid do not exceed the actual expenses incurred, preventing situations where the combined payouts from different plans could provide a financial advantage to the insured over their actual medical costs. By clearly establishing which plan is primary and which is secondary, COB provisions help ensure that the claim process is fair and equitable for all parties involved. While there might be various reasons related to the efficiency and clarity of administering multiple policies, the central focus of COB is targeted on preventing the overpayment of claims, safeguarding the financial integrity of the insurance systems in place.