Coordination of Benefits
Description of COB
Relevant Court Decisions
Plan Document Language
Use or Abuse of COB
Call for a change
This treatise deals with Coordination of Benefits (COB) in seven parts:
· Historical Perspective
· Description of COB
· Relevant Court Decisions
· Plan Document Language
· Actuarial Analysis
· Use or Abuse of COB
· Call for Change.
1970 The original model was adopted in the format of a series of
guidelines. ERISA and self-funding had not yet appeared.
1980 The model was amended for COB involving divorced or
1982 The active v. non-active rule was introduced. Non-active
includes retired and laid off participants (or a dependent of such
1984 Birthday rule (in lieu of father being primary) was introduced.
Also the rules permitted the secondary plan to preserve the deductible and copayment.
1985 Major revision of rules for clerical reasons.
1987 Provisions allowing less than 100% coverage options was introduced for the first time.
1988 Several new rules were added:
· Priority where divorced parents have joint custody
· Preservation of cost containment provisions of secondary plan for the first time are allowed.
1990 Several new rules were added:
· Medicare and working spouses
· Plan is primary to active participant who is also a COBRA participant from another plan.
1995 Several new rules were added and entire model was written.
· Two HMOs could not coordinate.
· Fall back rule was introduced (i.e., the plan having the covered person the longer).
· Parents who were never married considered.
Following an extended series of NAIC meetings in the 1960s with insurers and numerous industry groups, it was decided that NAIC guidelines should be promulgated so that all of the interested parties would be in sync as regards COB. Some of the rules were controversial and met significant opposition. Many insurers were alarmed that individual policies were not a subject of the rules.
The rules in the decades which followed have been perfected and such rules are now in some form of codification in all jurisdictions except DC, HI, NY, PA and VT. In the sections which follow, these rule-related topics are discussed.
· Purpose and Applicability
· Basic Concepts
· Rules for Coordination
· Secondary Plan Practices
· Numerical Examples
The original COB concept was adopted based on an actuarial estimate that 7½ % of total benefits would be avoided by enforcing the COB provision and that no person of virtue would be harmed thereby; also the control over on escalating health care costs (even then a problem or concern) would be helpful.
The original worries with the COB rules were these:
· How much would it cost to administer COB?
· Would additional information be required by the secondary payer?
· Would claim delays be a problem?
· Would participants understand and accept the COB concept?
· Would providers cooperate?
The original COB administration involved the use of the Duplicate Coverage Inquiry Form a cumbersome, hard-copy form which would be used by the secondary payer. Following the changes in the physician and hospital claim forms, this form went out of vogue years ago. The following prestigious industry groups promoted uniformity in COB administration.
· International Claims Association
· Health Insurance Association of American
· American Medical Association
· American Hospital Association.
Early problems which challenged the industry and NAIC groups included the following:
· What is the applicability to self-funded plans?
· Should individual policies be included?
· What of no-fault, auto medical, homeowners and workers’ compensation?
· How should HMOs be handled?
· What is the definition of allowable expenses?
· What of cost containment requirements?
· What of group look-alike coverages (franchise or supplemental coverages, e.g.)?
Early problems or challenges in the development were met and handled in the following manner:
· Gender Rule
This was generally not well received and was eventually replaced with birthday rule.
· Preservation of Deductible and Copayment
Because double-covered families spent their money, they reasoned all of their out-of-pocket expenses should be covered. This logic gave significant resistance to the preservation advocates.
· Cost-Sharing on Pro Rating Movement
The so-called Georgia proposal called for a pro rating of expense approach which was rejected because it was too costly and difficult to administer.
· Administrative principles which emerged were these:
2. Free of manipulation
3. Foolproof way to resolve conflicts
4. Adequate retooling time to adjust computers.
Separate COB rules were to apply to medicare.
· Children from Disrupted Homes
The variations are many, the family law principles are constantly changing and the states have their own separate legal standards. Then too, states have wide variations in the COB rules which have neen codified by law or regulations.
· Active/Inactive Rule
This is where a person is covered as both an active and retiree. Whether the person is a retiree or a person laid off or inactive, the rules are the same.
The introduction of COBRA brought new challenges to COB. The rules which eventually emerged are as follows for a COBRA beneficiary which is also on a another plan:
· John is COBRA and former employee of Plan A.
· John is dependent of Spouse Mary, an active participant in Plan B.
· Plan A covers John as secondary.
· Bill and spouse Nancy are family COBRA from Plan C.
· Nancy also is active participant in Plan D.
· Plan D covers Nancy as primary.
There are two guiding principles which are applicable to the secondary plan:
· Participants should be able to collect up to 100% of their allowable expenses which should be liberally defined.
· Claims settlement process should be simple.
Two enormous conceptual changes were introduced in 1984:
· Preservation of deductible and copayment
· Dependent opt-out privilege.
Preservation of Deductible and Copayment. For reasons of cost containment, the secondary plan must not let the affected participant escape the burden of paying the deductible and the copayment. The copayment is typically a constant (not reducing to $0 when an out-of-pocket limitation is reached). Such copayment rate is 80% as a rule.
Dependent Opt-Out Privilege. The removal from coverage because of double coverage is essentially forced due to the preservation rule. This being the case, lenient rules should be applied for the dependent to gain participant readmission when double coverage ceases.
In 1987 another enormous charges was introduced called the preservation of cost containment or managed care provisions. This change was accomplished by allowing the by allowing the secondary plan to use the allowable expenses of the secondary and not the primary plan.
The movement to rename Benefit Bank the Benefit Reserve is noted but it never really caught on. With self-funded plans, Benefit Bank is largely not used because of the confusion and difficulty. It is not appropriate with the carve out (or anti-duplication) method.
Consider these facts:
Primary Plan 1000 1000
Secondary Plan 1000 600
Neither plan has a deductible; Plan A has a 70% and Plan B has an 80% copay with
These are the options of the secondary plans:
Copay Cost Containment
A No No
B No Yes
C Yes No
D Yes Yes
Primary A B C D
Submitted 1000 1000 1000 1000 1000
Allowable 800 800 600 800 600
Primary Benefit 560 640 480 640 480
Secondary Benefit N/A 240 240 80 0
Participant Benefit 240 0 0 0 0
Benefit Bank N/A 400 440 560 480
· A and D are commnly seen; A and C are not commonly seen.
· The Benefit Bank is not typically used with C and D.
· The copay and allowable differences in the primary and secondary plans are due to cost containment or managed care factors.
Where an HMO is involved, the allowable expense of the HMO is the economic value of the benefits. This would be the charges which are usual, customary and prevailing.
The NAIC could only encourage self-funded plan to follow the NAIC COB guidelines. The NAIC has taken a strong position on these issues.
· COB and subrogation are entirely different concepts.
· An always secondary position should be repugnant to all parties to COB.
· The permitted waiver for small claims (under $50, e.g.) has failed to be codified.
· The concept of splitting the bill when the primary and secondary fail to agree was considered but rejected. Rather, the plan at risk the longer is to be
Description of COB
BASIC PRINICIPLES AND CONCEPTS
Group health coverage was developed so that employers could help lessen the burden of increasing medical expenses incurred by their employees and the employees' dependents. However, group health coverage is not intended to allow families to profit from illnesses or accidents.
Rules were initiated to cover instances where the same individual was covered under two group health insurance policies. This situation arises most often in two-worker families, where each person is covered both as an employee and as a dependent spouse (or, in the case of children, as dependents under each parent's plan).
The possibility of a person profiting from an injury or illness, as a result of duplicate coverage, might occur in the following situations:
· If both a husband and wife are employed.
· If a participant holds two jobs.
· If a participant has a covered dependent child who has not reached the age limitation in a plan and is also employed.
· If a child is involved in a divorce situation and group coverage is available through both the natural parents’ and the step-parents’ plans.
The possibility of profit may encourage people to seek medical treatment indiscriminately. Therefore, the industry developed the coordination of benefits provision which is used by most group plans. Coordination of benefits does not apply to individual health plans because of (a) consumer considerations and (b) freedom to contract principles.
Each state, with its own insurance commission, has individual jurisdiction over insurance law. Thus, each state may have its own set of COB guidelines. Individual state guidelines, are generally based on National Association of Insurance Commissioners (NAIC) model insurance provisions. The rules that each state has adopted regarding COB apply only to insured plans. Therefore, although many self-funded plans include these rules in their plan documents, they are not required to do so.
In an effort to ensure uniform regulation on a state-by-state basis (in the absence of federal legislation), the NAIC periodically updates their model law and encourages adoption by such updates by the states. Although the NAIC recommendations are not binding, they are usually adopted by individual state insurance departments or, in some cases, state legislatures. Therefore, NAIC guidelines are particularly influential.
The reader should keep in mind these facts when probing the intricacies of COB:
· COB is complex in application.
· COB is not generally understood.
Role of Self-Funder
A self-funded plan is free to follow or not follow the NAIC COB guidelines; may set its own rules and (albeit unwisely) may elect to be secondary to everyone if its wishes. Most self-funded plans elect to follow the NAIC guidelines because it is in their best interest to do so. The reader is alerted to the Section entitled: Plan Is Always Secondary Position later in this commentary. Where a self-funder elects to be a maverick or renegade plan, it risks being challenged as arbitrary and capricious by a court. For the self-funder to abide by the guidelines shows prudence on the part of such self-funder.
The COB provision has two key requirements:
· Benefits are reduced only to the extent necessary to prevent the participant from making a profit.
· In no event will any plan pay more than its total benefits without regard to the coordination of benefits clause.
The COB is not a cost containment device, but one designed to fairly allocate the burden of paying with multiple plans. While not perfect, it is workable. COB was designed with five basic principles in mind.
Optional. A plan may or may not include such provision in its plan document.
Universal. COB works only if everyone abides by it. The COB guidelines give every plan a level playing field.
Simple. The rules must be clearly stated and understood so as to avoid controversy and confusion.
Reliable. The rules should be relied upon as being authoritative and, also, free from control or manipulation.
Certain. The rules should always produce a plan to be primary and a plan to be secondary in a clear and authoritative manner. With the guidelines, no instance should be confronted in which there are two plans, each claiming to be secondary.
Certain basic concepts with coordination should be reviewed:
Allowable Expense. This is any item of expense which satisfies each of the following
· Is necessary, reasonable, and customary.
· Is covered in whole or part.
· Is covered under either or any group plan.
This category of expense is a concept established solely for the purpose of determining what expenses will be considered in applying COB. Allowable Expense is limited only by the plan definition and has no reference to other expenses described in the plan such as covered expenses. The Coordination of Benefits provision results in reduced benefits when the combined total benefits under all plans exceed Allowable Expenses. The benefit payable after coordinating benefits is the balance of Allowable Expense, but never more than the normal plan benefit for covered expenses specifically spelled out in the plan. Coordination of Benefits allows the payment of benefits for deductibles, for coinsurance, and for expenses which are Allowable Expenses but are not covered expenses under the plan.
Necessary, Reasonable, and Customary. It is not the intent of the COB provision to require payment of benefits to reimburse expenses which none of the plans consider necessary, reasonable, and customary. Therefore, only that portion of an item of expense which is necessary, reasonable, and customary is an Allowable Expense. Because each plan has its own standards, the amounts each plan considers reasonable may differ with respect to a particular item of expense. In this event, the Allowable Expense is the highest necessary, reasonable, and customary charge recognized by any of the plans. Each plan, of course, will determine its normal policy benefit based on its own reasonable charge figure.
Benefit Bank. The Benefit Bank accumulates the dollar difference between what the secondary carrier paid and what would have been paid had there been no other coverage. Benefit Bank is often referred to as claims savings or benefit savings account.
At Least a Portion of Which is Covered Under One Such Other Plan or This Plan When Incurred. To be considered an Allowable Expense, an item of expense need be covered by only one of the plans under which the participant is covered. Consequently, Allowable Expense can include a service excluded by one plan, but covered by the other plan. Since the benefit payable after coordinating benefits is the balance of Allowable Expenses, but never more than the normal policy benefit, the plan can be called upon to pay benefits toward the expense of such a non-covered service. Policy benefits would normally include no benefit for the non-covered service.
Other plans exclude individual plans, but do often include employer-sponsored plans that have the appearance of group medical coverage. Examples of such coverage follow:
Blanket Insurance. Issued to an indefinite and changing group temporarily exposed to a common hazard, but who are not individually identified, such is health coverage provided through a common carrier for passengers during a specific trip, or through a hotel for its guests, or through an athletic club for persons participating in the club's athletic activities. Such plans ns are not subject to coordination of benefits.
Student Accident Insurance. Do not include this type of coverage in the interpretation of the definition of a plan, even though written on a blanket, group, or franchise basis. In this context, Student Accident Insurance means coverage providing benefits to grammar school and high school students for accidents only, including athletic injuries, either on a 24-hour basis or to and from school, for which the parent pays the entire premium as a supplement to the parent's group coverage.
Franchise Insurance. Individual and family type insurance on a deduction basis or issued to the employees of a common employer or to the members of an association under an agreement by which the employer or the association agrees to collect premiums and remit to insurer. Do not coordinate benefits with franchise insurance because it is contractually interpreted to be a form of individual insurance.
ORDER OF BENEFIT PAYMENTS
(CURRENT NAIC RULES)
Use the first of the following rules which applies:
1. Non-dependent/Dependent. The benefits of the plan which covers the person as the participant (that is, other than as a dependent) are determined before those of the plan which covers the person as a dependent.
2. Dependent Child/Parents Not Separated or Divorced. Except as stated below, when the plans cover the same child as a dependent of different persons, called parents:
· The benefits of the plan of the parent whose birthday falls earlier in a year are determined before those of the plan of the parent whose birthday falls later in that year.
· If both parents have the same birthdate, the benefits of the plan which covered the parent longer are determined before those of the plan which covered the other parent for a shorter period of time. However, if the other plan does not have the rule described above, but instead has a rule based upon the gender of the parent, and if, as a result, the plans do not agree on the order of benefits, the rule in the other plan will determine the order of benefits.
3. Dependent Child/Separated or Divorced parents. If two or more plans cover a person as a dependent child of divorced or separated parents, benefits for a child are determined in this order:
· First, the plan of the parent with custody of the child.
· Then, the plan of the spouse of the parent with the custody of the child.
· Finally, the plan of the parent not having custody of the child.
However, if the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child, and the entity obligated to pay or provide the benefits of the plan of that parent has actual knowledge of those terms, the benefits of that plan are determined first. This paragraph does not apply with respect to any benefit year during which any benefits are actually paid or provided before the entity has that actual knowledge.
4. Active/Inactive Employee. The benefits of a plan which covers a person as a participant who is neither laid off nor retired (or participant's dependent) are determined before those of a plan which covers that person as a laid off employee (or as that participant's dependent). If the other plan does not have this rule, and if as a result, the plans do not agree on the order of benefits, this rule is ignored.
5. Longer/Shorter Length of Coverage. If none of the above rules determines the order of benefits, the benefits of the plan which covered the participant the longer are determined before those of the plan which covered that person for the shorter time.
Action Against Double-Coverage
The Employer of John (the family's principal wage earner) notes that John has Mary,
his wife, covered as his dependent; Mary who also works is covered under her own plan
as well. The Employer also has Nancy covered as well as her husband Bill (the family's principal wage earner); Bill, who also works, is covered under his own plan. The Employer may approach these facts in any of four ways:
Approach A. Mary may be covered under the plan because John is the principal wage earner; Bill may not be covered under the plan because Nancy is not the principal wage earner.
Approach B. The plan will accept the spouses, Mary and Bill, as secondary participants but if either Mary or Bill have declined coverage with their employer, Approach B will charge its participants (John and Nancy) an additional premium.
Approach C. While available only for the self-funder, the plan might be amended so that the participants (John and Nancy) must elect coverage either on the Employer's plan or their spouse's plan, but not on both. The (Mary and Bill) may be covered as secondary only.
Approach D. The employer may offer each participant (John and Mary) a $800 contribution to a cafeteria plan if they exclude the spouses (Mary and Bill) from the plan.
The plan having the person as an employee is primary. Medicare will, however, generally be secondary.
Special Medicare Situation. The guidelines deal with a special and unique situation.
· John is a retiree participant in Plan A where the benefits are stated as basic less Medicare benefits.
· John is also on Medicare.
· John is also a dependent on his wife’s (Mary’s) plan where Mary is an active employee. A vicious circle would, with no intervening rule, result with a claim submitted by John, i.e., an indeterminate claim by John.
To break the vicious circle, the guidelines declare that Mary’s plan is primary and that Medicare is secondary.
Dependent Children – Parents not Divorced or Separated
The birthday rule applies which means that the parent whose birthdate occurs first in the calendar year is primary. Example:
John’s birthday is 8-14
Mary’s birthday is 9-12
In this example, John’s plan is primary. In a rare case:
John’s birthday is 7-14
Mary’s birthday is 7-14
If John has been a participant for 30 months and Mary has been a participant for 20 months, John’s plan is primary because he has been covered the longer.
The birthdate rule replaced the gender rule which was out of step with the national philosophy of not basing decisions on sex.
The guidelines deal with the problem of each plan declaring secondary as follows:
· Plan A – Gender
· Plan B – Birthday
Claim on child. Father is Plan B and mother is Plan A. Father's birthday is 10-12. Mother's birthdate is 8-12. Plan B claims secondary because mother's birthdate is first; Plan A claims secondary because, by its gender rule, the mother's plan is secondary. As a transition rule, in such instances the guidelines state that the birthday rule shall be superseded by the gender rule and the priority order then redetermined.
Dependent Children – Parents Divorced or Separated
A substantial modification of either the birthday or the gender rule must be made in this circumstance because the primary plan may be the one covering the non-custodial parent. The difficulty will be compounded by non-cooperating parents or where one parent is missing. Further complexities arise where the custodial parent is the mother, the father's plan is primary and unwilling to cooperate, the mother's plan refuses payment and is sued by the provider claiming sex discrimination.
The guidelines declare that the plan of the custodial parent is primary. Custody means the exercising of responsibility and control over the child's health care. The other parent's plan, if there is one, is secondary.
Absent a court decree, the priority would work as follows:
· Mother, Mary, has custody of daughter: Mary’s Plan A.
· Mary has remarried and the stepfather of daughter is Bill. Bill’s Plan is B and daughter is also covered.
· Mary had a former husband, John. John’s Plan is C, but cannot cover daughter because she fails to meet the plan’s dependent child definition.
In this instance, plan A is primary and Plan B is secondary. Plan C is not involved.
Decree States Father is not Responsible. In this instance, the father is given the custodial role, regardless of other circumstances and has, through his plan, the primary plan responsibility. In such decrees, the parent with primary responsibility will be designated in the decree (in this case, the father). The regrettable feature of this allocation is that often it will not be clear as to which parent is to be primarily responsible for the health care needs of the child.
Decree States Joint Responsibility. In such instance, the priority may be determined as though the parents were not separated.
Active v. Inactive
This rule deals with the instance where John is a participant on Plan A as a worker, but is also a participant on Plan B as a retired or laid off employee. In such instance, John would normally be primary to Plan A and Secondary to Plan B. It must be noted that inactive is limited to retired or laid off persons; it is not extended to persons on continuation of coverage from another plan.
Summary of Active/Inactive Order
Does Plan Have
John is active
John is inactive
John is active
John is inactive
Continuation of Coverage
This continuation relates to COBRA primarily but to state-mandated continuation benefits also. Consider this example:
· John is on continuation from Plan A either as a COBRA or under any state continuation requirements. John has had a qualifying event in that he has both terminated employment and has also lost coverage.
· John becomes a participant under Plan B of a new employer; which has a preexisting condition provision.
· John has a claim which is not affected by the preexisting condition provision. In this instance, Plan B is primary and Plan A is secondary.
In this instance, Plan B is primary and Plan A is secondary.
The issue which remains unresolved is this:
· John is a COBRA in a self-funded Plan A.
· John is newly-covered under a fully-insured Plan B.
· Both plans declare a secondary position with the claim.
The rules do not resolve this issue, but default to the longer/shorter rule.
There are instances where the primary plan cannot be determined with the previous rule. In such instance, the plan covering the person the longer is primary. This is the so-called default rule.
Plan is Always Secondary Problem
The practice exists with some self-funded health care plans to always declare themselves to be secondary. The motive is cost containment; the self-funders often take a strong position, that, as fiduciaries, they must protect plan assets to the maximum extent possible
The simple truth is that if every plan, self-funded or not, were to take such a position, the result would be total chaos. It is difficult to imagine any logic which would allow a plan to declare itself secondary to all or any other plan or plans. The result of all plans being secondary is simply not reasonable.
The position of some federal plans (VA, Medicaid, CHAMPUS) should be noted; these federal plans declare themselves to be secondary, in most instances, by statute.
There appears to be no legal obstacle to a self-funded plan declaring itself to be secondary to any individual policy. The reasons why such coordination is rarely seen, is administrative and not legal. Such coordination would be very expensive to properly administer.
The language of the NAIC Model Bill condems the so-called self-funded renegade plans.
Differing Priority Provisions
These facts should be addressed:
· Self-funder has gender rule.
· Fully insured has birthdate rule.
· Both are properly secondary but fully insured plan does not have the longer/shorter rule.
What happens in this circumstance? Could a self-funder amend its plan so as to declare itself secondary it finds itself in a position where both it and the other plan are properly secondary?
The answers to these questions are as follows:
1. In the circumstance cited above, the self-funder would refuse; Depending on the actions of the insurer, the accommodation could be easy or a court case could result.
2. A court has allowed plan language which would allow the self-funder to always be secondary if both it and the other plan were properly secondary. See Lakeshore HMO v. Dilesco Corp. Employee Benefit Plan,___F.Supp___(W.D. Mich. 1991).
CLAIMS PROCESSING ISSUES
General guidelines to attaining increased COB savings are as follows:
· More investigative emphasis should be placed on the categories of benefits which have the greatest potential for other coverage.
· Examiners should not routinely accept a benefit form which is incomplete. Questions regarding other coverage and other employment should be carefully scrutinized.
Further investigation is warranted if:
· Claim form(s) have blanks.
· There is a slash through the answer box or N/A is stated.
· The phrases unemployed, retired, or self-employed are shown.
When an examiner wants more COB information, such examiner should not return the partially completed benefit form for completion. Instead, a specific inquiry should be used. Following are some of the common indicators for which an examiner should be on the alert relative to questionable COB situations:
· Large unassigned dollar amounts from a provider when there is no indication of payment having been made, especially when the services are several months old. (In this situation, the examiner should consider the possibility of fraud as well as COB).
· The provider's bill shows a payment or credit which is different from the way such provider normally charges. For example: A provider charges $40.00 per visit yet there is payment of $37.50. If this occurs, the examiner should contact the provider, by telephone if possible, regarding the item in question.
· A hospital bill in excess of $500.00 which is not assigned, especially if the bill is for services that are several months old. This is true even if the bill was paid in full. The examiner should either call the hospital to obtain information and/or send a written inquiry.
· Bills are constantly being copied and/or paid by personal check. A written inquiry should be sent to the participant.
· A copy of a bill that gives the appearance of having been altered. The examiner must suspect fraud as well as COB. For example: If the alteration is where the patient's name appears on the bill, the examiner may be concerned with fraud than with COB. The nature of the alteration should determine the type of questions asked of the provider and, possibly, the employee.
· The term unemployed as the answer to a question regarding employment status. Many unemployed persons are actually in a temporary lay-off category. Many times their group coverage remains in force. The examiner should send out an inquiry which includes the question: What was the reason you stopped working for your last employer? The examiner should also contact the most recent employer to verify the circumstances.
· Self-employed as the answer to a question regarding employment status. It is sometimes very difficult to prove whether other insurance exists in a self-employment situation. An inquiry should be sent to the work address. However, especially on large dollar claims, the examiner should also retain the services of an outside investigative firm to follow through on this type of situation. Checking payroll information may reveal that contributions are being deducted for group coverage.
· The term retired is shown relative to employment status. An examiner should not accept retired as meaning the person only has Medicare. Many companies allow retired employees to remain covered under the employer's group medical program. The examiner should send the employee an inquiry which specifically asks for the name of the most recent employer and whether the retired person is covered by a group plan. The most recent employer should also be contacted to verify the circumstances.
When handling any of the above situations, the examiner should also give consideration to enlisting the aid the employer whose group plan is being administered. Sometimes, the employer may be aware of circumstances which will assist the examiner in completing such investigation.
If it has been determined that the plan being administered is primary, the benefit should be processed as though there is no other coverage. If it has been determined that the plan being administered is secondary, the following steps should be taken to compute payment for each benefit.
· List the medical charges received for each type of service covered (hospital room and board, surgery, etc.). The total of these charges is the maximum allowable expense.
· Compute normal benefits.
· For all charges, determine the amounts which the primary payer has paid or will pay.
· For the maximum allowable expense, subtract the amount the primary plan has paid.
· The balance, not exceeding the plan's normal benefit, is the total liability for the plan.
· Any difference between the total payment and the normal benefit represents the benefit credit. Benefit credits are similar to a bank account. If a charge is received for expense covered by either plan, but for which both benefits combined do not equal the maximum allowable expense, accumulated benefit credits for the claimant can be used to make up the difference. Benefit credits not used by the end of the benefit year are canceled.
· For each payment, verify that the total payment amount plus the primary plan's payment equals the maximum allowable expense for the particular charge, provided that the normal benefit plus the total accumulated benefit savings are not exceeded.
The secondary plan may pay benefits toward all or part of the expense of an item covered under the primary plan but excluded under the terms of the secondary plan.
According to the COB provision, any expense which is allowed by either plan becomes an allowable expense under both plans in a COB situation (e.g., if one plan has coverage for certain dental expenses and the other plan does not, such dental charges are an allowable expense under the plan without dental coverage).
COB with a phantom plan works as follows:
· Other Coverage is Elective
Do not coordinate with the phantom plan.
· Other Coverage is Legally Required
Do coordinate with the phantom plan. An example would be where participant failed to maintain a no-fault auto insurance policy as required by the state’s laws.
An example of what is mean by COB with a phantom plan follows:
Mrs. Smith has family coverage with Plan A, which pays 80% of UCR. Mr. Smith's employer offers identical family coverage, but Mr. Smith has chosen not to enroll because he is covered under the wife's family coverage as a dependent. Mr. Smith receives medical treatment and files a claim with Plan A. The UCR for his claim is $100. Plan A ignores the fact that Mr. Smith is not really covered by his employer's health plan and pretends that he has enrolled in his employer's plan (the Phantom Plan). When it receives the claim for Mr. Smith, Plan A acts like a secondary payer, coordinating with the Phantom Plan. Although no payments are, or can even be, made by the Phantom Plan, Plan A pretends that Mr. Smith's employer's plan has paid its maximum benefits ($80). Plan A then subtracts the imaginary payment ($80) from the allowable expense (UCR) for the claim ($100). Subtracting $80 from $100 Plan A pay $20, and Mr. Smith must pay the remaining claim amount from his own pocket. As a result, Mr. Smith, who is actually enrolled under his wife's family coverage, receives little benefit from that family coverage.
The facts were these:
· Hospital, as assignee, filed claim on a newborn with Plan Supervisor.
· UB-92 indicated there was also an individual policy.
· TPA, on a hunch, pursued the individual policy matter so as to determine these questions:
1. Why did hospital’s UB-92 indicate that there was an individual policy?
2. What was the true nature of this other coverage?
· To obtain answers, the Plan Supervisor, after pending the claim, did the
1. Obtained a copy of the policy from the participant. It did have a COB provision therein.
2. Found out from the insurance department how the policy was filed. It was filed as a group policy and not as an individual policy.
3. Determined from the agency marketing (the plan) that it was sold as an individual policy – and most certainly bought as an individual policy.
The mechanics of the arrangement were these:
· Insurer places a trust in a state with no group laws - or limited law - Rhode Island, e.g.
· The traditional certificates are individual look-alikes so that the arrangement, in appearance, is individual.
· The employee pays for the coverage through an employer-sponsored payroll deduction arrangement with the employer normally making no contribution.
· A sales brochure, application, and underwriting is used. Dependents may be covered.
· To meet mandated benefit requirements, the coverage is filed in the state of sale under the extraterritorial rules of the state, if any.
In matching the COB provisions of the alleged individual policy and the self-funded health care plan, it proved that the self-funded plan was secondary. The insurer, upon review, concurred that it had to be primary. The participant was upset because she and her husband had planned on collecting from both in full. They were also upset that the terms were different from those expected. The hospital was upset as to the time delay needed to do all of the research, and work. The plan was pleased because being secondary rather than primary on a larger preemie claim made a huge financial difference.
Lesson: The practice set forth above has become quite common. Two approaches are
· Coordinate with Individual Policies.
This is an expensive, time consuming and highly controversial claims practice.
· Amend Wording in Claims Submission Statement.
Ask question: “Will you file against any policy, in addition to a group policy which has a coordination of benefits provision?” This will be most confusing to the participant; it will also be most expensive and time consuming to the administrator.
PRESERVATION OF DEDUCTIBLES AND COPAYMENTS
These facts are critical in understanding the preservation of deductible issue:
· Prioritizing is essential or else chaos will result.
· That 100% of allowable charges be covered is not essential in order to avoid chaos. That is, the secondary plan may elect that it will cover the usual difference but preserve its deductibles and copayment and exclusions; this is the pro-preservation rule.
Many self-funded plans are following the pro-preservation rule.
The NAIC was originally in favor' of the pro-preservation rule and adopted same in 1985. It subsequently repealed the rule. Eight states originally adopted the pro-preservation rule, but have since repealed it. The six states with a pro-preservation rule are these: KY, MN, NH, NY, TN, WS. The rule permits, but does not require, pro-preservation.
Against. It is not fair that the participant should have to incur double deductions when a fair contribution is being paid. The secondary plan has an advantage over the primary plan which runs contrary to the Guidelines.
For. By removing the economic stake, the participant has no reason to be prudent as regards to health care costs. It is only logical that the participant has some bite into the health care cost.
Debatable. A reason for the rule is that it will encourage families to discontinue double coverage. Some, however, believe this to be good -- some believe it to be bad.
· Insurers have tended to believe double coverage is good arguing that the difficulties of reinstating such, once dropped, are too great to justify the hazards of persons being left uncovered.
· Many self-funders have tended to believe double coverage is bad, arguing that the practice, by definition, is not cost containing. Special accommodations are made in the plan provisions to avoid persons who opt in and out for double coverage purposes only, without endangering their losing insurability.
Several simple rules will permit the HMO plan and the indemnity plan to coordinate.
Situation A – HMO Plan is Primary
Indemnity should pay only for nay of the participant’s out-of-pocket expense
Situation B – Indemnity Plan is Primary
The HMO provides the health careservices, but bill the indemnity plan for the cash value of such services; the indemnity plan pays the HMO what it would have paid as primary. Any unpaid portion is the burden of the secondary plan.
There remain, however, several unresolved and difficult problems with the indemnity - HMO COB.
· HMO is primary, care is provided by a non-HMO provider. By its rules, the HMO is not liable for any benefit. Does this make the secondary plan the primary plan? The indemnity plan will feel stuck with a heavy and unfair burden. No solution exists to this problem because the NAIC is not willing to ever have any allowable expenses go unpaid.
· HMO is secondary, care is provided by a non-HMO provider. The indemnity plan pays its normal expenses. This forces the HMO to be secondary to expenses which it normally would not pay. The HMO, as a consequence, feels put upon.
COB WITH AUTO COVERAGE
The Supreme Court held that the Pennsylvania no-fault automobile statute was preempted by ERISA. See FMC v. Holliday, 101 S.Ct. 1109 (1990). What impact would this decision have on self-funded medical plans?
One reasonable answer, it would appear, is this: Declare the health care plan to be secondary to all automobile no-fault and medical insurance. Suggested plan document language would be as follows: “This plan's benefits will always be secondary to benefits paid, or payable, by any automobile medical plan or a no-fault automobile insurance policy.”
There would appear to be no legal prohibition to such a plan benefit in view of the court's decision; it would be difficult to imagine that a could find the plan's fiduciaries guilty of arbitrary or capricious actions by adopting such a plan benefit.
There are, however, some administrative considerations to be taken into account. The main one is this: Once the benefit is in place, it must be properly administered. This is easier said than done. The methodology of locating the proper information, understanding the various automobile benefits, dealing with hostile insurers and unhappy participants, delays, and added claims expenses are but a few of the practical considerations.
Payment may not be made by the plan for otherwise covered items or services to the extent that payment has been made, or can reasonably be expected to be made, for the items or services, under automobile medical or no-fault insurance (including a self-funded plan). The plan is the secondary payer even if state law or private contract or insurance stipulates that the plan is primary. If plan payments have been made, but should not have been, or if the payments were made on a conditional basis, they are subject to recovery.
If the services are covered under automobile medical or no-fault insurance, the automobile insurer should pay first. If that insurer does not pay all of the charges, a claim for secondary benefits may be made. The plan may pay for services related to an automobile accident, if benefits are not currently available under the individual's automobile medical or no-fault insurance coverage, because that insurance has paid maximum benefits for items or services not covered by the plan or for non-medical benefits such as lost wages.
The question in each case involving automobile related medical expenses is whether automobile medical or no-fault benefits can be paid for them. If so, the automobile insurance is primary. If no, the plan may be primary. Primary plan benefits cannot be paid merely because the beneficiary wants to save such beneficiary’s automobile insurance benefits to pay for future services. Because automobile insurance benefits would be currently available in that situation, they must be used before the plan will pay.
If there is an indication that the individual has filed, or intends to file, a liability claim against a party that allegedly causes an injury, follow the plan subrogation rules.
Automobile. Any self-propelled land vehicle of a type that must be registered and licensed in the state where it is owned.
Automobile Medical or No-Fault Insurance. Insurance coverage (including a self-funded plan) that pays for all or part of the medical expenses for injuries sustained in the use of, or occupancy of, an automobile, regardless of who may have been responsible for causing the accident. (This insurance is sometimes called personal injury protection, medical payments coverage, or medical expense coverage).
Liability Insurance. Insurance (including a self-funded plan) that provides payment based upon legal liability for injuries or illnesses or damages to property. It includes, but is not limited to, automobile liability, uninsured motorist, homeowner's liability, malpractice, product liability, and general casualty insurance. This exclusion does not apply where the homeowner receives payment under his or her own homeowner's insurance policy since such a payment does not constitute a liability insurance payment. This coverage is involved with subrogation settlements.
Uninsured Motorist Insurance. Liability insurance under which the policyholder's insurer will pay for damages caused by a motorist who has no automobile liability insurance, who carries less than the amount of insurance required by law, or is underinsured.
The health care plan will carve out of its payments what has been, or will be, paid by the insurer offering the no-fault or automobile medical insurance.
It differs from COB in that with COB there is a sharing of the risk transfer. The two plans with COB agree that under circumstance A, the first plan is primary and, under circumstance B, the second is primary. With the carve out, the plan will always be secondary to the no-fault or medical benefits.
It differs from subrogation in that with subrogation there must be established a negligent third party to whom the burden may be shifted. By definition, neither the no-fault nor the medical benefits involve any issue of fault or liability.
Many states have statutes relating to no-fault or compulsory automobile insurance. In general, no-fault automobile insurance provides that persons injured in automobile accidents will be compensated for all types of personal injury losses (these may include both medical and loss of time benefits) up to a specified amount per person with the compensation generally being provided by the automobile owner's insurance company.
The term no-fault insurance may also be construed to refer to statutes which place limitations on, but do not overrule, the right of a party to recover when personal injury losses are suffered in an automobile accident.
How states have legislated in this regard is as follows:
No-Fault States with Compulsory Insurance Requirements.
AR, CO, CT, DE, GA, HI, KA, KY, MA, MD, MI, MN, NV, NJ, NY, ND, OR, PA, SC, SD, TX, VA, WA.
No-Fault States with Financial Responsibility Minimum Requirements.
States Requiring Minimum Proof of Financial Responsibility.
AL, AZ, CA, IA, MS, NH, TN, WI.
States Requiring Compulsory Liability Insurance.
AK, ID, IL, IN, LA, ME, MO, MT, NE, NM, NC, OH, OK, RI, VT, WV, WY.
The examiner should note that a no-fault law does not mandate no-fault coverage in all instances. Many states permit such coverage to be elective. No-fault coverage is particularly significant in accidents in, around, getting into and out of an automobile.
The claims examiner must determine at the outset if the services are for the treatment of an injury or illness which resulted from an automobile or other accident or for which another party is responsible. For automobile accidents, the examiner obtains the name, address and policy number of any insurance company which may be responsible for payment of medical expenses that resulted from the accident.
If the examiner learns that an automobile medical or no-fault insurance company may pay for covered services, it should treat the automobile insurance company as the primary insurer. The plan may pay secondary benefits if the automobile insurer does not pay in full. If the insurer pays for all covered services, there are no plan benefits paid.
If the services are related to an automobile accident, and an automobile insurer has been billed but does not make payment because, for example, the automobile medical or no-fault claim is contested by the insurer, or if there will be a substantial delay in resolving the claim, the examiner should process the claim without regard to the other insurance but treat the claim as an Indeterminate Claim as provided in the model plan document.
If the participant files a claim against a third party for injuries suffered in an automobile accident, the plan may pay for otherwise covered expenses to the extent that payment has not or cannot be made by an automobile or no-fault insurer or has not been made by a liability insurer. For example: A participant incurs $20,000 in medical expenses due to an automobile accident. The individual receives $5,000 in no-fault insurance benefits and also has a liability claim pending against the driver of the other car. The plan will not pay benefits for the $5,000 in expenses paid but will pay benefits based on the additional $15,000 in expenses, subject to the plan's usual subrogation rules.
Identification of Claims. Use these guides to identify claims for covered services in which there is a possibility that payment has been, or can be, made by automobile medical or no-fault insurance.
· The examiner receives information from a provider, a beneficiary, or any other source, indicating a possibility of payment by an automobile insurer.
· On Form HCFA-1450, another insurer is shown on Line A of item 57. On other billing forms, a primary insurer is identified in the Remarks portion of the bill.
· On Form HCFA-1450, occurrence code 0 1 and 02 is shown in items 28-32. On other billing forms the annotation automobile accident is in Remarks.
· The bill shows as complementary insurer an insurance organization that does not issue health insurance.
· The examiner receives or is informed of, a request from an insurance company or from an attorney for copies of bills or medical records.
· There is indication that the beneficiary previously received benefits under automobile insurance or that a claim for such benefits is pending.
UNDISCLOSED DOUBLE COVERAGE
All the elaborate rules may be expertly administered but be for naught if the employer or the TPA is unaware that their participant is double –covered (i.e., as a dependent spouse in another plan). It is the writer’s allegation that this type of double-coverage is not only common but significantly unreported. Also, with the prudency standards of ERISA, this question must be examined: should the employer or the TPA make an effort to know the existence of such double-coverage?
In the early days of COB, we would find a fully insured indemnity plan but not much else; also, the primary and secondary carriers were known to each other by means of the standard COB worksheet.
Even then, undisclosed double-coverage was well known and plans were preliminarily in place to have an industry-wide COB database of identifiable persons who were double-covered. Note: lack of cooperation between the traditional insurers and medical service carriers was one reason for the failure of the database idea. The other reason was that the industry erroneously concluded that the non-disclosure problem was not a serious one.
Industry grew into the generally-accepted practice of pay and pursue which meant a plan would pay as primary all the submitted charges and then pursue the other plan if such other plan proved to be primary. As experience developed, the pay part was happy-time; the pursue part the opposite. This practice is rarely seen anymore, having been replaced by the pay and do not pursue method.
As insurers were awakening to the increasing challenges of COB with fully insured plans there entered two new challenges’
· Managed care.
The ASO agreement offered no challenges; with the TPA-administered self-funded plans, these practices were upsetting to the traditional COB-balance of power:
· ERISA preemption issues
· Self-funders declaring their plan to be always-secondary
· Varying claims practices caused by disparate laws, rules, etc.
Managed Care Organizations (HMOs Usually)
The huge challenge to COB arose where the MCOs paid their benefits as health care services and not as benefit dollars. The Medicare-Plus programs contributed enormously to the primary-secondary confusion with such plans.
As far as the effective or disciplined administration of COB, the situation is not good:
· There is no centrality of COB information.
· Variations by benefit design, funding method, regulatory issues, etc., result in a babble of COB tongues.
· High speed claims processing, with its deemphasis on the claim form (used only rarely) make double-coverage almost impossible to monitor.
· Almost all employers and vendors are unwilling to expect the providers to bring any double-coverage monitoring to the process.
· Privacy rules will make what little records there may be almost impossible to access.
For a variety of reasons, the employer should maintain as part of each employee’s personnel fill the existence of other coverage on such employer. In having the information part of the personnel file, the employer will have greater control over it; that the children are or are not double-covered may be optional with the employer. Such information should be annually updated and also provided to the plan supervisor.
Relevant Court Decisions
RECENT AND/OR ERISA-RELATED
Anti-Duplication Provision. Plan required employees to choose A or B:
A. Be covered under subject plan as a participant.
B. Be covered by the spouse's plan as a dependent and not covered under the subject plan at all.
Employees protested. Court held that the employer was entirely within its right to put such a provision in the plan. It was neither sex-related, not arbitrary and capricious.1
Double Coverage Cannot Be Required. Mother, primary on Plan A, had a baby. Her husband was primary on Plan B. Each had family coverage. Mother added the child; father did not. If the father had added the child, the plan of the father would have been primary. Plan A wanted to pay secondary as though father had made the election. Plan B believed otherwise. Court held that since the father did not make the election, Plan A must be primary.2
Both Secondary Problem. Two self-funded plans had a common participant with large medical bills. The plan, normally primary, had declared itself, in its COB provision, to be secondary to any other health care plan. The court was faced with a standoff: Both plans, by design, were secondary. Plan which declared itself secondary (when it normally would be primary) was held to be primary and also guilty of arbitrary and capricious action. The clause is not enforceable under ERISA. Reason: Participants would reasonably have anticipated the benefit and what the other coverage does is out of their control.3
Always Secondary Language. Self-funded union plan arbitrarily declared itself to be secondary to Medicaid. Medicaid took, as a condition to paying its benefits, an assignment of all health care benefits. Self-funded plan refused to pay when Medicaid asked for reimbursement. Dispute went to court. While the plan is an ERISA one, it does not preempt the right of Medicaid to seek reimbursement therefrom. Therefore, plan did have to make the Medicaid reimbursement. Its claim of being secondary was of no avail.4
Secondary to Auto Medical Issues. Michigan had developed a complex body of law dealing with auto-group medical coverages and their coordination. These rules result, in part, from Michigan statutes. A conflict arose between an automobile policy and a self-funded medical plan. Each, in effect, was claiming to be secondary. As a result, a legal contest resulted. The court held that the Michigan statue and related laws are preempted by ERISA.5
Dependent Child Coverage. Marlene had a baby, born premature and with respiratory problems. Jeffrey, the baby's father, was common-law to Marlene. The baby was enrolled as a dependent of Jeffrey on his health care plan (CSS fund). The CSS fund is a self-funded plan of the Teamsters. Marlene was covered by the J. C. Penney plan (her employer); the baby was not covered under Marlene's plan due to late enrollment.6
· CCS agreed to be secondary but alleged that J.C. Penney plan was primary.
· J.C. Penney denied coverage because of late enrollment.
CSS (Winstead) sued J.C. Penney. As regards the health care plan of J.C. Penney (an ERISA plan), the CSS trust (Winstead) had no standing to sue. The court, therefore, dismissed the complaint.6
Both Secondary Problem. Ronald was a participant in Plan A (birthday rule); Barbara was a participant in Plan B (gender rule). Both plans were self-funded; each covered the other as a dependent spouse. Infant Tricia was born with large preemie expenses. Each plan claimed a secondary posture. Court was asked to decide. The court found that ERISA would preempt the Michigan COB statute and that the Plan B gender rule was proper. The court summarily declared a national or federal gender-neutral rule to be inconsistent with federal anti-sex discrimination philosophies. To that end, the court held that Plan B should replace the gender rule with the birthday rule; the birthday rule is a preferable method to use. It avoids the potential sex discrimination of the gender. Of the gender rule.7
Anti-Duplication Provision. Plan X had a clause in its COB provision which required that such Plan X be notified by the participant of other coverage prior to the incurring of any expense. Plan X was not a group, but an individual policy, and did not contain the standard COB clause. Simply put for Plan X:
Plan X Pays
· Notified of other coverages Regular benefits
· Not of other coverage Regular less carve out
Or other benefits
Plan X was issued to Mr./Mrs. Fosso. When Mrs. Fosso became pregnant they added their then unborn child as a covered dependent. Mrs. Fosso was covered in her own right as an employee under a Plan Y. Shortly before her delivery, Mrs. Fosso quit her job and became a COBRA with Plan Y. Within the thirty day period after birth, Mrs. Fosso enrolled their infant in Plan Y as a COBRA, retroactive to the date of birth. The infant had health problems; Mrs. Fosso failed to notify Plan X that the infant had been added to Play Y; Plan X did a carve out. The Fossos protested. The court found that anti-duplication provisions in whatever form are not contrary to Minnesota public policy nor in violation of any statute. The court, however, found a way of having the Fossos collect double.
· True, the Fossos had to notify Plan X of other coverage.
· The Fossos, when the child was born, did not have other coverage.
· Since the expenses were incurred prior to them being double covered, the provisions of Plan X did not apply.
The retroactive adding of the infant to Plan Y was the key to the court’s decision.8
Both Secondary Problem. Two self-funded plans each meet and each legitimately declared itself to be secondary. One has the birthday rule and one has the gender rule. Each stubbornly stuck to its denial. Due to the large sum withheld, the plans sued. The Ninth Circuit U. S. Court of Appeals decided the federal birthday rule has been adopted for coordination of benefits when at least one coordinating plan is self-funded. The court held that state law as to coordination of benefits is preempted by ERISA. Because ERISA does not provide coordination of benefits rules, it is left to the federal courts to decide whether to defer to state law or to establish a uniform federal rule. In this case, the appeals court held that a federal rule would best serve the intent of ERISA, in order to eliminate any possible allegations of discrimination that could arise from the gender rule. The case was returned to the district court for calculations of damages to be paid to the employee’s hospital as a result of the payment delay. Both employers were ordered to share liability for those costs.9
Marital Status Discrimination. The state's Labor and Industry Review Commission (Commission) reviewed a class action by a group defined as follows:
· Teachers of Maple School District
· Married with an employed spouse
· Teachers Who were dependents under their spouse’s plan.
The plan covered by the teachers, represented by Braatz, was a teachers' fully-insured plan. The plan required that the teachers had to elect coverage either under their plan or their spouse's plan, but not both. The teachers believed the employer's and the plan's action to be discriminatory as regards marital status. As a consequence of their belief, they sued. The court found the fully-insured plan to be discriminatory as regards marital status. Had the plan been self-funded, the results would have been different in that the state statute would have been preempted. The particular state statute prohibits discrimination by marital status.10
Both Secondary Problem. King had double coverage, both with fully insured plans:
· Plan A, issued 6-1-91 (a member of quasi-group)
· Plan B, Issued 12-1-91 (an employee of employer X)
Each carrier claimed a secondary position. The primary issue at issue was this: May the court contrast employee from member in prioritizing? The prioritizing should occur without distinguishing an employee from a member. That is, a member is an employee for plan purposes. The issue then simply becomes one of which plan was on the risk the longer. Plan A lost.11
Coordination with Phantom Medicare. Maxa, president of a small company, sponsored a group plan which had a provision that plan benefits would be coordinated with benefits payable under Medicare Parts A and B for eligible participants. Maxa became eligible for Medicare benefits in 1987 but did not apply for Medicare. Maxa became ill in early 1989 and was hospitalized until his death in June 1989. John Alden refused to pay several of the president's outstanding medical bills, claiming that it was not liable under the plan for bills that Medicare would have covered had Maxa enrolled in a timely fashion. Maxa's estate alleged that John Alden wrongfully denied benefits and failed to provide an adequate summary plan description as required by ERISA. While acknowledging that the description of benefits provided by John Alden may not have met ERISA standards, the court noted that Maxa did not rely upon the plan description, to his detriment, in failing to apply for Medicare benefits, as required under ERISA. The court also found that ERISA did not require individualized notice to each beneficiary that a reduction of benefits could occur in the absence of Medicare re-enrollment. The court also held that the coordination of benefits clause was not prohibited by Medicare's secondary payer laws and added that, even if they did prohibit such a policy, the Medicare Secondary Payer provision did not apply to the company in question because it had fewer than 20 employees. John Alden was able to coordinate with the phantom Medicare.12
EARLIER AND/OR FULLY INSURED RELATED
Plan with no COB Provision. The facts essentially were these:
Plan A Plan B (No COB)
Child (covered under both Insured Covered
Plans A and B) Participant (Father) Dependent (Mother)
Court held that Plan B should be primary to the child because that plan had no COB provision. This matter has now been made clear in the standard NAIC COB law.13
Benefit Carve-Out and Public Policy. Plan had an automobile benefit carve-out, paying only excess to any other benefits for the accident. Plan paid what the automobile benefits did not cover. Row sued on ground of public policy. Court said the plan's provision was entirely consistent with public policy.14
Being Excess and COB Contrasted. Bybee was primary with Medicare and in excess of Medicare with his group medical plan.
· Hospital Expenses $17,422
· Medicare paid 16,416
· Plan limits 6,566
Bybee wanted to collect the difference. The group plan did not coordinate with Medicare but was in excess of Medicare. The plan was not held liable for the difference because of the way the plan was written. The plan had no liability. 15
Coordinator and Dependent Child. Denton's son was hurt in an automobile accident. Group plan would pay. Facts were:
· Expenses $27,000
· Recovery from automobile policy of
father (release payments) 25,000
Plan was willing to pay $2,000; Denton wanted the plan to pay its share of the $27,000. Denton's logic – the son's settlement was his to keep. Court disagreed; it held that the plan of the son and father are as one. Son has no special rights or privileges as `a dependent participant. 16
Coordination of Benefits Not Contrary to Public Policy. Barker attacked his plan's c provision as being monopolistic and, therefore, voidable. The court held to the contrary. 17
Plan Error with Medicare Coordination. Plan refers to Medicare as a plan for persons over age 65; plan had a special benefit for persons eligible for Medicare; Coker qualified for Medicare by being totally disabled but under age 65. When plan denied, Coker protested. The court saw the ambiguity. The plan should have been amended when the Medicare law was changed to cover the under-65 totally disabled (over 24 months). 18
Covered v. Total Expenses. The court clarified what has sometimes been a point of confusion with coordination of benefits.
Rule: You coordinate with covered expenses and not with total expenses. The deductible applies to expenses covered by the plan. Expenses cast out as not covered do not count as amounts towards the deductible. 19
Coordinating with School Accident Policy. Dridsom, a student, was hurt in an after-school accident:
· On school premises
· Activity sponsored by school
· Activity supervised and conducted by YMCA.
School had an accident plan; YMCA had no insurance; Dridsom was a dependent in a group plan. Court held that the school accident plan would be liable as she was attending school while engaged in the YMCA-supervised activity. 20
No Coordination with Coverage Which Might Have Been. Goodyear had Davis as employee and his wife as dependent. She could have been covered under her plan which was non-contributory by merely signing up. For whatever reason, she declined to do so. Goodyear, facing a large claim, was to pay only as secondary wishing to coordinate with a phantom plan. Court said that Goodyear must accept the claim as primary. 21
Plan Declared to Be Secondary Only. Stark's self-funded union plan was written so as to be secondary to all other plans; that is a plan of last resort. Blue Cross objected. Court held that Blue Cross had to be primary whether it liked it or not. 22
Rely on Plain Meaning. The COB provision was required by Minnesota statutes but was ambiguous as to meaning. The court said that the parties should rely on the plain meaning. 23
Philosophy and Purpose. The court endorsed the COB concept and it was within the authority of the courts to prevent double recoveries and avoid unjust enrichment. 24
COB with Conversion Policy. Participant was a dependent on her husband’s plan and also the insured under a group conversion policy. Both coverage declared themselves to be secondary. The court held the contest to be a push which meant that the primary devolved on the plan covering the person the longer. 25
COB with Individual. Group plan sought by litigation to coordinate with an individual policy on the grounds of good public policy. The court said the law permitted individual coverage in addition to group and also that such double-coverage would not be against public policy. 26
Recovery of Mispayment which was COB-Related. Blue Cross paid as primary only to find later that it should have been secondary. The other insurer attempted to block its recovery of the claim mispayment. The court held for Blue Cross. 27
Always Secondary Where Other Plan Had No COB Provision. In effect, the plan with a COB trumped the plan that was silent. The court held that this was perfectly proper especially since the policy had claimed approval by the Insurance Department. 28
Coordination and Public Policy. Cody challenged the inclusion of the COB provision policy. Court held that it was not anti-public policy so long as it was not deceitfully sold. 29
Plan with No Coordination Provisions.Wassau's plan language on COB was at variance with the state's mandated language; also, the plan language had not been filed with the insurance department as was required by statute. The plan in effect had no COB and was held to be primary. 30
Plan Declared to Be Secondary Only. Participant was primary to his union plan and secondary on his spouse's plan. The union plan was amended so as to allow the participant to elect not to receive benefits; the purpose of this amendment was to make the union plan secondary in all instances. The Court held that the amendment would not accomplish its desired purpose. 31
Contrasting Subrogation and Coordination. Other coverage in a COB situation was a group accident indemnification policy; the plan benefits were for pain and suffering and not for reimbursement of medical expenses. Court held this type of contract was not other coverage for COB purposes. 32
Coordination with Disability Benefits. Plan’s short-term disability and medical plan provided that plan benefits be offset by no-fault automobile benefits. Disability claim arose, giving these facts:
· Salary $2,000
· Plan benefits (no offset) – disability 940
· No-fault benefit – disability 1,000
It was Equitable’s understanding that the plan’s liability would be nothing; the participant’s understanding was that the plan would coordinate as with medical so that he could collect $1,940 (i.e., both benefits). Court found Equitable’s plan ambiguous and held that the $940 was the proper benefit from Equitable. 33
Plan Declared to Be Secondary. Mr. Larson was covered by Blue Cross. Mrs. Larson was covered by an excess liability only plan; her plan declared itself to be secondary to all other plans. Court recognized the atypical nature of Mrs. Larson's plan and made Blue Cross be primary. 34
Alleged Coordination – Workers’ Compensation Conflict. Plan had a workers' compensation exclusion which was properly applied. Hines' workers' compensation benefits were skimpy compared to plan benefits. Hines believed that the workers' compensation exclusion was in conflict with the COB provisions. If COB were applied, he would get better benefits. Court said that no such conflict exists. 35
Coordination With Automobile Medical Not Appropriate. Participant, under a fully insured plan, believed that his automobile medical benefits were not the subject of the plan's COB provision. The insurer believed that since the coordination provision made no-fault the subject of coordination, automobile medical would also be included. The debate went to trial. The Court distinguished between no-fault and automobile medical benefits; it also distinguished between coverage individually purchased and coverage provided, or arranged, by an employer. The court allowed an individual auto policy with medical benefits to escape the group health plan sponsored by another employer ... including no-fault basic medical payment. 36
Always Secondary Language. A group policy contained the standard coordination of benefits provision. The state also had a special category of insurance called excess insurance. The participant attempted to have the group policy labeled excess because of the COB provision. The Court disagreed. 37
Both Secondary Problems. When Sandra and Charles were divorced, they were given joint custody of their daughter Amanda and were to maintain medical coverage for her. Sandra had the primary residential custody. Amanda had been ill from birth with Crouzon's syndrome.
Sandra - Covered by Royale Airlines, a self-funded plan.
- Administered by IMA, a TPA.
- Amanda was a covered child thereunder.
Charles - Covered by plan of CBC, a fully insured plan.
- Amanda was a covered child thereunder.
- Administered by GA.
When huge claims came in, a problem arose:
· Royale and IMA denied benefits because Amanda had not been covered from birth and, therefore, the surgery to correct a congenital problem would be excludable.
· CBC plan and GA would pay only as secondary since this had been the practice with earlier claims.
They deliberated on the confusion and ruled as follows:
· Both plans were held to be liable as to benefits.
· The mother's plan was deemed primary.
· The father's plan had to pay but could recover from the mother's plan; such recovery was by the plan's subrogation provision.
· Because the mother’s plan was and ERISA plan it was not assessed any punitive or compensatory damages. It did have to pay attorney’s fees, however. 38
Both Secondary Problems. The father, Robert, and the mother, Evangeline, had an infant out of wedlock. Robert and Evangeline had never lived together. The child had large medical bills. Both parents had enrolled the infant as their dependent. Robert's plan denied, in that the child would be with Evangeline's policy by the custody rule of separated parents since Evangeline had custody. Evangeline's policy denied in that the child was to be covered by the birthday rule. The court held that the Plan of the father would be primary because the custody rule would not be applicable since the parents were never married; therefore, never separated. 39
Always Secondary Language. The Michigan coordination of benefits law does not forbid a plan from using an escape clause in its coordination of benefits provisions. Michigan adopted the NAIC model birthday rule for coordination of benefits which the HMO sought to avoid. The HMO plan contained the following plan language: "When the other group health benefits plan does not have the same rules of priority as those listed below or does not contain a provision coordinating its benefits with those of this Contract, the benefits shall be determined under the other plan first; the Plan shall have only secondary liability." The Court allowed the plan language to stand. 40
Both Secondary Problems. Danielle had a child (Justin) out of wedlock with Fred. Fred put Justin on his plan timely as did Danielle on her plan. When Justin was released from the hospital after expensive neonatal care, he lived with his mother. Both plans claimed secondary. The problem was where Justin was not resident with either parent because he was hospitalized and the resident/custody language failed; also, the fact that, as his parents were never married, the separated/divorced language of the plan was not applicable. The court decided that primary care was with Fred's plan. Reason: The application of the residence/custody rule in the Fred/Danielle situation. 41
Medicare Supplement Policies and VA Benefits. The court held that an insurer’s Medicare supplemental policies are health plan contracts within the meaning of anti-discrimination provisions of the Veterans’ Benefits Act. The government was entitled, therefore, to recover the cost of services furnished to five Medicare-eligible veterans in a Veterans Administration hospital that would have been covered by the insurer’s Medigap policies if provided by a non-federal hospital participating in the Medicare program. 42
Both Secondary Problem. The Parents of a prematurely born and totally disable child were not covered for medical bills incurred during a six-month period when both parents sustained gaps in coverage. Each parent was subsequently covered under insurance provided by their respective new employer. However, eligibility was denied under the mother’s policy after her employer canceled its policy in favor of another insurer, and the new insurer would not cover the child until one month after the child’s disability ceased. The father’s policy would not cover because the policy had not taken effect regarding his entire family because the father, as a new employee, was not eligible for any health coverage. 43
COB-Sex Discrimination Contest. J.C. Penny amended its self-funded health care plan so as to require that no dependent care plan so as to require that no dependent spouse could be eligible for coverage on its plan whose W-2 income exceeded that of the J.C. Penny participant. The Court held that this did not constitute sex discrimination. 44
ERISA Preemption of State's No-Fault Statute. Self-funded plan claimed exemption from state no-fault law. That is, plan declared itself to be secondary. Participant contested in court. Court held that state's no-fault law was preempted by the ERISA self-funded plan. 45
ERISA Preemption of State's No-Fault Statute. Both the self-funded plan and the participant's automobile no-fault medical benefit claimed secondary in a coordination of benefits issue. The issue arose as to whether the presence of stop-loss agreement would make the plan an insured one. The court held that the no-fault carrier was primarily liable for medical benefit plan participant's automobile accident medical expenses. The employer's purchase of stop-loss insurance does not transform self-funded medical plan into insured plan that is unprotected by ERISA from application of state's no-fault insurance statute, which would give primacy to no-fault insurer's coordination of benefits provision, and, as ERISA preempts state statute, plan's coordination-of-benefits provision was, therefore, entitled to dominance, over insurer's conflicting coordination of benefits provision. 46
ERISA Preemption of No-Faults Statute. Auto club auto policy gave member the right to elect either to coordinate or not to coordinate with other health coverage. Member elected not to coordinate only to find, when a claim came due, that the no-fault was held to be primary, thereby not collecting primary from the group plan. Member protested in court. Court held that self-funded plan would preempt the Michigan no-fault but that a fully insured plan wout4npVreempt the law. See FMC v. Holliday, 110 S.Ct. 1109 (1990) in which Supreme Court made a similar holding. 47
ERISA Preemption of No-Fault Statute. Facts are similar to those of Auto Club v. Mutual Savings, 9 E.B.C. 1033 (N.D. Mich. 1987) in that preemption of Michigan's no-fault law was being questioned. The case in point was a self-funded plan. The court held that the state's no-fault law was not preempted. Decision reversed with Supreme Court decision in FMC v. Holliday. 48
Both Secondary Problem. Winstead purchased a no-fault auto policy and had a choice:
· Auto medical would be primary to his health care plan – premium was $100.
· Auto medical would be secondary to his health care plan – premium was $80.
Winstead chose the $80 premium. Winstead’s medical plan coordinated with no-fault auto. Accident occurred. Both plans claimed to be secondary. Court held both plan and no-fault insurer equally right and agreed with the lower court that a pro rata settlement was the appropriate solution. 49
Both Secondary Problem. Issue was between a no-fault auto insurer and fully insured MET over which plan would be primary. Each plan was written so as to claim a secondary position. Proceedings went to the federal courts. Since neither side claimed any ERISA preemption, the federal court refused to decide and remanded the case back to the state court for handling. 50
ERISA Preemption of No-Fault Statute. Michigan’s no-fault law mandates the purchasers to have the right to do either of the following:
· Coordinate with other health plans (at a lower cost).
· Not to coordinate with other health plans (at a higher cost).
Would an ERISA plan preempt this state law? The court held that an ERISA plan would, indeed, preempt this state law so long as the plan is self-funded. 51
COB and No-Fault. Where the no fault policy was silent on COB, the court found it to be offensive to public policy to require it. 52
Group v. No-Fault. Both plans declared themselves to be secondary to the other. The court held the group plan primary because of the Michigan Legislative policy was to make no-fault a secondary coverage. 53
COB and No-Fault. The issue was where both an ERISA self-funded plan and an auto club’s no-fault medical both claimed a secondary position. The court held for the ERISA plan; it could be secondary. 54
COB and No-Fault. In Pennsylvania, the insured when applying for no fault, declined that it wanted double coverage. When the time came to be primary; the group insurer declined the be primary. The court said that the group insurer had to be primary. 55
Both Secondary Problem. The auto insurance with medical coverages issued in a no-fault state reduced its rates and declared itself to be secondary to other medical coverage of the insured. The auto and group plan met, each claiming itself to be secondary; the court was asked to decide. ERISA plan's coordination of benefits clause, which makes plan secondary, must be given full effect where it conflicts with a state's no-fault automobile insurer's valid but conflicting coordination of benefits provision. The application of federal common law is appropriate because no federal statute addresses resolution of conflict between coordination of benefits clauses. ERISA's primary goal is safeguarding financial integrity of qualified plans by shielding them from unanticipated claims, such as asserted here by no-fault insurer. Apportioning liability between insurers gives insufficient weight to ERISA's policy considerations. The court, therefore, reversed lower court's pro rata decision and held instead that the ERISA plan was secondary. 56
Resolution of the No-Fault Preemption Issue. The self-funded plan intends to be secondary to no-fault auto; the no-fault auto also intends to be secondary. Some no- fault policies are sold at a reduced rate if the applicants elect such no-fault policy to be secondary. One court held the issue between the no-fault and the self-funded plans is strictly a state one and not to be dealt with in the federal courts. A Pennsylvania court held that state's no-fault law is not preempted by ERISA basing its decision on the fact that no federal interest in uniformity is involved; state's subrogation will apply to insured and self-funded plans equally. Most courts have held that self-funded plans preempt the state's no-fault laws; fully insured plans must abide by them. Both the self-funded plan and the no-fault plan demanded by their contract to be secondary. The court held the contractual demands to be equally repugnant, and held that the benefits should be prorated. The Supreme Court cleared up the dispute by holding that ERISA did, in fact, preempts the Pennsylvania no-fault laws. 57
Insolvency of No-Fault Carrier. Plan clearly declared itself to be secondary to no-fault if claim was under $5,000. Claim was $4,222 and duly denied. The difficulty arose when the no-fault carrier had declared insolvency. Could the plan still deny the benefit? Brown said no; plan said yes, the court ruled that the plan was correct in denying the claim under the no-fault exclusion. 58
Right to Coordinate with No-Fault. When Blue Cross was to pay $68,000 in hospital bills for Dudley’s automobile accident, it determined that Dudley had received a $50,000 no–fault benefit payment. Blue Cross then paid only $18,000; the hospital balance-billed Dudley the unpaid $50,000. Dudley sued. Court held that Blue Cross was within its rights to coordinate with the no-fault benefit. 59
Coordinating with Phantom No-Fault. Connecticut required no-fault auto. Neagle should, by law, have purchased no-fault policy, but in violation thereof did not carry same. His health plan, however, declared itself to be secondary to the Connecticut no-fault benefits as though they existed. Neagle, hurt in an auto accident, looked to his health care plan for primary benefits; the health care plan denied being primary, but would be secondary to what the no-fault policy would have paid had there been one. Neagle sued and court held for Blue Cross. Plan can coordinate with a phantom plan. 60
Coordination with Phantom No-Fault. Griswold should have had no-fault insurance, but negligently did not. In an automobile accident, the plan coordinated with the no-fault benefits which should have been but were not, Court held the plan could coordinate with benefits which did not exist, if such other benefits were legally required. 61
Coordination with No-Fault. Plan attempted to coordinate with a no-fault policy. Estabrook claimed his settlement with his automobile carrier was because of the fact that a third party had been at fault. Estabrook group policy clearly indicated that it would coordinate with any no-fault policies. Court held that the group plan was well within its rights to coordinate with the automobile no-fault policy. 62
Coordination with No-Fault. Clouse, a child, was hurt as a passenger in another person’s automobile. Clouse was covered as follows:
· His father’s employer’s group medical plan (Carrier A)
· His father’s two automobile no-fault policies (it was a multiple automobile family policy) were Carrier B and Carrier C. Both of these were declared on their face to be excess to any other medical plans.
The court ordered the settlement to be as follows:
· Carrier A is primary.
· Carrier B and C are excess equally. 63
Coordination with No-Fault. Subject group plan permitted coordination with other plans where coverage was provided or required by statute. Plan proceeded to coordinate with no-fault and was challenged by Dutton who claimed a no-fault policy was an individual policy. Court held that the plan's coordination with no-fault was proper. 64
Disclosure Plan Terms by No-Fault Insurer. Kilmore was hurt in an automobile accident being covered both by his auto no-fault medical benefits and a Blue Cross group plan:
No-Fault Carrier (Erie) 1st $10,000
Blue Cross $10,000 to $100,000
No-Fault Carrier (Erie) Excess over $100,000
Pennsylvania is a no-fault state. The difficulty arose in the Blue Cross plan excluded. TMJ. Kilmore was distressed that the TMJ exclusion was not explained to him.
· A similar set of facts involved another participant (Peterson) and another no-fault insurer (USAA Property and Casualty Insurance Company).
· The issue to be decided by the court was the extent of the obligation, if any, which the no-fault insurer or Blue Cross had to explain plan limitations and/or coverage differences. On this issue, the court held that the no-fault insurer and/or Blue Cross were under no special obligation to disclose coverage differences. 65
No-Fault v. Subrogation Distinctions. Bohn received $6,812 from the HMO and also $7,846 from his no-fault plan for the same accident. Humana, the HMO, believed it could subrogate against Bohn’s no-fault carrier and recover; the HMO cited public policy. The court told the HMO that an insured plan could not offset its benefits against those of a no-fault policy. The court noted that the plan was no specific in allowing the plan to be secondary to no-fault; the court also clearly indicated that subrogation issues exist only where recovery is established as a matter of liability, which, by definition, does not exist with a plan and a no-fault contest. 66
Declaring Secondary to No-Fault. Participant had an automobile accident with large bills; his health care coverage was as follows:
· A no-fault automobile policy
· A group plan limiting automobile-related claims to $5,000.
The group plan paid $5,000; the no-fault plan paid the remaining. Then the no-fault plan sued claiming (a) the group’s plan’s $5,000 was an escape clause designed to thwart the Michigan law; and (b) that no-fault plan had given a discount to the participant because of the valid other coverage being primary; and (c) that it was a travesty in law to have the group plan’s limit of liability so near to nothing. The court held the group plan had every reason to limit its benefit to $5,000 and it did not constitute a violation of Michigan law. 67
Michigan No-Fault/COB Issue.
Participant self-funded health care plan declared it self to be
secondary to a Michigan insurer’s no-fault policy. Both plans claimed to be secondary. The court held for the self-funded plan. 68
1. Northeast Department Fund v. Teamsters Welfare Plan, 584 F. Supp. 68 (M.D.Pa. 1983).
2. Shaw v. Republic National Insurance Co. 750 F.2d 1458 (9th Cir. 1985).
3. ILGWU Health and Welfare Fund v. Teamsters Welfare Fund, 764 F.2d 147 (3rd Cir. 1985).
4. Wisconsin Department of Health v. Upholsters Welfare Fund, 686 F. Supp. 708 (W.D.Wisc. 1988).
5. Northern Group Services, Inc. v. State Farm Automobile insurance Company, 898 F.2d 1125. (6th Cir. 1988).
6. Winstead v. J.C. Penney Company, Inc. VEBA 740 F.Supp. 1358 (N.D. Ill. 1990).
7. Reinforcing Iron Workers Health Fund v. Michigan Bell Telephone Co. 746 F.Supp. 688 (E.D.Mich. 1990).
8. Fosso v. State Farm Mutual Automobile Insurance Company, 940 F.2d 388 (8th Cir. 1991).
9. PM Group Life Insurance Company v. Western Growers Assurance Trust, 953 F.2d 543 (9th Cir. 1992).
10. Braatz v. Wisconsin Labor and Industry Review Commission, ---N.W.2d--- (Wisc. Ct. App.1992).
11. United Benefit Life Insurance Company v. U.S. Life Insurance Company, ---F.2d--- (8th Cir. 1994).
12. Maxa v. John Alden Life Insurance Company, 972 F.2d 980 (8 Cir.), cert. denied, 113 S.Ct. 1048 (1992).
13. Union Labor Life Insurance Company v. Rudd, 502 W.2d 1 (Tex.Ct. App. 1973).
14. Renslow v. Standard Life and Accident Insurance Company, 517 S.W.2d 1 (Tenn.Sup.Ct. 1974).
15. Bybee v. John Hancock Mutual Life Insurance Company, 507 S.W.2d 330 (Tex.Ct. App. 1974).
16. Denton v. International health and Life Insurance Company, ---P.2d--- (Ore. Sup.Ct. 1974).
17. Barker v. Coastal States Life Insurance Company, 225 S.F.2d 924 (Ga. Ct.App. 1976).
18. Coker v. Travelers Insurance Company, 553 S.W.2d 421 (Tex. Ct. App. 1976).
19. Kay v. Metropolitan Life Insurance Company, 548 S.W.2d (Mo. Ct.App. 1972).
20. Dridson v. Guarantee Trust Life Insurance Company, 371 So.2d 690 (Fla. Ct.App. 1979).
21. Goodyear Tire and Rubber Company v. Davis, ---S.W.2d--- (Tex. Ct.App.1980).
22. Starks v. Hospital Service Plan of New Jersey, 440 A.2d 1353 (N.J. Super.Ct.,1981).
23. Metcalf v. American Family Mutual Life Insurance Co, 381 N.W.2d 37 (Minn. App.Ct. 1986).
24. Dina v. Aetna Life Ins. Co., 316 N.Y.S.2d 654 (Dist. Ct. 1970).
25. William C. Brown Co. v. General American Life Ins. Co., 450 N.W.2d 867 (Iowa1990).
26. Time Ins. Co. v. Sams, 692 F.Supp.663 (N.D. Miss. 1988).
27. Blue Cross & Blue Shield v. Bowen, 326 S.2d 754 (Ala. App. Ct. 1976).
28. Blue Cross & Blue Shield of Alabama v. Hendrix, 385 So.2d 63 (Ala. App.Ct. 1980).
29. Cody v. Connecticut General Life Insurance Company, 439 N.E.2d 234 (Mass. Super. Jud. Ct. 1982).
30. Siller v. Employer’s Insurance of Wassau, 33 N.W.2d 197 (Mich. App.Ct. 1983).
31. Blue Cross of Northeast Ohio v. Furino, 470 N.W.2d 450 (Ohio Ct.App. 1984).
32. Myers v. U.S., 767 F.2d 1072(4th Cir. 1985).
33. Musisko v. The Equitable Life Assurance Society, 496 A.2d 28 (Penn. Super.Ct. 1985).
34. Blue Cross and Blue Shield of Mississippi v. Larson, 485 So.2d 107 (Miss. Sup.Ct. 1986).
35. Hines v. Blue Cross/Blue Shield of Virginia, 788 F.2d 1016 (8th Cir. 1986).
36. Haefele v. Meijer, 418 N.W.2d 900 (Mich. Sup.Ct. 1987).
37. Jonas v. Central Life Assurance Company, 528 So.2d 488 (FLA. Ct. App. 1988).
38. Caraway v. Royale Airlines, Inc., 559 So.2d 954 (La.Ct. App. 1990).
39. Humana Health Insurance Company of Florida, Inc. v. Halifax Health Network. ---S.E.2d--- (Fla. CT. App. 1991).
40. Lakeshore HMO v. Dilesco Corporation Employee Benefit Plan, ---F.Supp.--- (W.D. Mich. 1991).
41. Principal Health Care of Louisiana v. Lewer Agency, Inc., ---F.2d--- (5th Cir. 1994).
42. U.S. v. Blue Cross and Blue Shield of Maryland, Inc., 989 F.2d 718 (3d.Cir. 1993)
43. Craft v. Northbrook Life Insurance Company and Medical Plan, 813 F.Supp. 464 (S.D.Miss. 1993).
44. Wambheim v. J.C. Penney Co., 705 F.2d 1492 (9th Cir. 1983), cert. denied, 467 U.S. 1255 (1984).
45. Kilmer v. Central Counties Bank, 623 F.Supp. 994 (W.D.Pa. 1985)
46. Allstate Insurance Company v. Lufthansa German Airlines, ---N.W.2d--- (Mich. Ct.App. 1993).
47. Auto Club Insurance Association v. Mutual Savings & Loan Association, 672 F.Supp. 997 (E.D. Mich. 1977).
48. Northern Group Services, Inc. v. Auto Owners Insurance Company, 833 F.2d85 (6th Cir.), cert. denied, 486 U.S. 1017 (1987).
49. Winstead v. Indiana Insurance Company, 855 F.2d 430 (7th Cir.) cert. denied, 488 U.S. 1030 (1988).
50. Allstate Insurance Company v. The 65 Security Plan, 879 F.2d 90 (3rd Cir. 1989).
51. Liberty Mutual Insurance Group v. Iron Workers Health Fund, 879 F.2d 1384 (6th Cir. 1989); Allstate Ins. Co. v. Pioneer, Inc. Employee Benefit Plan, ---F.Supp.2d--- (W.D. Mich. 2003).
52. Blue Cross & Blue Shield of Kentucky v. Baxter, 713 S.W.2d 478 (Ky. Ct.App. 1986).
53. Federal Kemper Ins. Co. v. Health Insurance Administration, 383 N.W.2d 590 (Mich. App. Ct. 1986).
54. Auto Club Ins. Co. v. Frederick and Herrud, 505 N.W.2d 820 (Mich. App.Ct. 1993).
55. Solis v. Prudential property and Casualty Ins. Co., 496 A.2d 797 (Pa. Sup.Ct. 1985); See also State Farm Auto Ins. Co. 488 A.2d 335 (Pa. Super. Ct. 1985).
56. Auto Owners Insurance Company v. Thorn Apple Valley, Inc. 31 F.3d 371 (6th Cir.), cert denied, 513 U.S. 1184 (1994).
57. Brown v. Gulf Life Insurance Company, 343 So.2d 91 (Fla.Ct.App. 1977).
58. FMC v. Holliday 110 S.Ct. 1109 (1989).
59. Dudley v. Blue Cross Rochester Hospital Service Corporation, 405 N.Y.S. 2d 837 (N.Y. Ct.App. 1978).
60. Neagle v. Connecticut Blue Cross, Inc., 420 A.2d 369 (Conn. Sup.Ct. 1980)
61. Griswold v. Union Labor Life Insurance Company, 422 A.2d 920 (Conn. Sup. Ct. 1981)
62. Estabrook v. Lincoln National Life Insurance Company, 432 N.W.2d 733 (Mich. Ct. App. 1988).
63. Citizens Insurance Company of America v. Clouse. 439 N.W. 2d 304 (Mich. Ct. App. 1989).
64. Dutton v. Educators Mutual Life Insurance Company, ---N.E.2d--- (Penn. Sup.Ct. 1989).
65. Kilmore v. Eire Insurance Company, also U.S.A.A. v. Property & Casualty Insurance Company, ---N.E.2d--- (Penn. Super Ct. 1991).
66. Bohn v. Humana Health Plan, Inc., ---S.E.2d--- (Ky.Ct.App. 1991).
67. Transamerica Insurance Company of America v. IBA Health and Life Assurance Company,
---N.W.2d--- (Mich. Ct. App. 1991).
68. Allstate Ins. Co. v. Pioneer, Inc. Employee Benefit Health Care Plan, ___F.Supp.2d___ (W.D. Mich. 2003).
Plan Document Language
The treatment of COB is in the Plan Document under these headings:
· Schedule of Benefits
· Plan Document Language
· Commentary on the Schedule of Benefits.
Schedule of Benefits
The Schedule of Benefits makes provisions for the Plan to recognize any of the following benefit design decisions:
· COB may or may not be allowed.
· Range of benefits subject to COB are indicated.
· Varying definitions of submitted and Allowable Expenses are shown.
· Preservation of exclusions, deductibles or cost containment terms may be allowed.
· Benefit Bank may or may not used.
· Coordination of Eligibility is integrated in with the COB provision.
Schedule of Benefit
Coordination of Benefits
Coordination of Benefits is ___________permitted.
Applicable Benefits include________________________.
Where PPO discounts or similar are involved, Submitted Charges shall be determined as follows:
_______Using Primary Plan discount
_______Using Secondary Plan discount
_______Using the Larger of the Primary/Secondary Plan discount
_______Using the smaller of the Primary/Secondary Plan discount
Reduction in Submitted Charges following Secondary Plan Provisions:
Preserved? – Yes or No
· Excluded Charges _________
· Cost containment and Managed Care Reductions _________
· Deductibles and Copayments. _________
A Benefit Bank ________ be maintained.
Coordination of Eligibility
Coordination of Eligibility Condition is ___________________.
Coordination with Other Employer-Sponsored Health Care
This provision is applicable only if the Schedule of Benefits provides that COB is permitted. Where COB is permitted, this Provision has no application if this Plan is the Primary Plan, except than that the other plan, (Secondary Plan) must be provided a copy of the Explanation of Benefits of this Plan (Primary Plan).
The Schedule of Benefits sets forth whether COB is applicable to medical, Rx, dental or a combination thereof.
When this Plan is secondary, this COB Provision provides that the benefits of both plans will not exceed the Allowable Expenses as set forth in the Schedule of Benefits of this Plan.
Where a PPO network is involved for either or both plan(s), the Schedule of Benefits sets forth which discount will be used by the Secondary Plan in determining its Submitted Charges. That is, the Secondary Plan may have to reprice the Submitted Charges.
Allowable Expenses means Submitted Charges less COB Reductions which may include either, neither or all of the following (as shown in the Schedule of Benefits):
· Excluded Charges
· Cost Containment and Managed Care Reductions
· Deductibles and Copayments.
Examples of Excluded Charges
· Not a covered expense
· Incurred prior to effective date
· Plan exclusions apply
· Calendar year deductions met.
Examples of Cost Containment and Managed Care Reductions
· Second surgery opinion cutback
· Pre-certification rules not followed penalty
· Utilization review discount.
Examples of Deductibles and Copayments
· Annual deductibles and copayments
· Deductibles with drug card plan and managed care arrangements
· Special deductibles.
A Benefit Bank (accumulated COB savings) may be maintained, as set forth in the Schedule of Benefits.
Primary or Secondary Status
The following are the rules for determining primary or secondary status for this Plan:
1. The primary plan for participants and Spouses is that plan which covers the person as a participant, or as the certificate holder.
2. For dependent children's expenses, where the parents are not separated or divorced, the primary plan is the plan of the parent whose birthday (omitting year of birth) is the earlier in the calendar year.
3. If the parents are separated or divorced, the priority of the two plans shall be as follows:
a. Where there is a court decree or similar, such decree shall be followed if it
indicates the priority.
b. Absent a court decree or similar, the plan of the parent with primary
custody, as evidenced by residence, financial responsibility, claiming deduction on a tax filing, etc. shall be primary.
c. Absent a clear determination of custody, financial responsibility or claiming
of a deduction on a tax filing, the plan covering the dependent child longer shall be primary.
4. Priority for inactive covered persons shall be determined by the following examples:
Situation Primary Secondary
a. Active participant in Plan A is an inactive former A B
covered person from Plan B.
b. Dependent spouse of active participant in Plan A A B
c. Inactive former covered person in Plan A is an A B
inactive former covered person in Plan B. Such
covered person was covered by Plan A longer than
by Plan B.
These rules shall be followed:
· Primary plan of covered dependents is that under which they are covered as an employee.
· Inactive status means COBRA, other so-called continuation benefits or retiree status. It does not mean temporary lay-off, disability extension or leave of absence.
5. If the other plan lacks a coordination of benefits provision, or has such provision different from this plan, it is the primary plan.
6. Where the order of benefit determination between the two plans would result in both
plans being primary and where both plans have Rule Number 5, above stated, the plan covering such covered person the longer shall be primary. If both plans covered such covered person for the same period of time, the plan with the earlier effective date (meaning the date for which the lifetime maximum toll) shall be primary.
Meaning of Other Plan
Plans providing benefit or services for, or by reason of, medical care treatments, such as:
1. Insurance or any arrangement of benefits for individuals or a group. Examples included: employer-sponsored plans, Blue Cross plans, HMO plans.
2. Prepayment coverage or any other coverage toward the cost of which any employer makes available a system of payroll deductions or any labor union makes contributions. Examples include supplemental medical plans, cancer coverages, franchise (also called employee-pay-all plans), blanket accident plans, and one-life group plans.
3. A labor-management trusteed plan, union welfare plan, employer organization plan or employee organization plan (so-called VEBA plan).
4. Any governmental program or coverage required to be provided by statue unless such plan specifically declares itself primary. This includes federal, state, county, local government plan even if school board or agency sponsored. This does not include CHAMPUS, VA, Medicare or Medicaid.
5. Coverage for students sponsored by, or provided through a school or other educational institution.
COB with HMO
Secondary to an HMO
The HMO, by its nature, defines both the extent of care as well as its cost. The Covered
Person pays the HMO-required copayment and receives medical care usually at 100%
coverage. Where out-of-area care is involved or where the Covered Person has the choice of going to a non-HMO affiliated provider, the benefits are provided by the traditional fee-for-service basis.
This is, for a Participant with the primary plan being an HMO:
Case A – HMO Provider is Used
This Plan pays the Participant's out-of-pocket costs, not to exceed this Plan's regular benefits if greater.
Case B – HMO Provider is Not Used
Using the submitted EOB of the other plan, determine this Plan's benefit by examples earlier described.
The Plan may give to or obtain needed information from another plan. This information may
be given or obtained without the consent of, or notice of, a Covered Person. A Covered Person will give this Plan the information it asks for about another plan, the payment mode by such plan and the allowable charges.
Whenever benefits may have been paid with respect to Allowable Expenses in a total amount, at any time, excess of the minimum amount of payment necessary at that time to satisfy the intent of the coordination of benefits provision stated above, the Plan Administrator shall have the right to recover such payments to the extent of such excess from among any one or more of the following, as the Plan Administrator shall determine: any person to, for or with respect to whom such payments were made, any insurance companies or any other organizations.
The Plan Administrator shall have the right to cause the payment to any organizations making payments under other plans which should have been made under the Plan of any amounts it shall determine to be warranted to satisfy the intent of the coordination of benefits provision state above.
Plan Not Employer-Sponsored
· Automobile medical benefits and No-Fault
The Plan will be secondary to any benefits paid, or payable by an automobile or medical payment plan or a no-fault insurance policy. In the event that the no-fault policy, which is legally mandated, does not exist because of the fault of the other driver, the Plan will coordinate with what such no-fault benefit would have been had such no-fault been in force. That is, such coordination will be with a phantom no-fault policy.
· Homeowners and Similar Plan
The Plan will be secondary to any benefits paid or payable by coverage known as homeowners, renters or commercial premises insurance.
Coordination of Eligibility
The Schedule of Benefits may provide for any one of the following eligibility restrictions:
· Condition Number 1
No spouse of a Participant is eligible to participate in this plan while the annualized income of such spouse is greater than the annualized income of the Participant. Income means wages and salary reportable by IRS Form W-2.
· Conditions Number 2
No Dependent is eligible to participate in this Plan who is otherwise eligible to participate in a comparable employer-sponsored health care plan as an employee.
· Conditions Number 3
No Person is eligible to participate in this Plan Participant while also a covered person in a comparable employer-sponsored health care plan.
· Conditions Number 4
No Person is eligible to participate in this Plan while also a participant or covered person in an employer-sponsored health care plan or on Medicare (Part B) and over age 65.
· Conditions Number 5
No Person is eligible to participate in this Plan while also a participant or covered person in a comparable employer-sponsored health care plan or on Medicare (Part B) and over 65.
· Government-Sponsored Plans
The Plan will pay without regard (i.e., as primary) to CHAMPUS and VA-provided non-service related care. The Plan has no obligation to pay where VA-provided service-related care is available, however. Government-sponsored plans where the government entity, or one of its agencies, is the employer in the traditional sense shall be subject to usual plan-provided coordination of benefit rules.
· Group Look-Alike Plans
This Plan will not coordinate with any individual policy, meaning one which does not have any coordination of benefits. Where an individual policy is filed with the Insurance Departments as group insurance for administrative convenience and where such policy has a COB provision, such policy (legally a group certificate) will be subject to coordination with this Plan.
Coordination has no relationship to subrogation. Subrogation proceeds from a legally-established third party tort which permits recovery by the Plan after it has paid the promised plan benefit and gone back against the negligent third party for recovery.
See Medicare Coordination Section.
The fact that a covered person is eligible for, or is provided medical assistance under, a state plan for medical assistance approved under Title XIX of the Social Security Act (i.e., a state Medicaid plan) shall not be taken into account for purposes of determining eligibility to this plan or providing benefits hereinafter. Benefits shall be paid in accordance with any assignment of right made by or on behalf of a Covered Person as required by Medicaid. To the extent that payment has been made under Medicaid, benefits payable under this Plan shall be paid in accordance with any state law that provides that the state has acquired the rights with respect to a covered person to payment for benefits payable under this Plan. The provisions of this paragraph shall be applied in good faith, based upon a reasonable interpretation of applicable federal law and regulations.
COMMENTARY ON SCHEDULE OF BENEFITS
Coordination of Benefits
These questions must be addressed in the Schedule of Benefits:
· Will Coordination be permitted?
Increasingingly, plans are refusing to be a secondary payer. As argued in a later section, the writer believes COB with self-funded health care plans should be eliminated.
· What benefits are subject to coordination?
Typically, the response is medical only; however, dental may be coordinated or Rx may not be coordinated. Such distinctions should be made in the Schedule of Benefits.
· What constitute Submitted Charges?
The patient has a legal responsibility to pay only the Submitted Charges from the primary plan. Yet, the secondary plan may argue that their obligation is measured against what their plan would deem Submitted Charges. In self-funded plans, both positions are defensible and must be recognized. This Submitted Charge issue arises where both the primary and secondary plan may be given PPO discounts which are different in the provider charges. While variations may be found, any rules of the PPO or (PPOs) should be honored. Such rules, typically, are as follows:
1. If the primary plan takes a discount, the secondary plan must use the primary plan's Submitted Charge. That is, no dual-discounting is permitted.
2. If the primary plan does not take a discount, the secondary plan is free to do so.
· What secondary plan cutbacks should be preserved?
The secondary plan should declare which of its cutbacks (it any) should be preserved. By preserving such cutbacks, their efficacy is retained but the purpose or need of coordination is diminished. Cutbacks include (a) excluded charges, (b) cost containment or managed care discounts or, (c) deductibles/copayments.
· Should the Benefit Bank be retained?
The Benefit Bank was standard fare with fully insured plans at one time. Self-funded plans have tended to discard such for pragmatic reasons (computer complexities, difficulty in understanding, etc.).
· What rules are to be followed for dependent children?
The Benefits Schedule, for simplicity, declares the birthday rule should be followed unless otherwise provided.
The proper beginning of the analysis is to establish a steady model which will be the following:
· Self-funded plan of the ABC Company consisting of 1000 participants
· Participants are tiered
Participant 400 0
Participant and child 200 200
Participant and spouse 200 200
Family 200 600
· Funding and benefit content relative other employers in the trading area are dealt with later.
· Special attention will be given to three of the participants of the ABC Company.
A Mary, Participant, Attorney, John, Dependent Spouse, Rocket Scientist with High Tech Employer.
B Jack, Participant, Maintenance, Jane Dependent Spouse, LPN with Local Nursing Home.
C Bill, Participant, Junior Officer Nancy, Dependent Spouse, Bank Teller. Double coverage is not discussed.
Categories of Covered Persons under survey
The categories of covered persons who must be analyzed are as follows:
Designations Description of Category Estimated Number
1 Participant 400
2 Participant with one child 200
3 Participant with Spouse 200
4 Participant with Dependents 400
5 Children 500
6 Spouses 500
For purposes of COB analyses the census reduces to:
Covered Where Other Plan Reported To B
Reason Number Primary Secondary
Participant 1000 N/A Not Known
Dependent Children 500 5 N/A
Dependent Spouses 500 10 N/A
* While the employer does not known whether is the participant shown as Participant is married or not, it most certainly does not known whether not the participant is covered under another employer’s plan as secondary, Even so, a reasonable estimate of such would be 10.
** The issue of whether the plan knows that a participant is or is not covered under another plan as secondary will be discussed later.
The relatively rare instance of a participant to the ABC plan being secondary to such plan is dealt with is a special section henceforth.
1. Preservation means both the secondary plan’s (A) deductible and copayment and (b) cost concurrent or managed care provisions are preserved.
2. Instances of the preservation of cost containment or managed care provisions are as follows:
· Penalties for not meeting cost containment provisions (second opinion, e.g.)
· Alternate benefit reduction
· Negotiated discounts of all kinds
· Managed case penalties of all kinds (network-related rules with EPO, e.g.).
Description of Study
The secondary plan claims of 136 employer-sponsored self-funded health care plans which were paid examined during the late period of from January 1, 2001 to April 11, 2003 examined. The claims paid by such plans were $837,009 in amount and were submitted by 811 covered persons. The subject plans consisted of 36,586 participants. The terms preservation and non-duplication are, for our purposes, synonomous.
The fragmentation of the studied data is as follows:
Amount of Claims
Amount of Claims
Amount of Claims
Not included in the above data are 19 participants which were secondary to the ABC plan because of the Medicare Secondary rules.
Commentary on the Data
For the first category and column, 49 children were paid $10.446 during the study period with no claim over $3500 being included. The Traditional method and the Preservation have meaning as below shown in the following example.
Benefits by Plan
Paid by Participant
Paid by Secondary
Claim Costs for Secondary Plan
Taking the known paid claims for the claims paid period and matching such to the covered persons with appropriate adjustments to the exposure for such persons not covered for the full claim paid period) we extract the following results:
Use or Abuse of COB
In the first part of the Actuarial Analysis, four secondary participants were described each of which had covered spouses who were secondary to the ABC plan but primary to another plan. Each of these four are discussed in sufficient detail to illustrate how their actions in some way create a problem for ABC’s self-funded plan.
It is anticipated that in each of the four instances, the participant and spouse will sit down together, with each of their SPDS, and determine their most financially advantages course of action considering the following:
· Should neither, both or only one (and which one) be secondary to the other’s plan?
· What are their expected health demands?
· What are cost consequences of their choices as regards participant required contributions?
· What way may the managed care networking cost containment or other plan features either thwart or help their financial strategy?
Participant Designation B
Because Mary as attorney and John as a rocket scientist are both knowledgeable and relatively rich, it is expected that they understand what they wish to accomplish and will max out their return on investment. Also they will be able to easily pay for the extra cost of their double coverage. With John under Mary’s plan as secondary, John’s upcoming heart surgery can be done by his surgeon-of-choice who is an out-of-network surgeon to John’s plan and yet be recognized without a penalty by Mary’s plans. As a consequence, the self-funded plan of the ABC Company is significantly selected against and John and Mary survive what could be a serious Financial set back to them without a scratch; and the plan’s expense.
Participant Designation B
Jack and Jane worry that uncovered health care bills could result in personal bankruptcy but are woefully inept in assessing the potential return on investment from being double-covered. So Jane becomes a covered spouse under Jack’s policy. Because the contribution burden is heavy and because Jack’s policy has the preservation provision, and because Jane has no health problems, Jane becomes foolishly over-protected.
Participant Designation C
Bull and Nancy being both knowledgeable and reasonable decide to beat the system by electing double coverage but treating the group coverage as individual coverage. That is it, is not disclosed to their respective employers at any time. Bill and Nancy convert their scheme to cash in either of two ways.
· Way One. Assignment of Medical Bills
Nan would have her physician file with both her plan and Bills plans. The overpayment to the physician will write a credit balance which can be left on the physicians books as a liability or taken as an overpayment from the physician.
· Way two. Non-Assignment of Medical Bills
Nan pays the physician in cash and requests duplicate bills which are filed with her plan and Bills plan.
The writer identifies evils with the man and wife strategizing as above shown:
1. The man and wife hold the high cards because only the secondary plan has a chance of knowing the existence of double coverage.
2. The smart and rich can gain far greater rewards than the inept and poor. This is an unpleasant bit of discrimination not governed by law but certainly governed by ERISA prudency coverage will doubtless seem innocent to many people. It is the same as treating the coverages as individual which most people understand. Since it is common with insured plans, why is it not permissible with self-funded. Thus, anti-selection is entrenched in the practices and will not be easily uprooted.
3. Nondisclosure of double coverage will doubtless seem innocent to many people. It is the same as treating the coverages as individual which most people understand. Since it is common with insured plans, why is it not permissible with self-funded? Thus anti-selection is entrenched in the practices and will not be easily uprooted.
Call for a Change
The writer strongly believes that all self-funded health care plans should be amended as soon as possible so as to completely eliminate duplicate coverage. These are the reasons:
The married couple can each be double-coverage without the knowledge of their respective employers. By disclosing their primary plan’s ID card they can have most of their bills paid as primary. A simple request to the physician for a duplicate bill so a claim can also be filed as an individual policy claim will gain the provider form needed to file with their other plans. So long as no employer requests a coverage audit, the couple can doubly collect without interference. As the practices with PPO has become dominant and EDI about to be more common, the likelihood of the couple carrying off their schemes increases.
The married couple can lay their SPDs side-by-side and decide which family members should be double-covered so as max-out their return on investment (ROI) with due regard to who is sick and who is well. The employers are necessarily on the receiving-end of this anti-selection. The post-HIPAA ease of getting on or off plans and the almost universal use of multiple-tiered participant contributions make the anti-selection the more likely and costly to employers.
The present COB format permits (a) the prohibited group (being able to easily afford double coverage), (b) the more knowledgeable participants (being able to grasp the intricacies of double coverage) and (c) the group with the most knowledge as to their health conditions to take advantage of the opposite groups. In the study shown herein, the participants who had the greatest ROI belonged to the group above-described for the most part. Too often, the other group sign up for double-coverage not realizing that it has the preservation provisions or that their ROI will be negative or that the peace of mind they wish come at two great a price.
Anecdotal evidence and unsophisticated time studies of the writer would indicate the time and effort to process a secondary COB claim are approximately three times that of a regular claim. This additional time and effort in claim processing would be tolerable were that the only additional element of expense with COB. However the added complexities increase the COB expense drain in many other ways such as enrolling and reenrolling covered dependents, plan document and SPD complexities, misunderstandings, confusions, etc., and the need for additional surveillance.
· Anti-Cost Containment.
The reason to have deductibles, copayments, etc is to aid and encourage the most prudent use of health claim dollars. The allowance of COB is non-cost containing and therefore, in and of itself is an act of imprudence.
The writer, as an actuarial student decades ago was a water boy on some NAIC/Industry work groups which helped in the birthing of COB. All parties in connection with early COB matters were virtuous. However, the writer is convinced that had the COB founding fathers been clairvoyant, the present travesty of COB would have been avoided, that is, it would probably have been either banned outright or required the preservation rules.
The writer sites approximately 70 court cases. While not highly litigious by some standards, to this writer this is far too many. At best, COB gets a black eye as being a lightning rod to controversy.
For any self-funded plan fiduciary, the challenge of justifying COB against the ERISA prudency tests is overpowering. This logic may well apply to fully insured plan fiduciaries as well in light of Pilot Life Ins. Co. v. Dedeaux.
It appears to the writer that COB is, in political terms, a law which no body wants. This puts COB in enormous jeopardy for that reason alone. However, there are more than a few entities who will be disappointed were COB to be discontinued:
1. Covered persons and/or providers who use COB for their selfish interests.
2. Insurers who enjoy the pick-up of the added enrollments, premium income and ancillary business (Group Life, LTD, STD, supplemental coverages, etc.).
3. Those self-funders who have carefully assessed their enrollments and have established that for every participant who is on the other plan, there are several dependents who are on its plan. That is, where the balance sharply tilts in favor of the one self-funder (at the experience of the others) it may favor COB. The other self-funders have incentive, however, to not want COB.
The writer questions the prudency of either the employer in the TPA not making at least a effort to identify those participants who are covered as a dependent on their spouse’s plan. The writer alleges that were such identification done, the employer would locate a nest of high claims users. In fact, the number of participants covered as dependents on another health care plan could (and maybe should) become an underwriting marker. At present, the identity of such participants is a mystery and the writer’s allegation of such being high claims users must remain just that.
There are four miscellaneous items which deserve mention when contemplating the elimination of double coverage.
1. The group health statutes (which apply to stop-loss usually) require 75% of eligible employers be covered. For the purposes at hand, an employee otherwise covered is not eligible. Any person losing eligible because of being double-covered will regain eligibility upon losing such double-covered status.
2. By ERISA preemption principles, a self-funded plan sponsor is free to prohibit double coverage. It is the writer’s position that such plan sponsor is honor-bound to such prohibition for both (a) ERISA prudency logic and (b) risk management principles and practice.
3. From a competitive or free-market point of view the broader employer interests are met by offering a clear choice between (a) self-funding without double coverage and (b) fully insured with double coverage.
4. Those participants who are secretly double-covered both could and should be underwriting markers presuming their true identity is known. At least this is the allegation of the writer.