What does "coordination of benefits" mean?

The term "coordination of benefits" refers to a systematic approach used to determine the order of payment when an individual is covered by multiple insurance plans. This process is essential for ensuring that the total amount reimbursed does not exceed the total cost of the services provided. When a person has coverage from more than one insurance policy, coordination of benefits allows the insurers to work together in a structured manner to decide which plan will be the primary payer, meaning it pays first, and which will be the secondary payer, responsible for covering any remaining costs.

Understanding this concept is critical for both consumers and insurance professionals to navigate situations where multiple policies might apply. It helps to avoid overpayments and ensures that benefits are provided in a fair and efficient manner, with the goal of minimizing the out-of-pocket expenses for the insured.

The other choices do not accurately define coordination of benefits. For instance, the first choice mistakenly associates this term with car accidents, while the third option conflates it with rules regarding provider networks, which is a different subject entirely. The fourth choice implies a negotiation strategy rather than a systematic payment structure.