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which allowable???

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tlewis:
Under the rules of COB, a secondary carrier may reduce its benefits so that the total benefits paid or provided by all plans during a contract year are not more than the total allowable expenses.  The secondary carrier usually saves money on claims due to the other plan paying first.  These savings are placed in a benefit reserve account or savings bank for the covered person and are used to pay allowable expenses that would have not been paid otherwise.  For example, deductibles, copayments and coinsurance can be reimbursed to the covered person if there are savings available.

Following are simple examples of how claims should be paid in a COB situation.  Plan A is primary and Plan B is secondary.  Both plans pay claims at 80%; the insured is responsible for 20% coinsurance.  For illustrative purposes, Plan A has a $25.00 deductible and Plan B has a $100.00 deductible.  Claims have occurred in one contract year and in consecutive order.

CLAIM #1
Actual Charge = $100.00

Plan A                                                Plan B
$100.00                                              $100.00
   -25.00 Deductible                         -100.00 Deductible
$  75.00                                                    0.00 Payable
         80%                           
$  60.00

Plan A must pay $60.00.  Plan B would make no payment because it had no liability under the terms of the policy if it had been primary.  Also, there was no money available from the benefit reserve account or savings bank.

CLAIM #2
Actual Charge = $5300.00

Plan A                                                Plan B
$5300.00                                           $5300.00
       -0.00 Deductible                            -  0.00 Deductible
$5300.00                                           $5300.00
           80%                                                    80%
$4240.00 Payable                            $4240.00 Payable
             
The deductibles on both plans were calculated in claim #1.  Deductibles will not apply from this claim forward.  Plan A must pay $4240.00.  Plan B must pay the difference between the actual charge and the amount paid by Plan A ($1060.00).   Plan B must now establish a benefit reserve account or savings bank.  This amount is calculated by subtracting the amount it paid from the amount it would have paid if primary ($4240.00 - $1060.00 = $3180.00 benefit reserve account or savings bank).  Now Plan B must go back to Claim #1 and pay the $40.00 balance of the claim out of the benefit reserve account or savings bank ($3180.00 - $40.00 =$3140.00).  The balance of the benefit reserve or savings account is $3140.00.

CLAIM #3
Actual Charge = $110.00

Plan A                                                Plan B
$110.00                                              $110.00
         80%                                                    80%
$  88.00 Payable                              $  88.00 Payable

Plan A pays $88.00.  Plan B pays the difference of the actual charge and the amount paid by Plan A ($22.00).  Now Plan B calculates the amount to be put in the benefit reserve account or savings bank.  Plan B would have paid $88.00 if primary.  It only paid $22.00, so the balance of $66.00 goes into the benefit reserve account or savings bank. (Previous balance $3140.00 + $66.00 = $3206.00).

CLAIM #4
Actual Charge = $1500.00

Plan A                                                Plan B
$1300.00 U&C                                  $1100.00 U&C
           80%                                    __       80%
$1040.00 Payable                            $  880.00 Payable

The insured is liable for the difference between the actual charge and the highest usual and customary (U&C) amount ($200.00).  Plan A pays $1040.00.  Plan B pays the difference between the highest U&C amount and the amount paid by Plan A ($1300.00 - $1040.00 = $260.00).  The benefit reserve account or savings bank is increased by the difference between what Plan B would have paid if primary and the amount actually paid ($880.00 - $260.00 = $620.00).  The benefit reserve account or savings bank increases by $620.00 making the total savings $3826.00.

CLAIM #5
Actual Charge = $1500.00

Plan A                                                Plan B
$1100.00 U& C                                 $1300.00 U&C
           80%                                                     80%
$  880.00 Payable                            $1040.00 Payable

The insured is liable for the difference between the actual charge and the highest U&C amount ($200.00).  Plan A pays $880.00.  Plan B can pay up to what it would have paid if primary.  Therefore, Plan B will pay the difference between the highest U&C amount and what Plan A paid ($1300.00 - $880.00 = $420.00).  The benefit reserve account or savings bank will increase by the difference between what Plan B would have paid if primary and the amount if actually paid ($1040.00 - $420.00 = $620.00).  The prior benefit reserve account or savings bank balance increases by $620.00 to total $4446.00.

CLAIM #6
Actual Charge = $2295.00 for 51 visits
 
This claim involves spinal manipulation.  Plan A provides up to 26 visits per year on an 80% / 20% basis.  The total actual charge of $45 per visit is within U&C limits.

Plan A
$1170.00 U&C for 26 visits
  _______________  80%
$  936.00 Payable

Plan B has no coverage for spinal manipulation.  However, since Plan A has coverage under its policy, the claim is considered an allowable expense.  Plan B must pay the 20% coinsurance ($234.00) amount for the first 26 visits plus 100% of the charges for the additional 25 visits ($1125.00) from the benefit reserve account or savings bank, leaving a final balance in the reserve account of $3087.00. 

NOTE:  The savings generated by COB can only be used within the contract year (usually a calendar year).  At the end of the contract year, the benefit reserve account or savings bank is returned to a zero balance for the new contract year.

tlewis:
ok this example uses U/C charges. So I can see how this would work if you are not contracted with the insurance companies. However if you are contracted don't you have to accept the contracted rates?  I don't see how the patient is responsible for a higher amount when they have double coverage.

The following items are not required to be considered "allowable expenses":
The extra cost of a private hospital room versus a semi-private room, unless medically necessary according to the insured's physician;
Dental care, vision care, prescription drug or hearing aid programs;
The amount of a benefit reduction under the primary carrier because a covered person does not comply with plan provisions, such as second surgical opinions, pre-certification of admissions or services, or preferred provider arrangements.

tlewis:
What about secondary plans?
For the purpose of eliminating duplication of benefits, a secondary plan must reduce its
benefits so that the total benefits paid during a claim determination period do not exceed
100% of allowable expenses. Examples of expenses that are not “allowable expenses” are
private room charges and charges that exceed an applicable usual and customary (U&C)
rate or negotiated fee. If one plan uses a U&C reimbursement methodology and the other
plan calculates its benefits per a negotiated fee, the primary plan’s payment arrangement
must be the “allowable expense” for all plans. If a provider has a contract with both
plans, the provider may bill the higher of the two rates, if this is permitted in the contract.

tlewis:
Key statement "if permitted in the contract". and boy you do not want to be billing a medicare secondary patient the "higher" amount unless you want to get audited.
If in the example used they are both contracted insurance companies I would call look at your contract with the primary before charging the patient the higher co-pay.

tlewis:
Ok sorry but the math in this one is just really bothering me.. can't let it go. I have looked up the laws for my state ( oregon) and with reference to the payment example I posted I just think that the secondary did not pay this claim in accordance to COB laws. The secondary claim should have paid the claim  with a pt balance of $12.44.
Primary allowed $156.25
Primary paid a total of $135 with a pt balance of $21.25
Secondary allowed a total of $259.44 with a pt balance of $49.80
Secondary must pay as if they are primary but can subtract the amount paid by primary in their calculations. $259.44 -$135.00= $124.44 then they would pay the % they would pay on the $124.44 total. I'm going to assume they pay at 90% because of what they put at the pt's co-pay. so they would pay $112.00 leaving a pt balance of $12.44.
THe secondary shows the co-pay at being a 90% 10% plan. however they did not pay 90% of what they allowed but charged the pt 10% of what they allowed. They cannot use two different calculations to come up with the total. they can't subtract the amount the primary paid to come up with what they owe and not subtract it from the patient. They left the pt responsiblilty as if the primary did not pay but used the the primary payment to subtract from their payment. If we look at J1094 The primary had a a higher allowed amount of $11.25 than the secondary and paid at $9.00 yet the secondary has a lower allowed amount of $4.68 and charged the patient a co-pay of .47 and paid $0.00 I believe that the secondary is going to have to follow the higher allowed amount rule on this one and pay 90% on what the primary allowed so the would need to pay another $1.13 on this claim. which then would bring the pt balance to  $11.11. 

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