What is the purpose of 'coordination of benefits' in medical insurance?

The purpose of 'coordination of benefits' in medical insurance is to allocate payments between primary and secondary insurances. When an individual has multiple insurance plans, coordination of benefits ensures that the total reimbursement does not exceed the total cost of the medical services provided. This process determines which insurance payer is responsible for the claim first (the primary payer), and how the secondary payer will handle the remaining balance. By clarifying the responsibilities of each insurer, it helps to prevent overpayment and reduces the risk of confusion about coverage responsibilities for healthcare providers and patients alike.

This is particularly important in situations where individuals may have insurance through an employer and also qualify for Medicare or Medicaid, ensuring that claims are processed efficiently and accurately across different insurers.