Double coverage can be a real problem when employees and their spouses are both covering each other and their child(ren) on both health insurance plans.  Most employees also do not understand how COB (Coordination Of Benefits) or the Birthday Rule works.

 

Employees will doubly cover each other when the concern for coverage outweighs the premium contribution involved.  This occurs particularly in plans with good benefits or low premium contributions.

 

However, under COB, only the plan that is primary will pay first for that covered individual and only if there is a balance will the secondary plan kick in.  The Employee is always primary on their own health insurance plan while the spouse is always primary on their health insurance plan.  The Birthday Rule determines that the parent with the first birthday in the year is the plan that is primary for the children.  So, if the spouse's birthday comes before the employee's birthday in the calendar year, then the employee's children are covered primary on the spouse's plan regardless of whether the employee is covering their children on their plan.  In other words, wasted premium for the employer and wasted premium contribution for the employee.

 

The SPD rules as to how the employee's plan treats COB and can even dictate that the employee's coverage is limited is they are covered on a spouse's plan which has been upheld in court rulings.  A better drafted SPD can win over assumed practices.

 

An easy way to incent an employee to take a close look at whether they should cover their dependents or even themselves on their employer's plan, is to offer a Cash Bonus Opt Out Incentive for waiving coverage.

 

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