What does Coordination of Benefits allow in health insurance?

Coordination of Benefits (COB) is a provision in health insurance policies that helps avoid situations where a claimant receives more benefits than what is actually incurred by their medical expenses. In scenarios where individuals are covered by more than one health insurance plan, COB comes into play to ensure that the total benefits paid do not exceed the actual medical expenses incurred.

The correct answer reflects that under a COB arrangement, the secondary payer (the insurance plan that pays after the primary payer) can reduce its benefit payments. This means that if the primary insurance plan pays a portion of a claim, the secondary plan can adjust its coverage to prevent overlapping payments and ensure that the combined benefits do not surpass 100% of the total medical expenses. This system seeks to limit total benefits to the actual costs incurred rather than allowing excess profits or overpayments.

This method helps maintain fairness in the insurance system, protects the integrity of the claims process, and controls overall costs within the health insurance industry.