PSI Ohio Insurance Practice Exam

What is the purpose of the Coordination of Benefits Provision in health insurance?

1. To eliminate waiting periods for services.

2. To avoid underinsurance in high-risk cases.

3. To prevent profit on a covered loss for those with multiple health plans.

4. To ensure direct payment to healthcare providers.

The correct answer is: To prevent profit on a covered loss for those with multiple health plans.

The Coordination of Benefits Provision in health insurance serves to prevent individuals from profiting from their healthcare coverage when they have multiple health plans. This provision ensures that when a person is covered by more than one health insurance policy, the total amount reimbursed for their medical expenses does not exceed 100% of the allowable costs. Essentially, if a member has multiple insurance policies, the combined benefits from these policies are coordinated so that they do not receive more than their total medical expenses. For instance, if a person incurs a medical bill of $10,000 and has two insurance policies, the Coordination of Benefits will determine how much each policy will pay. If both policies would potentially pay the health care provider an amount that exceeds the total cost, the coordination helps manage these payments. This approach prevents situations where individuals might seek to maximize their profits by filing claims with multiple insurers, which could lead to overpayments for the same medical service. Understanding this concept is crucial in managing insurance policies effectively, ensuring fair distribution of costs among insurers while protecting the interests of both the policyholders and the insurance providers.