What is the purpose of the coordination of benefits (COB) provision in insurance plans?

The coordination of benefits (COB) provision in insurance plans serves the crucial role of avoiding duplication of benefit payments when a person is covered by more than one insurance plan. Essentially, COB ensures that when an individual has multiple health insurance policies, the total benefits paid do not exceed the actual costs incurred for medical services. This means that one policy will act as the primary payer, covering the initial portion of the expenses, while the secondary policy may cover additional costs, but only up to the total allowable amount.

This provision helps insurance companies manage their risk and prevents situations where policyholders could receive excess payments from multiple policies for the same healthcare services. As a result, COB promotes a fair system where insurance benefits are effectively coordinated to ensure proper coverage without leading to an overpayment scenario. Consequently, the system supports equitable treatment and responsible use of insurance resources.