What is the purpose of "coordination of benefits"?

The purpose of "coordination of benefits" is to determine the order in which multiple insurance policies will pay for a claim. This process is essential when a person is covered by more than one health insurance plan, ensuring that the total amount paid by both insurers does not exceed the actual medical expenses incurred. The primary objective is to avoid overpayment and to clarify which insurance company is responsible for the payment first, known as the primary payer, and which one pays the remaining balance, known as the secondary payer.

When coordination of benefits is effectively implemented, it helps streamline the claim settlement process for healthcare providers and ensures that patients receive the maximum benefits from their coverage without the confusion of overlapping claims. Each policy may have specific terms governing how they interact, which plays a crucial role in maintaining fairness and efficiency in the healthcare claim system.

The other options, while they may relate to health insurance in a broader sense, do not specifically capture the essence of what coordination of benefits aims to achieve. Simplifying the claims process, establishing premium rates, and providing additional coverage options are all important elements of health insurance but are distinct functions that do not involve the coordination of benefits.