AD Banker Comprehensive Practice Exam

Coordination of Benefits is designed to reduce what when an insured is covered under multiple health plans?

1. Continuation of coverage

2. Overinsurance

3. Extension of benefits

4. Excess coverage

The correct answer is: Overinsurance

Coordination of Benefits (COB) is a process established to manage the complexities that arise when an individual is covered by more than one health insurance plan. The primary aim of COB is to prevent overinsurance, which occurs when a person has more health coverage than necessary, leading to excessive benefits that exceed the actual costs of care. When an insured has multiple plans, COB ensures that the total amount paid does not exceed the actual medical expenses incurred. This means that the plans work together to allocate the payment of claims effectively, rather than allowing the insured to receive double payments for the same service, which could lead to financial waste and exploitation of the insurance system. By implementing these policies, COB helps to maintain the integrity of health insurance by keeping the costs manageable. Therefore, the correct answer highlights the focus on reducing overinsurance, which is essential for maintaining fair practices in the health insurance industry.