Prevent Overinsurance with Coordination of Benefits Provision
How can Jake prevent overinsurance with his multiple group health insurance plans?
Jake is covered by his own group health insurance plan as well as by his wife's group plan. Which provision in Jake's plan will prevent overinsurance?
Final answer:
The coordination of benefits provision in Jake's plan will prevent overinsurance by ensuring that the total amount reimbursed for a claim does not exceed the actual expenses incurred.
Explanation:
The provision in Jake's plan that will prevent overinsurance is called the coordination of benefits provision. This provision ensures that when a person is covered by multiple insurance plans, the total amount reimbursed for a claim does not exceed the actual expenses incurred.
For example, if Jake has a medical expense of $1000 and his own insurance plan covers 80% of the cost, his insurance will pay $800. If his wife's insurance plan covers 75% of the cost, her insurance will pay the remaining $200 (25% of $800). This prevents Jake from receiving more than 100% reimbursement and saves the insurance companies from overpaying.