Illinois Health Insurance Practice Exam

What is the primary aim of Coordination of Benefits provision in health insurance policies?

1. To increase coverage limits

2. To simplify claims processing

3. To ensure double payment to the insured

4. To prevent overpayment beyond the actual loss

The correct answer is: To prevent overpayment beyond the actual loss

The primary aim of the Coordination of Benefits (COB) provision in health insurance policies is to prevent overpayment beyond the actual loss. COB is designed to ensure that when an individual has multiple health insurance plans, the total benefits paid do not exceed the total medical expenses incurred. This mechanism coordinates the payments between different insurers to establish which plan pays first (the primary insurer) and which pays second (the secondary insurer). By doing this, the COB provision helps to ensure that the insured receives the appropriate level of coverage while avoiding any scenarios where they could be compensated more than what they actually incurred in medical expenses, which aligns with the principles of fairness and cost control in the insurance industry.