Louisiana Administrative Code › Title 37 - INSURANCE › Part XIII - Regulations › Chapter 3 - Regulation 32-Coordination of Benefits › Section XIII-325 - Appendix C-Explanation for Secondary Plans on the Purpose and Use of the Benefit Reserve

Current through Register Vol. 50, No. 6, June 20, 2024
A. Explanation
				for Secondary Plans on the Purpose and Use of the Benefit Reserve
COORDINATION OF BENEFITS
The purpose of coordination of benefits is to ensure that a
				  covered person does not receive more than 100% of the total allowable expenses.
				  Any plan that has been determined to be the secondary plan in accordance with
				  this model regulation is permitted to reduce its benefits so that the total
				  benefits paid by all plans during a claim determination period (a period of
				  time not less than 12 months, usually a calendar year or contract year) are not
				  more than the total allowable expenses.
The secondary plan usually saves money on claims due to the
				  other plan paying first. The amount saved by the secondary plan must be used to
				  pay allowable expenses which would not otherwise have been paid. To do this,
				  secondary plans must establish a benefit reserve account for each covered
				  person. The secondary plan puts the money saved on claims for the covered
				  person into the benefit reserve account. This money is to be used to pay any
				  portion of an allowable expense incurred by the covered person during a claim
				  determination period by using the following procedure:
*
First
, as each claim is received, the
				  secondary plan determines how much it would have paid if it had been the
				  primary plan.
*
Second
, the secondary plan subtracts this
				  amount from what it paid on the claim.
*
Third
, the difference (or savings) between
				  what the secondary plan paid and what it would have paid if it had been the
				  primary plan is then placed in the benefit reserve account established for the
				  covered person.
*
Lastly
, as subsequent claims are submitted for
				  the covered person, the secondary plan reviews previous claims and determines
				  its obligation to pay for allowable expenses on those claims and pays on those
				  claims to the extent savings are available in the covered persons benefit
				  reserve account. This includes claims that were previously applied to either
				  plans deductible, coinsurance or copayment. For example, if the first claim
				  incurred by the covered person was applied to both plans deductibles and the
				  second claim incurred by a covered person was payable at 100% by both plans,
				  the secondary plan must use the savings realized from the second claim to pay
				  toward the first claim.
The procedure outlined above is illustrated in the various
				  claim examples that follow. For all of the examples, Plan A is the primary plan
				  and Plan B is the secondary plan. Both plans have an 80 percent/20 percent
				  coinsurance requirement. For illustrative purposes, Plan A has a $25 deductible
				  and Plan B has a $100 deductible. Claims are assumed to have occurred in the
				  same claim determination period and in consecutive order.
Examples:
Claim Number 1
Actual Charge = $100
Plan A
Plan B
$100
$100
-25 Deductible
-100 Deductible
$75
$0 Payable
80 percent
$60 Payable
Plan A must pay $60. Plan B makes no payment because
							 it would have no liability under the terms of the policy if it had been
							 primary. No money is available from the benefit reserve account.
Claim Number 2
Actual Charge = $5300
Plan A
Plan B
$5300
$5300
-0 Deductible
-0 Deductible
$5300
$5300
80 percent
80 percent
$4240 Payable
$4240 Payable
The deductible on both plans was calculated in Claim
							 #1. Deductibles will not apply from this claim forward. Plan A must pay $4240.
							 Plan B must pay the difference between the actual charge and the amount paid by
							 Plan A ($1060). Plan B must now establish a benefit reserve account. This
							 amount, the savings, is calculated by subtracting the amount it paid from the
							 amount it would have paid if primary ($4240-$1060=$3180). Now Plan B must go
							 back to Claim #1 and pay the $40 balance of that claim out of the benefit
							 reserve account, leaving a balance in that account of $3140.
Claim Number 3
Actual Charge = $110
Plan A
Plan B
$110
$110
80 percent
80 percent
$88 Payable
$88 Payable
Plan A pays $88. Plan B pays the difference of the
							 actual charge and the amount paid by Plan A ($22). Plan B would have paid $88
							 if primary, but only paid $22, so the balance of the savings of $66 goes into
							 the benefit reserve account, which now totals $3206. Plan B does not have to go
							 back to any other prior claims to pay any incurred, but unpaid, allowable
							 expenses, because there are none outstanding. So, the balance in the benefit
							 reserve account remains unchanged at $3206.
Claim Number 4
Actual Charge = $1500
Plan A
Plan B
$1300 RVS
$1100 RVS
80 percent
80 percent
$1040 Payable
$880 Payable
The insured is liable for the difference between the
							 actual charge and the highest amount under the relative value schedule (RSV)
							 reimbursement methodology ($200). Plan A pays $1040. Plan B pays the difference
							 between the highest RSV amount and the amount paid by Plan A
							 ($1300-$1040=$260). The benefit reserve account is increased by the difference
							 between what Plan B would have paid if primary and the amount actually paid by
							 Plan B ($880-$260=$620), for a new balance of $3826.
Claim Number 5
Actual Charge = $2295 for 51
							 visits
This claim involves spinal manipulation. Plan A
							 provides up to 26 visits per year on an 80 percent/20 percent basis. Total
							 actual charge of $45 per visit is within RSV limits.
Plan A
$1170 RSV for 26 visits 80 percent
$936 Payable
Plan B has no coverage for spinal manipulation.
							 However, because Plan A has coverage under its policy, the claim is considered
							 an allowable expense for the 26 visits. Plan B must pay the 20% coinsurance
							 ($234) amount for the 26 visits from the benefit reserve account, leaving a
							 final balance of $3592. The remaining amount of $1125 for the additional 25
							 visits is not payable by either Plan A or Plan B because it is not considered
							 an allowable expense under Plan A. Plan A pays benefits for only 26 visits per
							 year. Again, Plan B has no coverage for spinal manipulation.
AUTHORITY NOTE:
				  Promulgated in accordance with R.S. 22:3.2014.