Coordination of benefits (COB) is the set of rules that decides which insurance pays first, which pays second, and how much each pays when a patient has more than one source of coverage.
When COB is wrong, the claim goes to the wrong payer first. The result is a denial such as CARC 22 or 109, a delayed secondary payment, or months later a recoupment when the plan that paid discovers it should have been secondary. All of these start with the same gap: nobody confirmed the order of coverage before the visit.
The rules differ by type of coverage. Two commercial plans follow state COB regulations, most based on the National Association of Insurance Commissioners (NAIC) model. Medicare follows the federal Medicare Secondary Payer (MSP) law. Medicaid, by law, pays after every other liable source.
This guide walks through each rule set, shows how to calculate a secondary payment, explains crossover claims and the COB denial codes, and gives your front desk a checklist that prevents COB errors.
Key Takeaways
- Between two commercial plans, the plan covering the patient as the employee or subscriber pays before the plan covering them as a dependent; for children of married parents, the birthday rule applies.
- Medicare is secondary to an employer group health plan for working beneficiaries aged 65 or older only when the employer has 20 or more employees, and for disabled beneficiaries only when the employer has 100 or more employees.
- For ESRD, the group health plan pays first during a 30-month coordination period, regardless of employer size.
- Medicaid is the payer of last resort: every other liable source, including Medicare, pays first.
- CARC 22 means another payer may be primary; CARC 23 reports the effect of a prior payer’s payment; CARC 109 means you sent the claim to the wrong payer.
How COB Works Between Two Commercial Plans
Most states have adopted COB rules based on the NAIC Coordination of Benefits Model Regulation. The plan’s own COB provision controls, but state regulations based on the model typically apply these rules in order, stopping at the first one that decides:
- No COB provision. A plan without a COB provision consistent with the regulation is primary.
- Subscriber vs dependent. The plan that covers the person as an employee, member or subscriber pays before the plan that covers them as a dependent.
- Dependent child, parents married or living together. The birthday rule: the plan of the parent whose birthday (month and day only, not year) falls earlier in the calendar year is primary. If both parents share a birthday, the plan that has covered a parent longer is primary.
- Dependent child, parents divorced or separated. A court decree that makes one parent responsible for health coverage controls, once the plan knows about it. Without one, the order is usually the custodial parent’s plan, the custodial parent’s spouse’s plan, then the non-custodial parent’s plan.
- Active vs retired or laid-off employee. Coverage as an active employee pays before coverage as a retiree or laid-off employee.
- COBRA or continuation coverage. Coverage through current employment or membership pays before COBRA or state continuation coverage.
- Longer vs shorter coverage. If nothing above decides, the plan that has covered the person longer is primary. If still tied, the plans share allowable expenses equally.
Do not apply the birthday rule to the parent’s age. Only the month and day matter. A parent born 4 March 1990 is primary over a parent born 19 July 1975.
Medicare Secondary Payer (MSP) Rules
When a patient has Medicare, the federal MSP law, not state COB rules, decides the order. The table summarizes the most common situations, as described by CMS and Medicare contractors such as First Coast Service Options. Our Medicare Secondary Payer rule guide covers MSP compliance in more depth.
| Situation | Who pays first | Key condition |
|---|---|---|
| Age 65+, still working | Employer group health plan | Coverage is based on current employment (patient or spouse) and the employer has 20 or more employees |
| Age 65+, small employer | Medicare | Employer has fewer than 20 employees |
| Under 65, disabled | Large group health plan | Coverage is based on current employment and the employer has 100 or more employees |
| ESRD | Group health plan | During the 30-month coordination period, regardless of employer size or employment status |
| Retiree coverage | Medicare | Coverage is based on past, not current, employment |
| COBRA | Medicare (generally) | Except during the ESRD coordination period |
| Work injury | Workers’ compensation | For services related to the work injury or illness |
| Accident | No-fault or liability insurance | Medicare may make a conditional payment if the insurer does not pay promptly |
CMS publishes a model MSP questionnaire in the Medicare Secondary Payer Manual (Pub. 100-05, Chapter 3). Hospitals use it at registration, and physician practices can adapt it to collect the same facts: employment status, employer size, other coverage, and whether the visit relates to an accident or work injury.
Ask the MSP questions again whenever a Medicare patient’s work status changes. A spouse who retires can move Medicare from secondary to primary overnight, and claims billed to the old primary plan will be recouped later. See recoupment in medical billing for how those takebacks work.
MSP Type Codes on the Claim
When Medicare is secondary on an 837P claim, you report the primary payer’s payment and adjustments in the COB loops and identify why Medicare is secondary with an insurance type code, such as:
| Code | MSP reason |
|---|---|
| 12 | Working aged beneficiary or spouse with employer group health plan |
| 13 | End-stage renal disease beneficiary in the coordination period with a group health plan |
| 14 | No-fault insurance, including auto |
| 15 | Workers’ compensation |
| 43 | Disabled beneficiary under 65 with a large group health plan |
| 47 | Other liability insurance |
Medicaid: The Payer of Last Resort
Federal law makes Medicaid the payer of last resort. As Medicaid.gov puts it, all other available third-party resources must meet their legal obligation to pay before Medicaid pays. That includes Medicare, commercial plans, and liability or workers’ compensation coverage. For dual-eligible patients, Medicare pays first and Medicaid considers the remaining cost sharing.
State Medicaid programs and their managed care plans run third-party liability (TPL) programs and will deny or recover payment when they find other coverage. Always bill the other coverage first, then send the Medicaid claim with the primary payer’s remittance data.
Crossover Claims
A crossover claim is a Medicare claim that Medicare forwards automatically to the patient’s supplemental payer, such as a Medigap plan, a retiree plan or Medicaid, after it processes the claim.
- Automatic crossover. Supplemental payers sign a Coordination of Benefits Agreement (COBA) with CMS and send an eligibility file. When a processed claim matches the file, Medicare sends it to that payer.
- Claim-based Medigap crossover. Participating providers can enter the Medigap policy number and insurer ID (items 9a and 9d on the CMS-1500) to trigger a crossover.
- How you know. The Medicare remittance carries remark code MA18, which tells you the claim information was forwarded to the supplemental insurer.
Do not send a separate claim to the secondary payer when the Medicare remittance shows the claim crossed over. Wait for the supplemental payment; a duplicate submission is likely to be denied. If nothing arrives, contact the supplemental payer.
How to Calculate a Secondary Payment
Medicare as Secondary: Worked Example
Medicare Administrative Contractors such as Noridian explain that Medicare’s secondary payment under Part B is the lowest of three amounts. Using hypothetical figures, with the patient’s Part B deductible already met:
| Item | Amount |
|---|---|
| Billed charge | $200.00 |
| Primary plan allowed | $150.00 |
| Primary plan paid | $120.00 |
| Medicare fee schedule amount | $130.00 |
Calculation 1. Charge (or the amount you must accept under your contract with the primary plan) minus the primary payment: $200 − $120 = $80.
Calculation 2. The higher of Medicare’s fee schedule amount or the primary allowed, minus the primary payment: $150 − $120 = $30.
Calculation 3. What Medicare would pay as primary: 80% of $130 = $104.
Medicare pays the lowest amount, $30. If you are in network with the primary plan and must accept its $150 allowed as payment in full, calculation 1 also becomes $150 − $120 = $30.
Two Commercial Plans
Under a standard COB provision, the secondary plan pays up to what it would have paid as primary, but not more than the balance left after the primary payment. Some plans use non-duplication or carve-out methods that pay less, so read the secondary plan’s COB language. The secondary claim must carry the primary payer’s adjudication, which the secondary payer reports with CARC 23.
COB Denial and Adjustment Codes
| Code | X12 description | What to do |
|---|---|---|
| CARC 22 | This care may be covered by another payer per coordination of benefits. | Confirm other coverage with the patient and payer, bill the primary, then resubmit with the primary’s payment data |
| CARC 23 | The impact of prior payer(s) adjudication including payments and/or adjustments. (Use only with Group Code OA) | Informational; post it as the primary payer’s effect, not as a write-off |
| CARC 109 | Claim/service not covered by this payer/contractor. You must send the claim/service to the correct payer/contractor. | Find the correct payer or Medicare contractor and submit there |
| CARC 24 | Charges are covered under a capitation agreement/managed care plan. | Often Original Medicare billed for a Medicare Advantage member; bill the managed care plan |
For other common denial codes and how they relate, see why medical claims are denied and how to fix them.
Front-Desk COB Checklist
- Ask every patient, at every visit, whether they have any other coverage, including a spouse’s or parent’s plan.
- For Medicare patients, ask the MSP questions: still working, spouse working, employer size, accident or work injury.
- For children, record both parents’ dates of birth and any custody or court order on file.
- Run real-time eligibility and read the COB or other-payer section of the response.
- Scan both sides of every insurance card and record the subscriber, relationship and group number.
- Update the payer order in your system before the claim is created, and ask the patient to update COB with the plan when a payer requests it.
Our guide to preventing insurance verification errors shows how to build these checks into intake.
Common COB Mistakes
Billing the plan on the newest card first. The newest card is not always primary; apply the rules above.
Billing a secondary without the primary’s remittance. The secondary payer needs the primary payment and adjustments, electronically in the COB loops or on a paper EOB.
Writing off CARC 23 amounts. CARC 23 shows what the primary already did; it is not a contractual write-off, and treating it as one hides patient balances.
Assuming COBRA is secondary for a Medicare patient. Between two commercial plans, COBRA is secondary to active coverage, but when the patient has Medicare, Medicare is generally primary to COBRA, except during the ESRD coordination period.
Tired of COB denials and takebacks? Steady Medical Billing’s insurance eligibility verification team confirms coverage order before every visit, so the right payer gets the claim first.
Frequently Asked Questions
What is the birthday rule in coordination of benefits?
When a child is covered by both parents and the parents are married or living together, the plan of the parent whose birthday, by month and day only, comes earlier in the calendar year is primary. If both share a birthday, the plan that has covered a parent longer is primary.
When is Medicare the secondary payer?
Medicare is secondary to an employer group health plan for a working beneficiary aged 65 or older when the employer has 20 or more employees, for a disabled beneficiary under 65 when the employer has 100 or more employees, and during the 30-month ESRD coordination period. It is also secondary to workers compensation, no-fault and liability insurance for related services.
Is Medicaid ever the primary payer?
Generally no. Medicaid is the payer of last resort, so Medicare, commercial plans and other liable coverage must pay first. Medicaid pays only after those sources meet their obligations.
What does denial code CARC 22 mean?
CARC 22 means this care may be covered by another payer per coordination of benefits. Confirm the other coverage, bill the primary payer first, then resubmit to this payer with the primary payment information.
Do I need to bill the secondary payer after Medicare pays?
Not if the claim crossed over. When the Medicare remittance shows remark code MA18, Medicare has forwarded the claim to the supplemental payer. Bill the secondary yourself only if the claim did not cross over.
