Rules & Regulations of the State of Tennessee
Title 0780 - Commerce and Insurance
Subtitle 0780-01 - Insurance Division
Chapter 0780-01-53 - Coordination of Benefits
Section 0780-01-53-.04 - RULES FOR COORDINATION OF BENEFITS

Universal Citation: TN Comp Rules and Regs 0780-01-53-.04

Current through September 24, 2024

(1) Order of Benefits.

(a) General.
1. The Primary Plan must pay or provide its benefits as if the Secondary Plan or Plans did not exist.

2. A Secondary Plan may take the benefits of another Plan into account only when, under these rules, it is Secondary to that other Plan. (See rule 0780-1-53-.03, subsections (3) and (4) (b) (3)

(b) Dependent Child/Parents Not Separated or Divorced.
1. The word ''birthday'' in the wording shown in rule 0780-1-53-.03, subsection (4) (c) (2) (ii) of this regulation refers only to month and day in a calendar year, not the year in which the person was born.

2. A group contract which includes COB and which is issued or renewed, or which has an anniversary date on or after sixty (60) days after the effective date of this regulation shall include the substance of the provision in rule 0780-1-53-.03(4) (c) (2) (ii) of this regulation. That provision shall become effective one (1) year and sixty (60) days after the effective date of this regulation. Until that provision becomes effective, the group contract shall, instead, use wording like this:

''Except as stated in rule 0780-1-53-.03(4) (c) 2. (ii), the benefits of a Plan which covers a person as a dependent of a male are determined before those of a Plan which covers the person as a dependent of a female.''

(c) Longer/Shorter Length of Coverage.
1. To determine the length of time a person has been covered under a Plan, two Plans shall be treated as one if the claimant was eligible under the second within 24 hours after the first ended. Thus, the start of a new Plan does not include:
(i) a change in the amount of a scope of a Plan's benefits;

(ii) a change in the entity which pays, provides or administers the Plan's benefits; or

(iii) a change from one type of Plan to another (such as, from a single employer plan to that of a multiple employer plan).

2. The claimant's length of time covered under a Plan is measured from the claimant's first date of coverage under that Plan. If that date is not readily available, the date the claimant first became a member of the group shall be used as the date from which to determine the length of time the claimant's coverage under the present Plan has been in force. (See rule 0780-1-53-.03,(4) (c) 2. (v))

(2) Reduction in a Plan's Benefits When it is Secondary.

(a) General. A Secondary Plan may reduce its benefits by using Alternatives 1, 2, or 3 below, or any version thereof which is more favorable to a covered person. This is subject to the conditions and limits described in this subsection (2).

(b) Alternative 1. Total Allowable Expenses.
1. When this Alternative is used, a Secondary Plan may reduce its benefits so that the total benefits paid or provided by all Plans during a Claim Determination Period are not more than total Allowable Expenses. The amount by which the Secondary Plan's benefits have been reduced shall be used by the Secondary Plan to pay Allowable Expenses, not otherwise paid, which were incurred during the Claim Determination Period by the person for whom the claim is made. As each claim is submitted, the Secondary Plan determines its obligation to pay for Allowable Expenses based on all claims which were submitted up to that point in time during the Claim Determination Period.

2. When this alternative is used, the suggested contract provision is as shown in rule 0780-1-53-.03,(4) (d) (2).

3. The last paragraph quoted in rule 0780-1-53-.03,(4) (d) (2) may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided.

(c) Alternative 2. Total Allowable Expenses with Coinsurance.
1. When this Alternative is used, a Secondary Plan may reduce its benefits so that the total benefits paid or provided by all Plans during a Claim Determination Period are not more than a stated percentage, but not less than eighty percent (80%), of total Allowable Expenses. The amount by which the Secondary Plan's benefits have been reduced shall be used by the Secondary Plan to pay the stated percentage of Allowable Expenses, not otherwise paid, which were incurred during the Claim Determination Period by the person for whom the claim is made. As each claim is submitted, the Secondary Plan determines its obligation to pay for the stated percentage of Allowable Expenses based on all claims which were submitted up to that point in time during the Claim Determination Period.

2. When this alternative is used, the suggested contract provision for use in rule 0780-1-53-.03,(4) (d) 2. is shown below.
(i) Reduction in This Plan's Benefits. The benefits of This Plan will be reduced when the sum of:
(I) the benefits that would be payable for the Allowable Expenses under This Plan in the absence of this COB provision; and

(II) the benefits that would be payable for the Allowable Expenses under the other Plans in the absence of provisions with a purpose like that of this COB provision, whether or not claim is made; exceeds the greater of (i) eighty percent (80%) of those Allowable Expenses or (ii) the amount of the benefits in (I) above. In that case, the benefits in this section do not total more than the greater of (i) and (ii) above.

(III) When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan.

(IV) The last paragraph of (2), quoted immediately above, may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided.

(d) Alternative 3. Maintenance of Benefits.
1. When this Alternative is used, a Secondary Plan may reduce its benefits by the amount of the benefits payable under the other Plans for the same expenses.

2. When this Alternative is used, the suggested contract provision for use in rule 0780-1-53-.03, subsection 4 (d) 2. is shown below.
(i) The benefits that would be payable under This Plan in the absence of this COB provision will be reduced by the benefits payable under the other Plans for the expenses covered in whole or in part under This Plan. This applies whether or not claim is made under a Plan.

(ii) When a Plan provides benefits in the form of services, the reasonable cash value of each service rendered will be considered both an expense incurred and a benefit payable.

(iii) When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan.

3. The last paragraph of 2., quoted immediately above, may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided.

4. This Alternative 3 may be used in a Plan only when, in the absence of COB, the benefits of the Plan (excluding benefits for dental care, vision care, prescription drug or hearing aid programs) will, after any deductible be:
(i) not less than fifty percent (50%) of covered expenses:
(I) for the treatment of mental or nervous disorders or alcoholism or drug abuse; or

(II) under cost containment provisions with alternative benefits, such as those applicable to second surgical opinions, precertification of hospital stays, etc., and

(ii) not less than seventy-five percent (75%) of other covered expenses.

5. A Plan using this Alternative 3 may exclude definitions of and references to Allowable Expenses, Claim Determination Period, or both.

(e) Conditions for use of Alternatives 2 and 3.
1. General. Alternatives 2 and 3 permit a Secondary Plan to reduce its benefits so that total benefits may be less than one hundred percent (100%) of Allowable Expenses.

2. Conditions. A Plan using Alternative 2 or 3 must comply with the following conditions:
(i) Notice. The Plan must provide prior notice to employees or members that when it is Secondary (that is, it determines benefits after another Plan):
(I) its benefits plus those of the Primary Plan will be less that one hundred percent (100%) of Allowable Expenses; unless

(II) the Primary Plan, by itself, provides benefits at one hundred percent (100%) of Allowable Expenses.

(ii) Copayment and Deductible Limit. When the Plan is Secondary, it must provide a limit on the amount the employee, member or subscriber is required to pay toward the expenses or services covered under the Plan and for which the Plan is Secondary. Such limit shall not exceed $2,000 for any covered person, or $3,000 for any family in any Claim Determination Period.

(iii) Unrestricted Enrollment. The Plan must permit a person to be enrolled for its health care coverage when that person's eligibility for health care coverage under another Plan ends for any reason if:
(I) such person is eligible for coverage under The Plan; and

(II) such enrollment is made before the end of the 31-day period immediately following either:
I. the date when health care coverage under the other Plan ends; or

II. the end of any continuation period elected by or for that person.

This unrestricted enrollment is not required if a person remains eligible for coverage under that other Plan, or a Plan which replaces it, without interruption of that person's coverage.

(iv) Enrollment Requirements. If the person is enrolled before the end of the period, described in subparagraph (II) above, there shall be no interruption of coverage. Thus, the requirements concerning active work of employees, members of subscribers, or non-confinement of dependents on the effective date of coverage, shall not be applied. However, coverage for the person under the Plan may be subject to the same requirements including underwriting requirements, benefit restrictions, waiting periods, and pre-existing condition limitations that would have applied had the person been enrolled under the Plan on the later of:
(I) the date the person first became eligible for the Plan's coverage; or

(II) the date the employee, member or subscriber last became covered under the Plan.

Credit shall be given under any pre-existing condition limitations or waiting period from the later of the dates described in (I) or (II) above to the date the person actually enrolled pursuant to paragraph (iii) above.

(3) Reasonable Cash Value of Services. A Secondary Plan which provides benefits in the form of services may recover the reasonable cash value of providing the services from the Primary Plan, to the extent that benefits for the services are covered by the Primary Plan and have not already been paid or provided by the Primary Plan. Nothing in this provision shall be interpreted to require a Plan to reimburse a covered person in cash for the value of services provided by a Plan which provides benefits in the form of services.

(4) Excess or Other Nonconforming Provisions.

(a) Some Plans have order of benefit determination rules not consistent with this regulation which declare that the Plan's coverage is ''excess'' to all others, or ''always secondary.'' This occurs because:
1. certain Plans may not be subject to insurance regulation; or

2. some group contracts have not yet been conformed with this regulation pursuant to rule 0780-1-53 - .05, Effective Date; Existing Contracts.

(b) A Plan with order of benefit determination rules which comply with this regulation (herein called a Complying Plan) may coordinate its benefits with a Plan which is ''excess'' or ''always secondary'' or which uses order of benefit determination rules which are inconsistent with those contained in this regulation (herein called a Noncomplying Plan) on the following basis:
1. If the Complying Plan is the Primary Plan, it shall pay or provide its benefits on a primary basis.

2. If the Complying Plan is the Secondary Plan, it shall, nevertheless, pay or provide its benefits first, but the amount of the benefits payable shall be determined as if the Complying Plan were the Secondary Plan. In such a situation, such payment shall be the limit of the Complying Plan's liability.

3. If the Noncomplying Plan does not provide the information needed by the Complying Plan to determine its benefits within a reasonable time after it is requested to do so, the Complying Plan shall assume that the benefits of the Noncomplying Plan are identical to its own, and shall pay its benefits accordingly. However, the Complying Plan must adjust any payments it makes based on such assumption whenever information becomes available as to the actual benefits of the Noncomplying Plan.

4. If:
(i) the Noncomplying Plan reduces its benefits so that the employee, subscriber, or member receives less in benefits than he or she would have received had the Complying Plan paid or provided its benefits as the Secondary Plan and the Noncomplying Plan paid or provided its benefits as the Primary Plan; and

(ii) governing state law allows the right of subrogation set forth below;

Then the Complying Plan shall advance to or on behalf of the employee, subscriber, or member an amount equal to such difference. However, in no event shall the Complying Plan advance more than the Complying Plan would have paid had it been the Primary Plan less any amount it previously paid. In consideration of such advance, the Complying Plan shall be subrogated to all rights of the employee, subscriber, or member against the Noncomplying Plan. Such advance by the Complying Plan shall also be without prejudice to any claim it may have against the Noncomplying Plan in the absence of such subrogation.

(5) Allowable Expense. A term such as ''usual and customary,'' ''usual and prevailing,'' or ''reasonable and customary,'' may be substituted for the term ''necessary, reasonable and customary.'' Terms such as ''medical care'' or ''dental care'' may be substituted for ''health care'' to describe the coverages to the which the COB provision applies.

(6) Subrogation. The COB concept clearly differs from that of subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.

Authority: T.C.A. §§ 56-1-701 and 56-2-301.

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