What does coordination of benefits (COB) aim to prevent in health insurance?

Coordination of benefits (COB) is a mechanism used in health insurance to manage situations where an individual is covered by multiple health plans. The primary goal of COB is to prevent overinsurance, which occurs when a person is compensated by multiple insurance policies for the same expense, resulting in financial gain rather than just reimbursement for incurred costs.

When health insurance policies overlap, COB helps determine the order of payment among insurers to ensure that one policy pays its share first and the other policy fills in any remaining gaps. This system establishes which insurer has primary responsibility for payment, thereby preventing policyholders from receiving more money than they actually spent on healthcare services.

In contrast, the other options focus on unrelated concepts: preventing fraud relates to auditing and verification processes rather than benefit coordination; addressing underinsurance involves expanding coverage options, which is not the purpose of COB; and managing policy cancellations due to non-compliance has no direct connection to how benefits are coordinated across multiple insurance plans.