Illinois Health Insurance Practice Exam

What does the Coordination of Benefits provision in health insurance policies allow?

1. Double the benefits

2. Prevent the insured from collecting more than the actual loss

3. Maximize profits for the insured

4. Allow for unlimited claims

The correct answer is: Prevent the insured from collecting more than the actual loss

The Coordination of Benefits provision in health insurance policies is designed to ensure that when a person is covered by multiple health insurance plans, the total benefits received do not exceed the actual medical expenses incurred. This provision helps prevent the insured from receiving more than what is necessary to cover their healthcare costs, thereby maintaining the integrity of the insurance system. It establishes rules to determine which plan pays first and ensures that the total payout from all plans does not exceed the total bills. This principle reinforces fair claims practice and mitigates the risk of fraudulent claims or overinsurance. The other choices do not accurately reflect the purpose of the Coordination of Benefits provision: for example, the provision does not allow for double benefits, it does not maximize profits for the insured, and it does not enable unlimited claims. Instead, it carefully manages how benefits are disbursed when multiple policies are involved.