Coordination of benefits in cases of dual insurance coverage

INSURANCE-HEALTH INSURANCE-INSURANCE COMMISSIONER-Coordination of benefits in cases of dual insurance coverage

1.         RCW 48.21.200, as amended, does not require a secondary insurer to pay the full policy amount to an insured who has dual or multiple coverage, whether the policies in question are individual or group policies.

2.         In enacting amendments to RCW 48.21.200, the Legislature intended to allow insurers to reduce overall health insurance cost by coordinating benefits in cases of dual or multiple coverage, subject to implementing regulations to be adopted by the insurance commissioner.

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                                                                     July 7, 1994

HonorableDeborah Senn
Insurance Commissioner
Insurance Building, MS 40255
Olympia, WA  98504-0255

                                                                                                            Cite as:  AGO 1994 No. 9

Dear Commissioner Senn:

            By letter previously acknowledged, you requested our interpretation of section 282, chapter 492, Laws of 1993, amending RCW 48.21.200.  That section was in Engrossed Second Substitute Senate Bill 5304 (E2SSB 5304, the Washington Health Services Act of 1993).  The section addresses dual health insurance coverage where more than one group or individual insurance plan provides hospital, medical, or surgical expenses benefits to a person.   For ease of analysis, we divided your inquiry into two questions paraphrased as follows:

            1.         Does RCW 48.21.200,[4] as amended, require each insurer, where there is dual coverage, to pay the full amount under each policy, regardless of whether the insured is covered by a group or individual plan?

            2.         Or, do the amendments to RCW 48.21.200 allow the secondary insurer to take credit for amounts paid for by the primary insurer, exclusive of copayment, deductibles, and other similar cost-sharing arrangements, where there is dual coverage, regardless of whether the secondary coverage is provided on a group or individual basis?

                                                               BRIEF ANSWER

            We answer the first question in the negative and the second question in the affirmative.

            We conclude that RCW 48.21.200, as amended, does not require each insurer to pay the full amount under each policy when there is dual coverage.  The statute, when read as a whole, allows the secondary insurer to take credit for amounts paid for by the primary insurer (exclusive of copayments, deductibles, and other similar cost-sharing arrangements) when there is dual coverage, regardless of whether the secondary coverage is provided on a group or individual basis.

                                                                BACKGROUND

            You provided background information concerning individuals who have coverage for health care under more than one insurance policy or health care plan.  This is the situation, for example, with a married couple with each spouse employed and covered (along with dependents such as a spouse and children) through employer insurance where participation is mandatory.

            In such instances, one insurer ("secondary")[5] may take into account the payments of the other insurer ("primary") when considering a claim, and the secondary may be released from the obligation to pay the full claim, based on the amount the primary insurer pays.  You refer to this practice as "coordination of benefits" which was authorized in RCW 48.21.200 prior to its amendment, and regulations promulgated by your office at chapter 284-51 WAC.  However, the prior law and regulations promulgated thereunder spoke only to group insurance policies and benefits which could not be reduced because of the existence of similar benefits under individual policies.

                                                                    ANALYSIS

            During the 1993 legislative session, state lawmakers passed a comprehensive health care reform bill.  The act addresses many issues regarding health care, including "short-term health insurance reform".  Laws of 1993, ch. 492, §§ 280-296, pp. 2126-35.  RCW 48.21.200 was amended in section 282 of that act.  Because we believe the answer to your question relies upon a reading of the entire statute, for ease of reference, we set forth in full RCW 48.21.200 as amended:

                        (1)        No individual or group disability insurance policy, health care service contract, or health maintenance agreement which provides benefits for hospital, medical, or surgical expenses shall be delivered or issued for delivery in this state ((after September 8, 1975)) which contains any provision whereby the insurer, contractor, or health maintenance organization may reduce or refuse to pay such benefits otherwise payable thereunder solely on account of the existence of similar benefits provided under any ((individual)) disability insurance policy, ((or under any individual)) health care service contract, or health maintenance agreement.

                        (2)        No individual or group disability insurance policy, health care service contract, or health maintenance agreement providing hospital, medical or surgical expense benefits and which contains a provision for the reduction of benefits otherwise payable or available thereunder on the basis of other existing coverages, shall provide that such reduction will operate to reduce total benefits payable below an amount equal to one hundred percent of total allowable expensesexclusive of copayments, deductibles, and other similar cost-sharing arrangements.

                        (3)        The commissioner shall by rule establish guidelines for the application of this section, including:

                        (a)        The procedures by which persons ((insured)) covered under such policies, contracts, and agreements are to be made aware of the existence of such a provision;

                        (b)        The benefits which may be subject to such a provision;

                        (c)        The effect of such a provision on the benefits provided;

                        (d)        Establishment of the order of benefit determination; ((and))

                        (e)        Exceptions necessary to preserve policy, contract, or agreement requirements for use of particular health care facilities or providers; and

                        (f)         Reasonable claim administration procedures to expedite claim paymentsand prevent duplication of payments or benefits under such a provision((: PROVIDED, HOWEVER, That any group disability insurance policy which is issued as part of an employee insurance benefit program authorized by RCW 41.05.025(3) may exclude all or part of any deductible amounts from the definition of total allowable expenses for purposes of coordination of benefits within the plan and between such plan and other applicable group coverages:  AND PROVIDED FURTHER, That any group disability insurance policy providing coverage for persons in this state may exclude all or part of any deductible amounts required by a group disability insurance policy from the definition of total allowable expenses for purposes or coordination of benefits between such a policy and a group disability insurance policy issued as part of an employee insurance benefit program authorized by RCW 41.05.025(3).

                        (3)        The provisions of this section shall apply to health care service contractor contracts and health maintenance organization agreements.

Laws of 1993, ch. 492, § 282, pp. 2126-27, amending RCW 48.21.200.

            In interpreting a statute, we must analyze the language as a court would.  The court's primary objective in statutory interpretation is to ascertain and carry out the intent of the Legislature.  Rozner v. Bellevue, 116 Wn.2d 342, 804 P.2d 24 (1991).  Statutory interpretation requires that we must first look to the plain meaning of the words used in the statute.  State v. McDougal, 120 Wn.2d 334, 841 P.2d 1232 (1992).  Statutes should be construed to effect their purpose, and to avoid unlikely, absurd, or strained consequences.  Ski Acres, Inc. v. Kittitas Cy., 118 Wn.2d 852, 857, 827 P.2d 1000 (1992).  Statutory provisions are interpreted so as to give effect to the legislative intent as determined within the context of the entire statute.  State v. Elgin, 118 Wn.2d 551, 825 P.2d 314 (1992).  Piecemeal analysis should be avoided and various provisions in a statute should be interpreted in light of one another.   In re Matter of Bible, 69 Wn.App. 394, 845 P.2d 1336 (1992).

            The amendments to RCW 48.21.200 reveal three general areas addressed by the Legislature.  First, the Legislature eliminated differentiations between group and individual health coverage.  Second, the Legislature added an insured's cost-sharing responsibilities to subsection (2), which provides for a reduction in benefits when there are existing coverages, and otherwise prohibits reductions in benefits below 100 percent coverage.  Third, the Legislature recognized health care contracts and agreements.

             Turning to your inquiry, if we looked only to the language of subsection (1) of RCW 48.21.200, one might conclude that the answer to your first question would be "yes".  That answer would find that under subsection (1), where there is dual coverage, neither the primary nor secondary plan "may reduce or refuse to pay such benefits otherwise payable thereunder solely on account of the existence of similar benefits provided under any disability insurance policy, health care service contract, or health maintenance agreement".

            We believe, however, that this is an erroneous conclusion as it turns upon an incomplete, piecemeal reading of the statute.  Thus, as we outline in four bases below, we answer in the negative to the first question and the affirmative to the second question.

            First, even if we examine only RCW 48.21.200(1), to give full effect to that subsection, we cannot overlook the significance of the term "solely", which was also in the prior statute.   Although a policy, contract, or agreement may reduce benefits otherwise payable under another plan, it cannot do so solely because of the existence of other benefits.  By implication then, a policy, contract, or agreement may reduce benefits for other reasons.  Those other reasons are found in the remainder of the statute where coordination of benefits and measures to avoid duplication of benefits are authorized.

            Second, in analyzing RCW 48.21.200(1), we must review language in light of the provisions in subsections (2) and (3).  Subsection (2) acknowledges that a policy, contract, or agreement may contain "a provision for the reduction of benefits otherwise payable or available . . . on the basis of other existing coverages".  This language was in the former statute as well.

            Under the former and current statute, RCW 48.21.200(3)(d) provides that the Insurance Commissioner shall promulgate rules governing the "[e]stablishment of the order of benefit determination".  The 1993 Legislature did not delete this directive, and also amended subsection (3)(f) to state that the Commissioner shall also promulgate rules to provide "[r]easonable claim administration procedures to expedite claim payments and prevent duplication of payments or benefits".  The Legislature recognized that benefits from a policy, contract, or agreement, such as those paid by a secondary insurer, may be reduced because of the benefits paid by another policy, contract, or agreement, such as those paid by a primary insurer.  That is to say, reading the statute as a whole, and as under prior law, we conclude a secondary insurer may "take credit" for amounts paid on a claim by a primary insurer.  Under the 1993 amendments, this credit may be taken whether the secondary coverage is provided on a group or individual basis.  Under the current statute, your office shall by rule set out steps for insurers to avoid duplication of payments or benefits.[6]

            Third, by examining RCW 48.21.200(1) in isolation, we would ignore the insured's cost-sharing requirements confirmed in subsection (2).  If the Legislature had intended that there be no coordination of benefits, and both a primary and secondary policy, plan or agreement would pay fully for the same claim, the insured (or perhaps the health care provider) would receive a financial windfall.  Instead, the Legislature not only required there must be rules for nonduplication of benefits, but also specified that copayments, deductibles and other cost-sharing arrangements would be deducted from the 100 percent of allowable total expenses.[7]

            Fourth, concluding that benefits between a primary and secondary insurer for a person with dual coverage could not be coordinated in a cost-effective manner would disregard the larger context in which the Legislature adopted the amendments.  The amendments to RCW 48.21.200 were part of a comprehensive health care reform law.  In that act, the Legislature stated that, among other objectives, it intended to "establish structures, processes, and specific financial limits to stabilize the overall cost of health services".  RCW 43.72.005.  See also, Laws of 1993, ch. 492, §101, p. 2072.  Health care cost containment features are found throughout the act.  See, i.e., Laws of 1993, ch. 492, §§ 259-260, 265-268, 406, pp. 2109,  2114, 2148; RCW 70.170.100, .110, 70.41.250, 18.64.430, 18.51.540, 43.72.040.

            It is contrary to the purposes of the health care reform act to conclude that health insurance benefits could not be coordinated to avoid duplication of claim payments for persons with dual coverage.  Such a conclusion would inevitably result in higher health care costs, which would be an unlikely and strained consequence of the comprehensive reform legislation.[8]

                                                                 CONCLUSION

            To summarize, we conclude that RCW 48.21.200 as amended does not require each insurer to pay the full amount under each policy when there is dual coverage, under the factual situation you presented us.  With such dual coverage, the statute allows the secondary insurer to take credit for the amounts paid for by the primary insurer, exclusive of copayments, deductibles, and other cost-sharing arrangements, regardless of whether the secondary coverage is provided on a group or individual basis.

            We trust that this information has assisted you.

Very truly yours,

CHRISTINE O. GREGOIRE
Attorney General

NANCY J. KRIER
 Assistant Attorney General

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