What is the Health Insurance ‘Birthday Rule’?

Couple indoors with baby smiling

When domestic partners or a married couple have work-based health coverage, they can maximize their health benefits by signing up their children for both plans. One plan, however, generally get designated as the primary health coverage and it will cover expenses up to the limits of that plan. The other parent’s plan is then considered as secondary coverage and takes care of the remaining portion of the health bill to its limits.

The health plan’s “birthday rule” is an informal procedure widely adopted by the health insurance industry for the coordination of benefits when parents list their children as dependents on their two health plans. The rule applies to children and it coordinates insurance health coverage for children listed on two health insurance plans covering the two parents. The birthday rule doesn’t apply to spouses who are listed on each other’s job-based health insurance plans.

How Birthday Rule Works

The birthday rule is a technique used by many insurance companies in the US in determining which parent’s health plan is considered the primary one and which plan is the secondary plan. Generally, the parent whose birthday comes earlier in the year will be designated as the primary health insurance, while the other plan covering the parent whose birthday comes later will be designated as the secondary one.

If your birthday, for example, is earlier in the year than that of your spouse, your health insurance plan will become your children’s primary plan. The birthday rule will apply even if you are younger than your spouse. If yours falls on June 2, 1980 and your wife’s on January 8, 1982, her health insurance becomes the primary cover for your kids. In reality, the year of birth doesn’t count as it’s the day and month that come into play when determining the birthday rule.

Coordination of Benefits (COB)

The birthday rule is an important element of coordination of benefits. Known in short as COB, this is the process used by an insurer in determining who should be the secondary or primary payer of medical claims when the covered person has more than one insurance policy. 

Coordination of benefits provides insurers with a process that helps them to avoid overpayment for claims. Costs are first paid by the primary health plan and if something still remains unpaid, the secondary cover then handles the balance so long as the plan covers it. Coordination of Benefits assigns one insurance plan as the principal insurance while the other as considered secondary.

Under COB the birthday rule provides coverage for children from the policy of that parent who registers the earliest birthday in the calendar year. Simply stated, if the father’s birthday is in May and the mother’s in December, dad’s policy provides for the insurance for the kids. Unless a court injunction has ruled otherwise, the earliest birthday determines coverage.

Same Birthday for Both Parents

It is not very unusual to have spouse health insurance plans that overlap. For that, insurance companies have developed an informal but recognized method of deciding which health coverage is considered the primary plan and which is secondary. If both parents were born on the same day, it is the parent who has enjoyed the longest period of continuous health care coverage who becomes the primary health insurance provider. Automatically, the other parent’s plan becomes the secondary one.

Active Employees

Your health insurance plan is considered primary if you are currently employed and covered under employer health insurance while your spouse is covered through a former employer like COBRA, yet your children are listed on both plans as dependents.

Divorced or Separated Parents

The birthday rule becomes slightly more complicated when the parents are divorced or separated. If legally divorced or separated and not remarried, the spouse with the child’s primary custody will provide healthcare coverage. This stipulation, however, is only applicable if a group plan is covering both parents. If the spouse with the primary custody of the child has an individual plan while the non-custodial one has a group health plan, the health plan of the non-custodial parent provides primary coverage.

To put it in a slightly different perspective, for divorced parents, the custodial parent automatically provides the primary insurance for the children.  The other spouse becomes the secondary payer, if children are covered under that person’s group health insurance plan. If, however, the children are not covered under that group plan, the non-custodial parent’s plan then becomes the secondary insurer. 

The birthday rule, however, is superseded by any court ruling about health coverage for the children following a divorce.

Group Plans & COBRA

The birthday rule is not applicable across different types of health insurance plans. Group plans, for example, pay first, irrespective of whether the individual holder of the plan has the earlier birthday. In this case, if the individual plan is offering the better coverage, it’s important to decide if you want to include your children on the group plan at all.

The working of the birthday rule under Consolidated Omnibus Budget Reconciliation Act (COBRA) is slightly different. If one of the parents is already insured under current employer and the spouse is covered under COBRA, the primary insurance will be that of the working parent.  Consolidated Omnibus Budget Reconciliation Act is insurance extended to a former employer after termination of employment.

Conclusion

It’s worth noting that the “birthday rule” and the exceptions that apply are not, in fact, insurance laws. Rather they are commonly accepted customs in insurance claims practice, and not every insurance plan follows them. Often, insurers abide by these customs in determining which parent’s policy is responsible when it comes to providing health care coverage for children and which one provides the secondary coverage. The informal birthday rule is also endorsed by the National Association of Insurance Commissioners.

It is important to note that definitions of the different terms used in the insurance industry may vary across the many insurance companies. You should carefully read your policy agreement to verify what procedure your specific health insurer says about the different terms. This may, for example, help you in determining which plan is the primary one and which is secondary when it comes to the birthday rule.

Also ensure that you know and understand the payment procedure before your children visit the physician otherwise you could find yourself being held personally responsible for some unplanned or expected medical bills.