What is the purpose of Coordination of Benefits in insurance coverage?

The purpose of Coordination of Benefits in insurance coverage is primarily to establish a structured method for determining which insurance policy will be the primary payer and which will be secondary when an individual holds more than one group policy. This process ensures that the total reimbursement does not exceed the total medical expenses incurred, thus preventing overpayment from multiple sources for the same medical service.

When an insured has coverage under more than one policy, coordination of benefits helps insurers communicate effectively to streamline claims processing. It allocates the financial responsibility between the various insurers involved, ensuring that the insured receives the maximum benefit available while minimizing the potential for disputes regarding payment responsibilities. This approach promotes fair reimbursement practices and protects against fraud, as it avoids situations where an individual could profit from multiple insurance payouts for the same expense.

The other options do not accurately describe the function of Coordination of Benefits. Terminating policies, managing claims payment delays, or evaluating premium rates based on an individual's financial situation fall outside the scope of what Coordination of Benefits is designed to achieve within group policy contexts.