Third Party Liability & Coordination of Benefits
Third Party Liability (TPL) refers to the legal obligation of third parties (e.g., certain individuals, entities, insurers, or programs) to pay part or all of the expenditures for medical assistance furnished under a state plan. By law, all other available third party resources must meet their legal obligation to pay claims before the Medicaid program pays for the care of an individual eligible for Medicaid. States are required to take all reasonable measures to ascertain the legal liability of third parties to pay for care and services available under the state plan.
Coordination of Benefits
Coordination of Benefits (COB) refers to the activities involved in determining Medicaid benefits when an enrollee has coverage through an individual, entity, insurance, or program that is liable to pay for health care services. Individuals eligible for Medicaid assign their rights to third party payments to the State Medicaid Agency.
Examples of third parties which may be liable to pay for services:
Identification of Third Parties
States gather information regarding potentially liable third parties, including health coverage, when individuals apply for medical assistance. This information is periodically updated whenever a Medicaid enrollee's eligibility is re-determined.
States conduct data matches to identify third party resources. The Deficit Reduction Act of 2005 (DRA) requires states to have laws that require health insurers to provide their plan eligibility and coverage information to Medicaid programs.
States conduct data matches with public entities, such as the Department of Defense, to identify Medicaid enrollees and/or their dependents that have coverage through the Military Health Services system and the TRICARE program. States also match with workers' compensation and state motor vehicle accident files. These matches can identify Medicaid enrollees that have sustained injuries which may be covered through workers' compensation or through an automobile insurance policy. State child support agencies are required to notify the Medicaid agency whenever a parent has acquired health coverage for child as a result of a court order.
State Medicaid Programs and Use of Contractors for Data Matching
State Medicaid programs may enter into data matching agreements directly with third parties or may obtain the services of a contractor to complete the required matches. When the State Medicaid program chooses to use a contractor to complete data matches, including matches as required by the DRA, the program delegates its authority to obtain information from third parties to the contractor.
Third parties should treat a request from the contractor as a request from the State Medicaid agency. Third parties may request verification from the State Medicaid agency that the contractor is working on behalf of the agency and the scope of the delegated work.
Managed Care and Third Party Liability
The contract language between the State Medicaid agency and the Managed Care Organization (MCO) dictates the terms and conditions under which the MCO assumes Third Party Liability (TPL) responsibility. Generally, any TPL administration and performance activities by the MCO will be set by the state and should be accompanied by state oversight.
There are four basic models being used to carry out TPL functions in a managed care environment. The models are:
- Enrollees with any other insurance coverage are excluded from enrollment in managed care;
- Enrollees with other insurance coverage are enrolled in managed care and the state retains TPL responsibilities;
- Enrollees with other insurance coverage are enrolled in managed care and TPL responsibilities are delegated to the Managed Care Organization (MCO) with an appropriate adjustment of the MCO capitation payments; and
- Enrollees and/or their dependents with commercial managed care coverage are excluded from enrollment in Medicaid MCOs, while TPL for other enrollees with private health insurance or Medicare coverage is delegated to the MCO with the state retaining responsibility only for tort and estate recoveries.
MCOs and Data Matching
State Medicaid programs may contract with MCOs to provide health care to Medicaid beneficiaries, and may delegate responsibility and authority to the MCOs to perform third party discovery and recovery activities, including data matches as required by the DRA. The Medicaid program may authorize the MCO to use a contractor to complete these activities.
When TPL responsibilities are delegated to an MCO, third parties are required to treat the MCO as if it were the State Medicaid agency, including:
- Providing access to third party eligibility and claims data to identify individuals with third party coverage;
- Adhering to the assignment of rights from the State to the MCO of a Medicaid beneficiary’s right to payment by such insurers for health care items or services; and
- Refraining from denying payment of claims submitted by the MCO for procedural reasons.
Third parties may request verification from the State Medicaid agency that the MCO or its contractor is working on behalf of the agency and the scope of the delegated work.