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What's the birthday rule all about?

Both you and your spouse are working, and, to maximize your benefits, you've each put your kids on your group health insurance plans. But whose insurer pays if you have a claim?

In most cases, insurance companies work out this issue by assigning primary coverage responsibility to one parent's health insurance plan, while the other parent's plan becomes the secondary payer. Covered expenses are first paid by the primary plan, up to that policy's limits. If unpaid costs remain, the secondary plan picks up the difference, up to the limits of that policy.

The system for assigning primary and secondary plan status to different health insurance plans is entirely arbitrary and relies on what has become known as the birthday rule. According to this rule, the primary health insurance plan is the one that belongs to the parent whose birthday comes up first in the calendar year. It makes no difference to the insurance companies which parent is older; it's the pecking order of the month of the birthdays, and not the year of birth, that matters here.

Just when you thought it might be that simple, here are some special situations to consider:

  • You and your spouse were born on the same day. Here, the plan of the parent with the longest continuous health coverage is the primary payer.
  • You have health insurance through a current employer, and your spouse has coverage through a former employer (e.g., COBRA). Your health insurance will be primary because you're the currently employed parent.
  • If you're divorced or separated, the custodial parent provides the primary coverage for the kids. If that person remarries, his or her new spouse's plan becomes the secondary payer. The noncustodial parent's plan then becomes third in line to provide coverage. A divorce decree or a mutual agreement can alter this payment order, but you'll have to notify the insurance companies.

Although these guidelines are common among health insurance providers, they're not mandated by law, and practices can differ among insurers. To understand how your insurer handles dual coverage, read your policy. If its language leaves you in the dark, seek clarification from your employer's benefits administrator or your insurance company's customer service department.