Many people in the insurance industry simply assume that an employee’s own health plan pays first and the spouse’s plan pays second when an employee has double coverage. And in practice, that is usually what happens. But if you asked most people to prove it, they would have a hard time finding a federal law that spells this out—because it doesn’t really exist.
There is no universal federal rule that establishes the order of benefit payments.
Neither HIPAA nor ERISA contains a provision stating that “the employee plan is primary.” HIPAA only sets standards for electronic transactions and data sharing, while ERISA governs employer-sponsored plans but does not dictate coordination-of-benefits rules.
Instead, the COB framework is built at the plan level and, for insured plans, at the state level. Fully insured plans must follow the COB rules adopted by their state’s insurance regulator—rules often based on model language developed by the National Association of Insurance Commissioners (NAIC). Self-funded plans, however, are governed by ERISA, which preempts state insurance laws. That means the COB provisions contained in a self-funded plan’s Summary Plan Description govern the order of payment.
And importantly, if a plan does not include a COB provision at all, that plan is considered the primary payer by default. Once these structural pieces are understood, the more familiar concepts—such as primary and secondary payment—start to make a lot more sense.
Why Coordination is Necessary
When someone is covered under more than one health insurance plan—such as their own employer’s plan and their spouse’s plan—the process of determining which plan pays first is governed by Coordination of Benefits (COB). COB ensures that medical claims are paid in the correct order, prevents duplicate payment, and allows multiple plans to share the cost of care without exceeding the total allowable charge.
Under standard COB rules used across the industry, the primary plan pays first as if no other coverage exists, and the secondary plan pays next, covering the remaining eligible charges up to 100% of the allowable expense. (Source: University of Michigan COB Explanation)
Many plans include COB provisions because it ensures orderly claims processing and promotes fairness. Most COB rules are based on longstanding model regulations adopted by insurers and states. (Source: 28 Texas Administrative Code, Subchapter V)
Plan Type Matters: Fully Insured vs. Self-Funded
Whether COB rules come from state law—or from a plan’s own documents—depends entirely on how the employer funds the coverage.
Fully insured plans are regulated by the state. That means COB requirements in that state’s Insurance Code and Administrative Code apply. (Source: National Conference of State Legislatures)
Self-funded (self-insured) plans are governed by the federal Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, state insurance mandates—including COB rules—are generally preempted. (Source: American Academy of Actuaries ERISA Brief)
As a result, the COB rules for self-funded plans are determined solely by the plan document or Summary Plan Description—not by Texas COB statutes. (Source: Paradigm Employee Benefits COB Overview)
Coordination of Benefits Under Texas Law
For insured plans issued in Texas, COB is governed by the Texas Department of Insurance (TDI) through 28 Texas Administrative Code §3.3501–3.3510. (Source: Texas Administrative Code – Subchapter V)
The regulation establishes the rules insurers must follow when coordinating benefits, including how to determine which plan is primary and how secondary benefits are calculated.
Under 28 TAC §3.3507, when a person is covered by more than one plan, the primary plan must pay benefits as if no other coverage exists, and the secondary plan may reduce its payment so total benefits do not exceed the allowable expense. (Source: 28 TAC §3.3507 – Order of Benefits)
Under §3.3508, the secondary plan must also give credit toward its deductible and out-of-pocket maximum as though it had been the primary payer. (Source: 28 TAC §3.3508 – Secondary Plan Calculation)
Texas also maintains model COB contract language under §3.3510, which insurers may adopt to standardize how COB is handled in their policies. (Source: 28 TAC §3.3510 – Model COB Provisions)
In addition, TDI has proposed new updates—such as a uniform COB questionnaire—to help carriers determine whether an enrollee has other coverage. (Source: TDI Proposed Rule §3.3520 (2025))
What This Means for Texas Employers
For a mid-market employer in Texas, COB works differently depending on funding type.
1. Fully Insured Plans — These plans must follow Texas COB regulations. The assumed industry-standard ordering—employee’s own employer plan is primary, spouse’s plan secondary—is usually correct if the plan includes COB language consistent with 28 TAC Subchapter V.
2. Self-Funded Plans (including level-funded arrangements that are ERISA plans) — State COB laws do not apply. The only authoritative source is the plan document itself. Most self-funded plans voluntarily adopt industry-standard COB rules, but this is not guaranteed.
3. Small Group vs. Mid-Market — For insured plans, the Texas COB rules apply across both small group and mid-market segments. There is no difference in COB handling between a 50-life group and a 500-life group if the plan is insured.
Key Takeaways for Brokers and HR Teams
- Always determine whether a plan is fully insured or self-funded before applying Texas COB rules.
- For insured plans in Texas, rely on 28 TAC §3.3501–3.3510 for the order of payment.
- For self-funded plans, review the plan’s Summary Plan Description (SPD) to confirm COB rules.
- Do not assume “employee plan is primary” without verifying the plan’s COB language—especially in dual-coverage households.
- COB ensures claims are paid correctly, prevents overpayment, and helps employees understand how dual coverage works.
Understanding where the rules come from—and whether they apply—is essential when advising Texas employers and employees navigating dual coverage.