Health Care Reform Regulations on Rescission of Coverage

The Patient Protection and Affordable Care Act of 2010 includes a provision designed to prohibit health insurance issuers and group health plans from rescinding coverage except in the case of fraud, an intentional misrepresentation of a material fact, or failure to pay a required premium. A rescission is defined as a cancellation of coverage that has a retroactive effective date. This provision applies to all group and individual health plans and is consistent with the consumer rights and protections that are the foundation for health care reform.

The following are several examples that illustrate this health care reform provision:

• If a member paid premium or contributed to the cost of the plan, coverage may not be terminated with a past effective date – except in the case of fraud or a misrepresentation of a material fact. The group health plan or health insurance issuer must provide a 30 day written notice of coverage termination to each individual affected by the termination before coverage may be rescinded. The member has the right to appeal the rescission of coverage.
  
  Example: If it was discovered that the insured individual intentionally omitted significant health related issues from the application, coverage may be terminated back to the effective date of coverage. However, the group health plan or health insurance issuer must provide 30 days prior written notice to each individual who would be affected by the termination before the coverage may be rescinded.
   
• If a member paid premium or contributed to the cost of the plan and it is subsequently determined he or she was ineligible for coverage, the group health plan may terminate coverage with a prospective (future) termination date only.
  
  Example: If an employer group covers full-time employees only and later discovers that, due to administrative error, a part-time employee was added to the plan and paid premium or contributed to the cost of the plan, then the employee can only be terminated using a future effective date.
   
• If a member did not pay premium or contribute to the cost of the plan after the termination date, an employer may terminate coverage with a past effective date as part of their administrative record keeping to reconcile eligibility data. The Departments of Health and Human Services and Labor and Treasury have issued guidance that they do not consider retroactive terminations back to the date of termination of employment, due to a delay in record keeping, to be a rescission under the health care reform provision. The retroactive termination date must coincide with the IBC retroactive termination policy.
  
  Example: Human resources reconciles the list of eligible individuals with the health insurance issuer or group health plan via a data feed only once per month. In this case, if the member did not pay premium or contribute to the cost of the plan, the retroactive termination is considered a delay in record keeping and part of the normal course of business.

IBC Retroactive Termination Policy

In connection with the implementation of this health care reform provision, IBC is revising our retroactive termination policy. Read more.

For more information

For more information regarding Health Care Reform or the rescission policy, please contact your IBC account executive or visit the following websites:
http://www.dol.gov/ebsa/faqs/faq-aca2.html
http://www.healthcare.gov/law/features/rights/cancellations/

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Independence Blue Cross offers products directly, through its subsidiaries Keystone Health Plan East and QCC Insurance Company, and with Highmark Blue Shield. Independent licensees of the Blue Cross and Blue Shield Association.

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