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Aetna's HCR Update re: Retroactive Termination of Member Coverage

Mar 14, 2011




The health care reform law puts new restrictions in place for terminations. This means plan sponsors and insurers can only terminate a member’s coverage retroactively in specific circumstances.  This affects all plans that are subject to the health care reform law, regardless of funding or grandfathering status. It is in effect as of each plan’s first renewal or effective date after September 23, 2010.

Here’s what you and your customers need to know about the new rules concerning administrative retroactive terminations.

The plan sponsor can’t terminate coverage effective with a date in the past if:
  • The member was covered through plan error, and
  • The member paid premium or contributed to the cost of the plan.

In these cases, the plan sponsor can only terminate the member’s coverage with a future effective date of termination.

The plan sponsor may terminate coverage retroactively as part of a monthly reconciliation of eligibility data if:
  • The member did not pay any premium or contribution for coverage past the termination date.

The plan sponsor also may terminate coverage retroactively in cases of fraud or intentional misrepresentation. In these cases, a 30-day written notice of coverage termination is required, and the rescission of coverage may be appealed. (Aetna will handle this notice for insured plans upon notification. Self-funded plans must administer this notice.).

Here are some examples:

  • The plan sponsor finds it mistakenly enrolled a part-time employee who was not eligible under its plan. The employee paid premium/contribution, received medical services and submitted claims. Under the new law, the plan sponsor can terminate this employee’s coverage, but only with a prospective (future) termination date.
  • A member’s employment was terminated, and the employee did not make any payment of premium/contribution toward his benefits after he left the job, but Aetna was not notified about termination of coverage until a few weeks later. In this case, the plan sponsor may terminate benefit coverage as of the employment termination date.
  • The plan does not cover divorced ex-spouses, but an employee failed to notify the plan sponsor about a divorce for a period of time. As long as the employee or ex-spouse did not pay premium/contribution toward the benefit, the plan sponsor may terminate the ex-spouse’s coverage retrospectively.

How Aetna will handle retroactive terminations under the new rules
If a plan sponsor submits a retroactive termination to Aetna (or you submit it on the customer’s behalf), it must ensure that employees/dependents did not pay premiums/contributions during the retroactive termination time period.

When retroactive terminations are submitted, we will regard the submission as verification that no premium/contribution was paid by the member/dependent for that period.

Aetna’s policies related to time limits for retroactive terminations continue to apply.

The Patient Protection and Affordable Care Act of 2010 (PPACA) prohibits health insurance carriers and group health plans from rescinding coverage (rescissions) except for cases involving fraud or intentional misrepresentation of material fact. 

A rescission is defined as a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to failure to pay required premium/contribution. 

The Departments of Health and Human Services, Labor, and Treasury released interim final regulations and guidance for handling retroactive terminations. This regulatory guidance  was summarized in the letter above.

This prohibition on rescissions applies to single individuals or individuals within a family, or an entire group of individuals. 

More Information
We are also communicating this to plan sponsors. Read a copy of the letter.

For additional information, please see the following websites or contact your Aetna representative.

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