Rescission requirements impact group health plans
The federal health care reform law changed the way health plans and issuers approach rescissions in both the group and individual markets. Group health plans are affected whether they are insured or self-insured.
What constitutes a rescission?
It's important to understand what constitutes a "rescission" for federal health care reform, as opposed to another type of coverage termination. A rescission is broadly defined as a retroactive termination of a member's coverage.
However, there are some important exceptions from this broad definition. For example, termination of coverage because of nonpayment of premium or contribution (either by the group or the member) is not a rescission. It is not considered a "rescission" when the member's coverage is retroactively canceled to the last paid-to date if the member pays no premiums or contribution for periods of time after termination of employment or eligibility. The member's coverage can be retroactively canceled to the last paid-to date.
Restrictions on rescissions
If a group health plan or issuer is faced with a "rescission," certain restrictions apply for plan years that start on or after September 23, 2010:
· The federal health care reform law does not allow the plan or issuer to rescind coverage, except in cases of fraud or intentional misrepresentation of material fact as prohibited by the plan or coverage. Examples of when a group may consider rescinding coverage include intentional misrepresentations of marital status or dependent eligibility.
· Although federal law may prohibit rescinding coverage because of a member's lack of intent, the plan and issuer may still cancel coverage prospectively.
· When a policy or coverage is rescinded due to intentional misrepresentation of material fact or fraud, the plan or issuer must:
o Provide notice of the rescission 30 days in advance of taking the action
o When providing notice, inform the member of the opportunity to appeal the determination to rescind (as outlined in regulations for the appeals provision)
For group health plans, group customers control communications of membership eligibility. Therefore, when a member is removed from coverage, we would not be aware of the reason for the coverage termination. For this reason, we believe it is the employer group's responsibility to comply with this provision. If the group notifies us within a reasonable period of time that the member is no longer an employee and, therefore, no longer a member, we would assume that it is not a rescission because we received no payment from the member.
For individual market plans we implemented this provision on May 1, 2010, ahead of the required implementation date of September 23, 2010, and we only rescind a member's coverage in cases of fraud or intentional misrepresentation of facts.
More information about rescissions
For clarification on which coverage terminations qualify as rescissions, refer to the Affordable Care Act Implementation FAQs - Part 2 . These frequently asked questions address scenarios such as a retroactive termination resulting from a record-keeping delay or determination that a member isn't eligible for coverage under the plan.