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  • What Is Allowed as a Recission of Group Health Coverage Under Health Reform?

    The federal health care reform law changed the way health plans and issuers approach rescissions in both the group and individual markets. 

    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. 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.

     If a group health plan or carrier 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 carrier to rescind coverage, except in cases of fraud or intentional misrepresentation of material fact as specified in the contract. Examples of this include intentional misrepresentations of marital status or dependent eligibility.  When a policy or coverage is rescinded due to intentional misrepresentation of material fact or fraud, the plan or issuer must: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

    o When providing notice carriers must inform the group or member of the opportunity to appeal the determination to rescind (as outlined in regulations for the appeals provision)

    For group health plans, group policyholders control otice of membership eligibility. Therefore, when a member is removed from coverage, a carrier must be notified by the group .

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