ACA Overview: Prohibition on Rescission of Coverage
The Affordable Care Act (ACA) sets many rules and regulations in place to protect individuals covered under healthcare plans. One of the many ways it does this is by preventing insurance providers from stripping coverage from individuals after they’ve already received the coverage. This act, known as rescission, can cost individuals greatly if it’s not kept in check.
Let’s take a closer look at what rescission is before examining a few of the instances during which rescission may be permissible, when it may not, and any appeal and notices that may be required to prevent rescission.
What is Rescission?
Simply put, when an individual’s coverage is in rescission, it means that their insurance provider is no longer accepting responsibility to pay out any health or medical care claims that they may have approved or covered in the past. It’s important that this cancellation of coverage has a retroactive effect rather than a prospective–or future–effect because if it only discontinues or affects future payouts, it cannot be categorized as rescission.
The loss of coverage from an individual’s provider may also not be deemed rescission if their coverage is lost due to missed premium payments, late premium payments including those payable to COBRA (Consolidated Omnibus Budget Reconciliation Act) premiums, or failure of the individual’s part to contribute their share toward the cost of coverage. This stipulation applies even when the cancellation is retroactive.
Fraud and Intentional Misrepresentation
In addition to rescission being permitted in the case of late or missing premium payments and contributions, it is also permissible under the ACA if the covered person commits fraud or intentionally misrepresents the material facts relating to their coverage. This can include misrepresentation of any drug or alcohol usage as well as tobacco usage.
Rules established by the U.S. Department of Health and Human Services dictate that individuals who have intentionally misrepresented their tobacco usage specifically may be responsible for all appropriate premium payments that otherwise should have been paid during their plan year.
Accidental Misstatements and Plan Errors
While fraud and intentional misrepresentation of the facts will permit rescission, accidental or inadvertent misstatements do not. So if an employee fails to disclose pertinent information about their healthcare unknowingly, they may not face a penalty. However, if it can be proven that the omission was intentional, they may lose coverage or face alternative penalties.
Similarly, if mistakes are made to an individual’s plan that provides them with more coverage than they are technically entitled to, those supplemental coverage options may be canceled. However, if the individual receives care under that coverage, they do not have to repay the covered amount unless fraud can be proven.
Employee-Initiated Coverage Termination
If a participant, beneficiary, or enrollee of a particular healthcare insurance program chooses to terminate their coverage, they can’t be held responsible if their employer, sponsor, or insurance issuer fails to cancel that policy, thereby continuing to provide coverage. It is important to note that for this kind of retroactive cancellation not to be termed a recession, the individual must terminate their coverage free of any outside coercion, intimidation, or influence from their employer or issuer.
Delays by Administration
There are instances where an employee, after their termination, may continue to receive coverage without paying any premiums. This occurs when their employer’s administrative and recordkeeping accounts are not kept up to date. These delays are usually no fault of the employee, and, therefore, the individual cannot be held accountable for coverage they receive after termination due to their employer’s administrative delays.
The ACA’s Appeals and External Review Requirements
Appeals for rescissions of coverage, among other appeal and external review types, are eligible to be considered under internal claims, appeals, and external reviews for non-grandfathered plans regardless of the rescission’s effects on the individual’s benefits when the appeal is filed. Any coverage an individual has going into an appeal process of this nature must also remain effective during the course of the appeal until the outcome is released.
Advance Notice Requirements
The ACA has placed advance notice requirements in effect to alert individuals when their coverage is being rescinded. For group health plans and issuers, this notice must come at least thirty days before the coverage option may be stripped. This is to allow individuals time to either find new healthcare coverage options to make up the difference or to challenge the rescission.
It is important to note here that when an issuer or plan chooses to rescind coverage, they must do so only where permissible under ACA guidelines, and they must make their notices available to all affected policyholders in both culturally and linguistically appropriate manners.
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