Curbing Insurance Cancellations

The Affordable Care Act stops health plans from retroactively canceling your insurance coverage solely because you or your employer made an honest mistake on your insurance application.

What This Means for You

Before the health care law, if your insurance company found that you’d made a mistake on your insurance application, the insurance company might “rescind” your benefits — that is, declare your policy invalid from the day it began. Your insurance company might also ask you to pay back any money already spent for your medical care.

Now, an insurer cannot rescind your coverage simply because you made an honest mistake or left out information that has little bearing on your health.

Some Important Details

• This provision applies to all health plans, whether you get coverage through your employer or purchase it yourself.
• This provision applies to plan years or policy years that begin on or after September 23, 2010. To find out when your plan year or policy year begins, ask your insurer or plan administrator.  
• Your insurance company can still rescind your coverage if you intentionally put false or incomplete information on your insurance application, and it can cancel your coverage if you fail to pay your premiums on time.
• Your insurance company must give you at least 30 days’ notice before it can rescind your coverage, giving you time to appeal the decision or find new coverage.

Example:

When her insurance application asked for “anything else relevant to your health that we should know about,” Katy forgot to mention two visits to a psychologist she had 6 years earlier. Katy was later diagnosed with breast cancer, and submitted claims to her insurance company for breast cancer treatment. After receiving Katy’s claim, her plan discovered the two psychologist visits. Before the new law, Katy’s mistake might have prompted her health insurer to rescind, or retroactively cancel, her coverage. But under the health care law, Katy’s insurance plan cannot rescind her coverage, because Katy did not intentionally misrepresent significant information.

For More Information

• Read the regulation at Regulations.gov.
• Find detailed technical and regulatory information on rescissions (cancellations).
• HealthCare Blog: Protecting Patients with Private Insurance.
• Patient's Bill of Rights: Learn more about other consumer protections in the health care law.

Posted on: September 23, 2010

Last updated: January 27, 2012