Insurance Companies Can’t Cancel Coverage For Any Reason Other Than Fraud or Non-Payment
ObamaCare bans rescission (rescinding health coverage), in other words, insurers can’t cancel coverage from any reason aside from non-payment or fraud. Before the ACA an insurance company could find a small detail like a mistake on your application, or the omission of something simple like forgetting to report that you had chickenpox when you were two, and could:
- Take away your coverage
- Declare your policy invalid from the day it started
- Ask you to pay back any money they’ve already spent for your medical care
Since the 2010 passing of the Affordable Care Act it has been illegal for insurance companies to cancel your coverage simply because you made an honest mistake or left out information that has little bearing on your health.
ObamaCare means that you can’t be dropped from coverage due to a simple mistake on your application.
Was Rescission a Problem Before ObamaCare?
You may be thinking, was rescission a problem in healthcare before the Affordable Care Act? While the problem wasn’t widespread it was a practice that left some folks in a position where they were denied treatment, forced into bankruptcy, and/or essentially left for dead while their insurer got away with big savings. Many states took it upon themselves to pass laws against this, but some states never passed such laws or laws up to the current standard. Preventing these practices prevents insurers from having to explore this loophole and prevents consumers from having to worry about whether or not they will be dropped from coverage when they need it most.
Rescission Was Banned in Some States Before the ACA
Before the ACA some states already had similar provisions to Sec. 2712. Prohibition on rescissions, in states that have stronger protections the state law prevails while state laws not meeting the minimum standards of the federal law may have no effect.
Does the Ban on Rescission Apply to All Plans?
This provision, officially called Sec. 2712. Prohibition on rescissions, applies to fully insured and self-insured plans, including grandfathered plans, effective the first day of the plan year beginning on or after Sept. 23, 2010.
What Reasons Can My Plan Be Cancelled For?
Your insurance can be canceled for the following reasons:
- Fraud (it must be proven that you knowingly committed fraud)
- Misrepresentation (it must be proven you knowingly misrepresented yourself)
- Your plan isn’t ACA complaint and your insurer stops offering it.
Will I Be Notified Before My Plan is Cancelled?
Your insurance company must give you at least 30 days notice before they can cancel your coverage for the reasons stated above. This gives you time to appeal the decision or find new coverage. Coverage is guaranteed issue under the Affordable Care Act so you can’t be denied coverage based on health status or charged more for health status. If your insurance is canceled you will most likely qualify for a special enrollment period giving you 60 days to re-enroll in a new coverage option.
Know the Law. Title I Sec. 2712. Prohibition on rescissions. Prohibits all plans from rescinding coverage except in instances of fraud or misrepresentation. Check out our Summary of Provisions of the Patient Protection and Affordable Care Act for a plain English summary of each provision pertaining to the “benefits of ObamaCare”.
No Rescission of Health Coverage Under the ACA