A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Such plan or coverage may not be cancelled except with prior notice to the enrollee, and only as permitted under Health Care Reform section 2702(c) or 2742(b).
Insurance Companies are getting more & more limited if they want to cancel coverage. Policy holders, who had coverage improperly cancelled have the right to get their policy back. Agents and brokers attest that they explained the importance of filling out an application correctly. (AB 2569 (2008) 1389.7 and 1389.8 Health and Safety Code, 10119.2 and 10119.3 Insurance Code.) lawsuits pending to limit insurer ability to cancel
Existing law prohibits a plan or insurer from rescinding, canceling, or limiting a health plan contract or health insurance policy due to the plan’s or insurer’s failure to complete medical underwriting and resolve all reasonable questions arising from written information on or with an application before issuing a contract or policy (Legislative digest of AB 2569 medical news today.com)
Insurance Companies can no longer cancel for minor or unintentional mistakes in a member’s application. Consumers may sue insurers over policy rescissions. The cancellation must give 30 days notice and advise members of their right to appeal (AB 2470
Blue Cross settlement 5/11/2007 proposal to only rescind or cancel if the error was intentional (LA Times 2/23/2008 $9 million award more Calif Health Line Anderson Cooper Newscast $15 Million Settlement on CA DOI Website) Sacramento Bee 6.20.2013
Insurance Company employees encouraged to drop sick policyholders per LA times.com
Every applicant age 18 or older acknowledges the following:
I have provided true and complete answers to all questions in the application to the best of my knowledge and understand that all answers are important and will be considered in the acceptance or denial of this application.
I understand that all information I know, that is responsive to a question on this application, must be provided in my answers consistent with California law. If Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company discovers that you committed an act, practice, or omission that constitutes fraud, or intentional misrepresentation of material fact is found in this application, Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company may rescind my plan/policy within the first 24 months from my effective date.
I understand this means that Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company will revoke my plan/policy as if it never existed back to the original Effective Date. Rescission may occur even if we review your medical records or seek medical confirmation of your health information as part of our processing of your application.
The primary applicant additionally acknowledges the following:
All of my dependents listed on this application who are 18 years of age or older have read this application and have provided complete and accurate information for this application to the best of my knowledge and have signed the application below.
Also, to the best of my knowledge and belief, I have done everything necessary to be able to assure you that all information about all applicants, including my children under the age of 18, listed on this application is true and complete. Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company may deny or rescind the entire plan/policy if it discovers that you committed an act, practice, or omission that constitutes fraud, or intentional misrepresentation of material fact is found in this application. Enrollees/insured’s other than the individual(s) whose information led to the rescission on such plans/policies may be able to obtain coverage as set forth in the section
Eligibility following Rescission.
I understand that if my plan/policy is rescinded, I will be sent written notice that will explain the basis for the decision and my appeal rights.
I have the option to submit a new application in the future to be underwritten and considered for benefits.
I also understand that, consistent with California law, I will be required to pay for any services Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company paid on my behalf and that Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company will refund any premium paid by me, less my medical expenses that Anthem Blue Cross and/or Anthem Blue Cross Life and Health Insurance Company (Blue Cross Application Section 7)
Q7: The Affordable Care Act (through Public Health Service Act section 2712) generally provides that plans and issuers must not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact.
A rescission is defined as it is commonly understood under the law – a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to a failure to pay timely premiums towards coverage.
Is the exception to the statutory ban on rescission limited to fraudulent or intentional misrepresentations about prior medical history?
What about retroactive terminations of coverage in the “normal course of business”?
The statutory prohibition related to rescissions is not limited to rescissions based on fraudulent or intentional misrepresentations about prior medical history.
An example in the Departments’ interim final regulations on rescissions clarifies that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee.
On the other hand, some plans and issuers have commented that some employers’ human resource departments may reconcile lists of eligible individuals with their plan or issuer via data feed only once per month. If a plan covers only active employees (subject to the COBRA continuation coverage provisions) and an employee pays no premiums for coverage after termination of employment, the Departments do not consider the retroactive elimination of coverage back to the date of termination of employment, due to delay in administrative record-keeping, to be a rescission.
Similarly, if a plan does not cover ex-spouses (subject to the COBRA continuation coverage provisions) and the plan is not notified of a divorce and the full COBRA premium is not paid by the employee or ex-spouse for coverage, the Departments do not consider a plan’s termination of coverage retroactive to the divorce to be a rescission of coverage. (Of course, in such situations COBRA may require coverage to be offered for up to 36 months if the COBRA applicable premium is paid by the qualified beneficiary.)
Recession in CA – IRMI.com
Post Claim Underwriting The Federation.org
Recent news articles Calif. Health line
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