For plan years beginning on or after September 23, 2010, health plans may not retroactively terminate (rescind) coverage except in limited circumstances, such as for an individual who commits fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan. Even in cases where permitted, plans must provide participants with written notice 30 days before coverage is retroactively terminated. The regulations clarify that plans may also terminate coverage retroactively without providing advance notice if a covered person fails to make timely premium or contributions payments (such as COBRA premium).
Note: The limit on rescissions only applies to certain types of health plans, such as major medical insurance. It does not apply to HIPAA excepted benefits, such as disability, cancer, hospital indemnity, or accident insurance. Click here for more information about the types of benefits that are exempt from the ACA plan design mandates.
If your plan does not currently include language allowing rescission in the case of fraud or intentional misrepresentation of material fact, you may not ever terminate an individual’s coverage retroactively. You may want to review your plan document and perhaps adopt a plan amendment incorporating such language.