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Rescission


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Under PPACA, a group health plan cannot rescind coverage under the plan with respect to an individual once the individual is covered under the plan unless the individual performs an act, practice, or omission that constitutes fraud, or unless the individual makes an intentional misrepresentation of material fact. In addition, a group health plan is allowed to cancel coverage retroactively for non-payment of premiums.

The Interim Final Rules set forth an example which states that an employer who sponsors a group health plan provides coverage for employees who work at least 30 hours per week. Individual A has coverage under the plan as a full-time employee. The employer reassigns A to a part-time position. Under the terms of the plan, A is no longer eligible for coverage. The plan mistakenly continues to provide health coverage, collecting premiums from A and paying claims submitted. If the plan discovers that A no longer works at least 30 hours per week, the plan cannot rescind A's coverage because there was no fraud or intentional misrepresentation of material fact. The plan may only cancel A's coverage prospectively.

I am wondering how other employers, who use automated benefits systems, are planning to comply? Also, does anyone know if these rescission rules are intended to "trump" HIPAA's special enrollement rules?

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  • 7 years later...

JCJD

Curious what you concluded on this issue as well as your or others' thoughts with respect to the interplay with COBRA rules. 

We have case where ineligible individual was erroneously offered group health plan coverage.  Mistake discovered after about 6 months of ineligible coverage.  No indication of fraud by individual other than arguably should have known his status had not changed from prior exclusion from plan.  Seems we cannot rescind or retroactively terminate prior coverage but can terminate prospectively.  Assume doing that would not permit individual to elect COBRA since he was never technically eligible for coverage in first place so fine to provide notice of unavailability as part of prospective termination of coverage?

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