When is a Coverage Rescission Allowed?


The Affordable Care Act (ACA) generally prohibits rescission of coverage once an individual is enrolled.  Under the ACA, a rescission means the cancellation or discontinuation of health-plan coverage with a retroactive effect.

Is a rescission of health-plan coverage ever allowed?  Only prospective terminations are permitted, except in the following circumstances: (a) if the participant commits fraud or material misrepresentation; (b) if the participant fails to pay the required employee contribution; (c) if the participant does not timely notify the employer of a divorce (spouse coverage); and (d) when the employer reconciles its enrollment files in the normal course of business.  Thirty days’ advance written notice is required before coverage can be retroactively terminated only in the case of fraud/material misrepresentation.

Further, a voluntary drop initiated by the participant is not a prohibited rescission as long as the employer did not persuade the individual to drop coverage.  This rescission may be retroactive, and no 30-day advance notice is required.

If you have questions about coverage rescissions, call ASR Health Benefits at (616) 957-1751 or (800) 968-2449.