Activity 4 - Health Insurance Rescissions
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Date
Feb 20, 2024
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Uploaded by AdmiralWillpowerSeahorse20
To: Consumer Advocacy Agency From: Jada Porter, Policy Analyst Re: Insurance Rescission Regulations Pamphlet
Date: 2/10/2024
Activity 4: Health Insurance Rescissions
Insurance companies play a crucial role in the healthcare industry by protecting patients against the financial strain of medical bills
.
Due to the fact that health insurance agreements are complex, there was a clear need for regulatory laws that would maintain fairness for consumers. The Obama Administration recognized this issue and took steps to address it by implementing the Affordable Care Act (ACA) which was a milestone in the United States government. This landmark legislation was created with the goal to expand accessibility to cost-effective healthcare services and insurance plans for all. By enacting the Affordable Care Act, the government aimed to confront the problem of expensive healthcare costs. The Affordable Care Act regulations are applicable to both group and individual health insurance plans. This ensures that people can receive quality care nationwide without many financial obstacles
. An essential rule that the Affordable Care Act provides focuses on insurance coverage rescission which is defined as “a cancellation or discontinuance of coverage that
has retroactive effect” (ACA 45 CFR § 147.128). Section § 147.128 of the Affordable Care Act has created clear guidelines that govern an insurance provider’s ability to revoke a health insurance contract due to minor technical errors found in an application. Under this rule, health insurance coverage should only be rescinded under the circumstances of fraud or an “intentional misrepresentation of material fact” (ACA 45 CFR § 147.128). This regulation enables insurance providers to protect themselves from increased risk by declining coverage to individuals who have misrepresentations in their application. However, the ACA notes that insurance rescission would not be applicable if
a consumer accidentally fails to provide their prior health information. Consider this example, an individual unintentionally does not disclose their recent medical visit to a neurologist regarding unexplained headaches to their insurance company. If this
individual is later diagnosed with brain cancer and receives expensive medical bills their insurance company cannot terminate their coverage agreement on grounds of fraud or misrepresentation
. This person’s insurance policy would be protected because their failure to disclose the prior specialist visit was a mere oversight. Prior to the enactment of
the Affordable Care Act, health insurance companies had the discretion to terminate a customer’s coverage agreement based on slight discrepancies that were not fraudulent. However, Section § 147
.
128 of the Affordable Care Act now prohibits this practice, making it illegal under federal law
. This reinforces consumer protection in health insurance contractual agreements
.
The § 147.128 regulation outlined in the Affordable Care Act mandates that health insurance providers must not rescind coverage unless there is clear evidence of fraudulent activity or intentional misrepresentation by the insured party (ACA 45 CFR § 147
.
128)
. Additionally, Section § 147.128 requires insurance companies to provide their consumers with a written notice at least thirty-days prior to terminating their agreement (ACA 45 CFR § 147
.
128)
.
This written notice is required regardless of whether the insurance coverage pertains to a group or individual plan
.
This requirement protects individuals from a sudden cancellation of their health insurance which would typically lead to unexpected out-of-pocket medical expenses. By providing advance notice, people are given the fair opportunity to make necessary arrangements to mitigate an upcoming disruption in their coverage. This provision offers a proactive approach to insurance rescission that promotes more stability for consumers within the healthcare industry. The Gaffer v
. HealthPartners Insurance Company lawsuit gained attention from ABC News, detailing the challenges a Minneapolis couple faced when their health insurance coverage was unexpectedly canceled due to premium payment issues. Caitlin and Corey Gaffer made a genuine mistake by directing their premium payment to the wrong entity of the HealthPartners Insurance Company
.
The Gaffers then received a letter stating that their insurance was being rescinded by HealthPartners without an advance written notice
.
The Gaffer couple were put under a significant amount of stress as they were expecting a baby in just three months and lacked active health insurance
coverage
.
Caitlin and Corey eventually filed a lawsuit against the HealthPartners Insurance Company claiming a wrongful cancellation of their health insurance contract
.
The Minneapolis couple argued that their insurer failed to properly communicate with them regarding their premium payments
.
This situation placed a financial strain on Caitlin and Corey Gaffer as they were now responsible for covering the medical costs of prenatal care and childbirth out-of-pocket. This incident shed light on the flawed dynamic
of the insurer’s contract termination policies
. As a result of the negative backlash they received from this lawsuit, the HealthPartners Insurance Company revised their notification procedures that would now provide their customers with a written late payment notice and “a thirty-day grace period” after a missed payment (Appleby, 2019)
. This guarantees a secure environment for HealthPartners’ customers as they continue to utilize their healthcare services. Following several months without coverage, the plaintiffs had their health insurance restored as a result of the Gaffer v. HealthPartners Insurance Co
.
lawsuit. With the thirty-day period mandated by the Affordable Care Act consumers have sufficient time to consider alternative health insurance options. This requirement helps to prevent prolonged time periods without active health insurance by providing advance notice to prepare for the cancellation. In conclusion, the Affordable Care Act continues to stand as a transformative piece of legislation that was passed to improve access to cost-effective healthcare in the United States
.
The Obama Administration utilized the Affordable Care Act to address critical issues within the healthcare industry which included the regulation of health insurance rescissions. Section 147
.
128 of the ACA prohibits rescissions except in cases of fraud or intentional misrepresentation to protect consumers from an unjust cancellation
of their health insurance agreement. Additionally, the federal mandate for insurance companies to issue a thirty day written notice prior to coverage termination allows consumers to be prepared for any unforeseen financial burdens
.
Overall, the ACA regulations help to create fairness in the healthcare system. By preventing wrongful insurance rescissions, the Affordable Care Act assures that individuals can retain their access to healthcare without the risk of sudden coverage loss due to unsupported claims.
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Citations
Appleby, J. (2019, June 9). Health insurance canceled without warning: One couple’s story
. ABC News. https://abcnews.go.com/Health/health-insurance-cancelled-warning-couples-
story/story?id=63590695%29 Legal Information Institute. (2015, November 18). 45 CFR § 147.128 - Rules Regarding Rescissions.
Legal Information Institute. https://www.law.cornell.edu/cfr/text/45/147.128