Health insurers end rescissions

July 1, 2010

Anticipating provisions of the healthcare reform passed by Congress, US health insurers have agreed to stop issuing rescissions, the practice of terminating coverage when a policyholder becomes ill.

Anticipating provisions of the healthcare reform passed by Congress, US health insurers have agreed to stop issuing rescissions, the practice of terminating coverage when a policyholder becomes ill.

Although insurance companies have until September to implement the legislation's ban on rescissions, insurers agreed in May to abide by the provision voluntarily in the interim months.1

Under the Patient Protection and Affordable Health Care Act, insurance companies will be allowed to cancel coverage only if they can prove fraud or intentional misrepresentation.

Rescission primarily affects people who are forced to buy their own health insurance rather than relying on a large employer to provide it.

According to the National Association of Insurance Commissioners, rescissions occurred at an average rate of 3.7 for every 1,000 policies from 2004 to 2008 and peaked in 2005.2

A separate survey by America's Health Insurance Plans, an industry lobbying group, found that of 1.16 million individual policies existing in 2005, nearly 2,700 (0.23%) were rescinded.3

1. Heavey S, Krauskopf L. Health insurers end cancellations; enforcement key. Reuters. April 30, 2010. http://www.reuters.com/article/idUSTRE63T3VR20100430. Accessed June 2, 2010.

2. National Association of Insurance Commissioners. NAIC rescission report. December 17, 2009. http://www.docstoc.com/docs/33403321/NAIC-Recission-Report. Accessed June 1, 2010.

3. America's Health Insurance Plans. Guaranteeing access to coverage for all Americans. January 30, 2009. http://www.ahip.org/content/default.aspx?docid=21727. Accessed June 1, 2010.