Recission of Medical Insurance- Now more difficult « Health Insurance Advisory

Welcome to the New Healthcare Law Center and State News

new healthcare reform lawThe new healthcare law, called the Patient Protection and Affordable Care Act (PPACA), represents comprehensive healthcare reform legislation signed into law on March 23, 2010. It contains numerous provisions designed to protect consumers and promote low cost medical insurance, including many new taxes to pay for the cost.

In this section of the site, you can also obtain the following information specific to your state: available medical insurance options, efforts to regulate medical insurance premiums, healthcare, the individual medical insurance marketplace and the new healthcare law.

Our objective is to help Americans make sense of the new healthcare law by explaining key provisions in plain English and assisting individuals, families and the self-employed in using this information to find and secure affordable medical insurance.

Recission of Medical Insurance- Now more difficult

Author: Pete S - Sr. Staff Writer | Nov 20 2010 | General Provisions - New Healthcare Law

The new healthcare law (through Public Health Service Act section 2712) limits the ability of medical insurance carriers to rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact on his/her application for health insurance.  A rescission is defined as a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to a failure to pay timely premiums towards coverage.

Prior to the Patient Protection and Affordable Care Act (PPACA) becoming law on March 23, 2010, health insurance carriers had much more latitude for rescinding a medical insurance policy because, in most states, they did not have to prove fraud or intentional misrepresentation.  With the passage of the new law, a greater burden of proof exists for health insurance carriers before coverage can be rescinded.

Individual and self-employed medical insurance is medically underwritten today.  As a result, applicants are required to provide detailed information about their health history when applying for coverage.  This information is used to assess each applicant’s insurability during a process called medical underwriting.  Once underwriting has been completed, the health insurance company may offer coverage at a preferred or standard rate.  Individuals with pre-existing health conditions may receive an offer to issue coverage at a higher rate (the additional premium is used to cover the added risk).  Additionally, certain health conditions may be excluded through an Exclusionary Rider.  If the applicant’s health status is poor, then the insurance carrier may decline to issue a medical insurance policy altogether.

While some applicants unintentionally omit details from the application for health insurance, others purposely exclude relevant information regarding their health status.  The latter typically have pre-existing conditions and will not qualify for medical coverage or do not want to pay a higher premium or simply think the insurance carrier will not find out about their current health status.  There are many ways a person’s health status can be revealed, including medical records, prescription drug databases and other sources of electronic information.  Applicants, when applying for coverage, authorize the release of their medical information.  Many individual’s do not even realize they personally granted the health insurance company permission to obtain their health data.

While it may be more difficult to for a health insurance carrier to rescind medical insurance coverage post (PPACA), rule number one is never, ever omit information from an application for health insurance.  Otherwise, the individual runs the risk of losing their medical insurance policy via rescission and being 100% responsible for their medical bills.

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