Retroactive Rescission of Coverage Notice
(Health Plan)

This template is a notice that can be used by group health plan sponsors and health insurance issuers to provide 30-day notice to plan participants retroactively rescinding coverage, primarily due to an omission that constitutes fraud or an intentional misrepresentation of material fact. This template includes practical guidance and drafting notes. ACA's Prohibition Against Rescission. Section 2712 of the Public Health Service Act (Act) (42 U.S.C. § 300gg-12), as added by the Affordable Care Act (ACA), provides that a group health plan or health insurance issuer cannot rescind an individual's coverage under a health plan or policy unless the individual performs an act, practice, or omission that constitutes fraud, or intentionally misrepresents a material fact, as prohibited by the terms of the plan or health insurance coverage. This rule became effective for the first plan year beginning on or after September 23, 2010 and applies to both grandfathered and non-grandfathered health plans. 29 C.F.R. § 54.9815-2712, 29 C.F.R. §2590.715-2712, 45 C.F.R. §147.128. For a discussion regarding grandfathered plan rules, see ACA Grandfathered Plan Rules. What is a rescission? Regulations define a rescission as a cancellation or discontinuance of coverage that has a retroactive effect. For example, a revocation of coverage under a calendar year plan issued on June 30th that cancels coverage back to the first day of the plan year is a rescission. 29 C.F.R. § 2590.715-2712, 45 C.F.R. §147.128; Treas. Reg. § 54.9815-2712. However, a cancellation or discontinuance of coverage is not a rescission if: 1. The cancellation or discontinuance of coverage has only a prospective effect. 2. The cancellation or discontinuance of coverage is effective retroactively to the extent it is attributable to a failure to timely pay required premiums or contributions (including COBRA premiums) towards the cost of coverage. 3. The cancellation or discontinuance of coverage is initiated by the individual (or by the individual's authorized representative) and the sponsor, employer, plan, or issuer does not, directly or indirectly, take action to influence the individual's decision to cancel or discontinue coverage retroactively or otherwise take any adverse action or retaliate against, interfere with, coerce, intimidate, or threaten the individual. –or– 4. The cancellation or discontinuance of coverage is initiated by the Exchange pursuant to 45 C.F.R. § 155.430 (other than under paragraph § 155.430 (b)(2)(iii)). See 29 C.F.R. § 2590.715-2712, 45 C.F.R. §147.128; Treas. Reg. § 54.9815-2712. Rescission Other Than for Fraud/Misrepresentation. Q&A-7 of the Affordable Care Act Implementation FAQS – Part 2 (FAQ Part 2), issued October 8, 2010, noted that the statutory prohibition related to rescissions is not limited to rescissions based on fraudulent or intentional misrepresentations about prior medical history, clarifying that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee. See 29 C.F.R. § 2590.715-2712(a)(3), Example 2. However, if a plan covers only active employees (subject to the COBRA continuation coverage provisions) and an employee pays no premiums for coverage after termination of employment, the Departments do not consider the retroactive elimination of coverage back to the date of termination of employment, due to delay in administrative record-keeping, to be a rescission. FAQ Part 2, Q&A-7. The final regulations published by the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (collectively, the "Departments") on November 18, 2015, 80 Fed. Reg. 72,192 (Final Regulations), apply to group health plans and health insurance issuers beginning on the first day of the first plan year (or, in the individual market, the first day of the first policy year) beginning on or after January 1, 2017. The Final Regulations state that coverage cannot be rescinded merely because an individual makes a mistake on an insurance application or enrollment form. 80 Fed. Reg. 72,192, 72,203. Required Notice. The regulations require a group health plan or health insurance issuer to provide at least 30 calendar days advance written notice to each participant who would be affected before coverage can be retroactively rescinded, regardless of whether the coverage is self-funded or fully insured. 29 C.F.R. § 2590.715-2712(a)(1), 45 C.F.R. § 147.128(a)(1); Treas. Reg. § 54.9815-2712(a)(1). This advance notice provides individuals time to appeal the decision or enroll into new coverage. Note section 2712 does not override other provisions which require a longer notice period, e.g., section 2702(c) (requiring 180-day notice for suspension of coverage in the small group and individual market through a network plan) and 2742(b) (requiring 90-day notice for discontinuation of coverage in the individual market). Per PHS Act section 2719, a plan or issuer must provide notice to individuals, in a culturally and linguistically appropriate manner, of the reason or reasons for an adverse benefit determination or final internal adverse benefit determination (including a rescission of coverage) and a description of available internal appeals and external review processes, including information on how to initiate an appeal. See, generally, 29 C.F.R. § 2590.715-2719(e) and (b)(2)(ii)(E). The Departments encourage plans and issuers to coordinate notices related to rescissions and appeal procedures to the extent possible. 80 Fed. Reg. 72,192, 72,205. Right to Appeal. The Departments' regulations under PHS Act section 2719 broadened the definition of ''adverse benefit determination'' to include rescissions of coverage. Accordingly, a plan or issuer must treat a rescission of coverage (whether or not the rescission has an adverse effect on any particular benefit at that time) as an adverse benefit determination. 45 C.F.R. § 147.136(b)(2)(ii)(A). Therefore, rescissions of coverage are also eligible for internal appeal and external review (for non-grandfathered health plans), whether or not the rescission has an adverse effect on any particular benefit at the time of an appeal. The regulations under PHS Act section 2719 also contain provisions requiring coverage to remain effective pending the outcome of an internal appeal. 80 FR at 72204. It follows that the effective date of the rescission must be delayed until outcome of any internal appeal. Prohibited by Plan Terms. Note the regulation permits rescission on account of a fraud or intentional misrepresentation of material fact only to the extent that is prohibited by plan terms. Accordingly, the Plan document, policy, and/or the SPD should contain provisions that specifically inform participants and dependents that coverage may be retroactively rescinded if they commit fraud or an intentional misrepresentation of a material fact in an application for enrollment or coverage under the Plan; in a claim or appeal for benefits; or in response to a request for information from the Plan Administrator, claims administrator, appeals administrator, or other third-party administrator. For additional ACA-related content, see ACA Preexisting Condition, Benefit Limit, Rescission, Patient Protection, and Clinical Trial Rules and ACA and Group Health Plan Resource Kit.