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Retroactive Termination of Former Spouse's Coverage Doesn't Constitute Rescission

05/23/11

  04:30:50 pm, by MedBen5   , 223 words,  
Categories: News, Health Plan Management

Retroactive Termination of Former Spouse's Coverage Doesn't Constitute Rescission

Consulting firm EBIA has addressed the question of employer responsibility when an employee divorces but doesn’t notify their employer until sometime later. Does retroactively cancelling the ex-spouse’s insurance coverage back to the date of the divorce constitute rescission under the Affordable Care Act? EBIA says, “No.”

Rescission – the termination or discontinuation of coverage to a point sometime in the past – is prohibited by health care reform laws, except in cases of fraud or material misrepresentation. And even then, the health plan must give at least 30 days’ advance written notice of a rescission. But since the ACA was enacted, the Department of Health and Human Services and other government agencies have clarified the rules that retroactively cancelling a policy due to nonpayment of premiums does not constitute rescission.

In the case of a failure to notify the employer of a divorce, because the former spouse did not elect COBRA and pay COBRA premiums, canceling coverage retroactively is not a rescission under the clarified ruling. The employer would not be required to provide 30 days’ notice.

EBIA does caution that the employer should review all pertinent documents, their past practices, and the facts of the case before terminating coverage under COBRA’s rules. MedBen COBRA clients with questions regarding a potential instance of rescission are requested to contact Vice President of Compliance Caroline Fraker at (800) 851-0907.

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