QUESTION: We are a plan sponsor and want to make sure we understand the rules around rescinding health coverage. Under what circumstances may we rescind a participant’s health plan coverage, and what steps must we follow if we do?

 ANSWER: Group health plans and insurers are prohibited from rescinding an individual’s coverage except in cases where the individual has engaged in fraud or made an intentional misrepresentation of material fact, as prohibited by the terms of the plan. Advance notice is required. A “rescission” is a cancellation or discontinuance of coverage that has retroactive effect. But a retroactive cancellation or discontinuance of coverage is specifically not considered a rescission if (1) it is effective retroactively to the extent attributable to a failure to timely pay required premiums or contributions toward the cost of coverage; or (2) it is initiated by the individual, and the plan sponsor or insurer does not, directly or indirectly, take action to influence the individual’s decision or otherwise take any adverse action or retaliate against, interfere with, coerce, intimidate, or threaten the individual.

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