Rescission

The retroactive cancellation of a health insurance policy.

Insurance companies will sometimes retroactively cancel your entire policy if you made a mistake on your initial application when you buy an individual market insurance policy.

♦ This was a well know problem with the insurance industry prior to the Affordable Care Act.

Individuals would start to run up high medical expenses and insurance companies would search applications for mistakes or omissions to justify dropping the patient.

To make things worse, the insurance companies then tried to reclaim all payments they made for medical expenses from the date the policy started, sometimes dating back years.

The industry justified their actions as business. Moral responsibility did not exist.

♦ Under the Affordable Care Act, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.