Health Insurance Cancellation Laws and Policies

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 What Is a Health Insurance Policy?

Health insurance policies are essentially contracts that are issued by health insurance companies to group or individual policyholders. A policyholder will purchase a health insurance plan from a specific health insurance company in exchange for coverage of any medical bills associated with possible treatments they receive for an injury or illness. The health insurance policy itself will dictate the terms of the policyholder’s health insurance plan.

For instance, a health insurance policy may state that a health insurance company will only agree to pay for generic medications, as opposed to its brand-name counterpart. A health insurance policy may also provide for the percentage a policyholder will need to pay for operations. It may also explain what happens when a doctor or medical facility is considered to be “out-of-network.”

A health insurance policy will also provide details, such as when a policyholder’s health insurance plan may be terminated or cancelled. This is known as a health insurance cancellation policy and is typically found in its own section within the documents provided for a health insurance plan. 

For example, a health insurance cancellation policy may state that a policyholder’s health insurance plan may be cancelled if they misrepresent and/or intentionally omit details about their past medical history or any medical conditions for which they are currently receiving treatment.

To learn more about health insurance policies and when one may be cancelled, you should speak to a local healthcare attorney for additional information on the laws affecting health insurance policies as well as healthcare coverage in your state.

Can a Health Insurance Company Cancel My Policy for Any Reason?

Health insurance companies used to be able to cancel policyholders’ health insurance plans for accidentally leaving out information that was not related to their medical history and for making errors as small as clerical ones. Now, however, these practices are deemed to be illegal. A health insurance company also cannot cancel a person’s health insurance policy for unlawful reasons, such as those that violate state and federal anti-discrimination laws.  

In addition, some states have laws that bar health insurance companies from cancelling policyholders’ healthcare coverage due to having or being diagnosed with certain medical conditions, such as HIV, Alzheimer’s disease, and a few other types of illnesses. A health insurance company also cannot cancel a policyholder’s health insurance plan because they simply do not want to cover the costs of their medical bills.

When Can a Health Insurance Company Cancel My Policy?

According to the Affordable Care Act (“ACA”), a health insurance company cannot cancel health insurance anytime. In fact, it is now against the law. This is especially true in cases where a policyholder accidentally left out medical information or documents when applying for health insurance coverage. 

On the other hand, a health insurance company can cancel a policyholder’s health insurance plan if they failed to make monthly payments on their premiums, intentionally omitted or misrepresented information when applying, or committed health insurance fraud. However, even in a scenario involving health insurance fraud, a health insurance company may still not be able to cancel a policyholder’s health insurance plan if they appeal and win their case.

Are There Any Time Restrictions?

The time restrictions for cancelling a health insurance plan are typically defined by individual health insurance companies’ policies and by state or federal law. Generally speaking, a health insurance company will normally have between 90 to up to 180 days to notify a policyholder that their health insurance coverage is ending or being cancelled. Again, this is an estimated range and does not apply in every case regarding terminated healthcare coverage.

In situations where a person’s health insurance plan was cancelled due to a move or new job, they will usually be allowed to apply for a new health insurance plan at least 45 days in advance of when their current health insurance policy ends. If a person decides to wait until after their current health insurance plan ends to re-enroll, they will normally have up to 60 days to select a plan through the marketplace.

As for those receiving health insurance coverage through a new employer, a supervisor or someone who works within their company’s human resources departments will be able to inform them of any time constraints.

The one exception as to when a policyholder may only be warned 30 days in advance before having their health insurance plan cancelled is if they are being accused of or actually committed health insurance fraud when applying for their policy. However, the policyholder will be permitted to appeal the cancellation decision or defend themselves against the accusation in court.

Can I Cancel My Health Insurance Policy without Being Penalized?

In most instances, a policyholder will usually be able to cancel their health insurance coverage without fear of being penalized. According to certain health insurance cancellation laws, however, there are some situations in which a policyholder may face penalties for cancelling their health insurance coverage. Though such situations are typically based on a legal exception, and are not the norm. 

For example, a policyholder may be penalized for cancelling their health insurance plan if they fail to comply with the cancellation process listed in their health insurance company’s policies. A policyholder can also face penalties if they deliberately stop making monthly payments towards their health insurance premiums. Additionally, if a policyholder resides in a state that requires health insurance coverage, then they may have to pay a state tax penalty. 

Another situation wherein a policyholder may be subject to penalties for cancelling their health insurance policy is when they are required to pay for health insurance coverage as part of a court mandate, such as a divorce or child support order. In which case, the policyholder can be held liable for breaching the mandate. Medicare recipients who opt to change their health insurance coverage may be penalized for not alerting the appropriate agencies as well.

Lastly, while not a penalty per se, policyholders who cancel health insurance coverage being administered to them through a health insurance marketplace in their state will not be permitted to re-apply for health insurance until the next enrollment period begins.

Thus, unless a person without health insurance can demonstrate that they qualify for special coverage, they will need to wait to apply for health insurance coverage, which can sometimes take up to a full year.

Do I Need an Attorney?

You may want to consider obtaining further legal advice from an insurance lawyer who handles health insurance matters in your area. An experienced financial lawyer will be able to provide sound legal guidance and can explain how the laws regarding health insurance operate in the state where you reside.

Your lawyer can also review the terms of your health insurance policy and can inform you as to whether you have grounds to file a lawsuit against a health insurance company for penalizing you or for cancelling your coverage. In addition, if you need help with filing your claim or would like to retain a legal professional for representation in court, your lawyer will be able to provide these services as well. 

Finally, should you have any other issues or concerns arise throughout the course of your case, your lawyer will be able to offer legal support every step of the way and until your health insurance matter is completely resolved. 


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