Cancelling an Insurance Policy

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 What Is a Health Insurance Policy?

A health insurance policy is essentially a contract that is issued by a health insurance company to a group or an individual policyholder. The policyholder purchases a health insurance plan from a specific health insurance company in exchange for coverage of any medical bills that are associated with possible treatments they may receive for an illness or injury.

The health insurance policy itself will outline the terms of the policyholder’s health insurance plan. For example, a health insurance policy may state that the company only agrees to pay for generic medications instead of brand-name counterparts.

Health insurance policies may also provide the percentage the policyholder will need to pay if they have an operation. The policy may also explain what may occur when a doctor or medical facility is considered to be out-of-network.

Health insurance policies will also provide details, for example, when the policyholder’s health insurance plan may be canceled or terminated. This is called a health insurance cancellation policy.

This aspect of the plan is usually found in its own section within the documents that are provided for the health insurance plan. For example, the health insurance policy may state that the plan can be canceled if they misrepresent or intentionally omit details about their past medical history or about any medical conditions that they were currently being treated for.

If an individual would like to learn more about health insurance policies and when they may be canceled, it is important to consult with a local healthcare attorney for additional information on the laws that affect health insurance policies as well as healthcare coverage in their state.

Can My Insurance Policy Be Canceled?

Previously, a health insurance company was able to cancel a policyholder’s health insurance plan for accidentally leaving out information that was not related to their medical history and for making errors, even small clerical ones.

Under current insurance laws, these practices are illegal. In addition, a health insurance company cannot cancel an individual’s health insurance policy for an unlawful reason, such as reasons that violate federal and state anti-discrimination laws.

Additionally, there are some states that have laws that prohibit health insurance companies from canceling a policyholder’s healthcare coverage based on having or being diagnosed with certain medical conditions, for example, HIV, Alzheimer’s disease, and a few other types of illnesses. Health insurance companies are also prohibited from canceling a policyholder’s health insurance plan because they simply do not want to cover the cost of the medical bills.

There are, however, many situations in which an insurance policy may be canceled, either by the insurance company or by the policyholder. The majority of policies, however, are written for a specified term.

Typically, there are also restrictions that limit when the policy can be terminated before that term is completed.

Cancellation by the Insurance Company

In general, an insurance company does not have a right to cancel an insurance policy unless the policy itself explicitly reserves and ensures their right to do so. Because of this, it is common for a provision to be included in a policy that allows an insurance company to cancel a policy upon certain terms and conditions.

If such a provision is not included, an insurance company may only be able to cancel a policy based on valid reasons for canceling an insurance policy, including:

  • The insurance company discovers the policyholder has made a fraudulent claim;
  • The insurance company discovers the policyholder lied or used false documentation in applying for the policy; or
  • Other factors that may indicate that the policyholder poses a substantial risk to the insurance company.

Even when cancellation is permitted, either by a provision in the policy or based on other grounds, the insurance company will typically be required to give the policyholder a notice of the cancellation within a reasonable amount of time prior to termination.

Can an Insurance Company Cancel My Policy without Notice?

Usually, insurance companies can only perform a rescission of an insurance policy if the policyholder:

  • Lied in applying for your insurance coverage;
  • Concealed information when applying for insurance coverage;
  • Made an error in applying for coverage that greatly impacts the company’s position; or
  • Made a dishonest claim for benefits.

The majority of states require the insurance company to provide a rescission notice to the policyholder with a written notice of cancellation at least 30 days before the rescission of a coverage claim. The policy contract will identify why the insurer is permitted to perform a rescission of a coverage claim and the time frame and manner in which it is allowed to do it.

If an individual’s policy has been rescinded, the insurance company is required to send the individual a notice outlining the reasons for the rescission. If the company fails to do so, the individual should demand a letter that properly explains the grounds for the rescission.

If an individual believes they have suffered a wrongful repudiation, they should consult with a lawyer as soon as possible. If they have received a rescission notice, it is important they understand their rights.

An insurance policy cannot be rescinded if, for example:

  • The alleged misconception is trivial or immaterial, for example, a mistake in an applicant’s contact information or a negligible condition such as one report of high blood pressure;
  • The applicant did not know about a latent medical condition; or
  • The applicant did not comprehend the significance of providing an insufficient response.

The time restrictions for canceling health insurance policies are usually defined by the individual health insurance company’ policies and by state or federal law. In general, health insurance companies typically have between 90 to 180 days to notify the policyholder that their health insurance is being canceled or ending.

It is important to note this is an estimated range and does not apply to every case involving the termination of healthcare coverage.

Can I Reinstate a Canceled Insurance Policy?

In general, an individual cannot reinstate a canceled insurance policy. Many companies are prohibited by federal regulations from reinstating insurance companies outside of the enrollment period unless the individual qualifies for a special enrollment period.

In addition, if an individual’s policy was canceled as a result of not making the required payments, many companies will not reinstate coverage.

Cancellation by the Policyholder

A policyholder may terminate an insurance policy at the end of the term in one of two ways:

  • Failing to pay premiums once the designated term for the policy has run; or
  • Canceling the policy midterm.

Similar to the insurance company, a policyholder is not obligated beyond the term that is specified by the policy. Therefore, a policyholder may cancel the policy by simply not paying to renew it.

It is also possible to cancel a policy midterm. However, in order to do this, a policyholder will have to meet certain requirements.

Do I Need an Attorney?

If you believe your health insurance policy was unlawfully canceled or your insurance company will not allow a proper cancellation, you should consult with an insurance lawyer as soon as possible. Insurance policies are complex and detailed.

Your attorney will have the knowledge, training, and experience to handle insurance companies while protecting your rights. In some cases, your attorney may also be able to negotiate a resolution with your insurance company.


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