Health Insurance Articles
3 Reasons Why Health Insurance Benefits Might Be Cancelled
In general terms, a health insurance company cannot cancel or alter your insurance benefits without legal justification. Canceled health insurance can cause great hardship for the insured party so the regulations describing the circumstances under which a policy can be terminated are quite specific. State and federal laws are clear that no issues of race, sex, and even mental illness among others, can be the basis for a canceled health insurance policy. There are however, legitimate reasons why insurance providers can and will cancel health care coverage. The three most common are listed here.
The first of these reasons is a failure of the policy holder to pay his premiums on time and in full. Most companies have a grace period for late payers which can be as little as one day or as long as one month. This is a handy feature but it is never a good idea to take advantage of it unless absolutely necessary. All policies reserve the right of the insurer to terminate coverage, at its discretion, if the policy holder fails to make his payment within the allotted time period. Partial payments are not acceptable. It is an inconvenient fact that even if you have made timely payments for many years, your provider will likely terminate your insurance benefits if you miss a single payment.
The second common cause of canceled health insurance benefits is providing misleading or incorrect information on your application, or if you commit intentional fraud. The questions asked on the application for health insurance are highly specific and meant to obtain information that is essential to the decision making process and for the calculation of your premium. If anything you say on that form proves to be wrong, whether intentional or not, the insurance company will notify you in advance that of its decision to terminate your policy. In most states, the company has up to two years to discover any inconsistencies in your application. If any are found, termination of your insurance benefits may be retroactive. After two years that option is no longer available to the company but they can use your lack of truthfulness as cause to deny or contest future claims.
The third reason is a situation called rescission. If you have purchased an individual health insurance policy, you are exposed to the possibility of canceled health insurance if you should acquire a serious and costly to treat illness. Rescission is the annulment of your existing policy. It is exercised by the insurer if the cost of treatment for your catastrophic illness becomes, in their estimation, prohibitive. Currently there are no laws prohibiting this practice but remedies are in progress.