Black Rhinoceros. Asian Elephant. Giant Panda. Rescission. What do they have in common? All are endangered species.
It is common knowledge in the benefits community that Rescission refers to the practice of retroactive cancellation or discontinuance of coverage, usually by a plan sponsor. Prior to the enactment of PPACA, employers could easily remove benefits retroactively from members and then rightfully pursue reimbursement for paid claims or premiums, especially for ineligible dependents. Thanks to PPACA this is no longer the case and the practice of Rescission is now endangered.
According to the ACA, an employer “shall not rescind such plan or coverage with respect to an enrollee, once the enrollee is covered under such plan or coverage involved.” The only exceptions allowed are if the employer can prove the employee performed “an act or practice that constitutes fraud” or “makes an intentional misrepresentation of material facts as prohibited by the terms of the coverage”. This subjective determination of “intentional” acts makes rescission only possible with evidence in the most extreme cases of fraud, and even then may not be worth the ethical, legal, and morale risks. With such a burden, most companies are abandoning rescission altogether, rapidly pushing the practice toward extinction.
This subjective determination of “intentional” acts makes rescission only possible with evidence in the most extreme cases of fraud, and even then may not be worth the ethical, legal, and morale risks.
What are clients to do?
What is a client to do if an employee’s dependent is discovered to be ineligible for benefits after he/she has racked up thousands of dollars (or more) of claims? According to a publication by AON Hewitt, “Ineligible dependents, such as ex-spouses, nieces, nephews, girlfriends/boyfriends, neighbor’s children, parents, etc., could have claims paid by the employer-sponsored health plans during the period of ineligibility.”
Situations like these will invariably come up for any plan sponsor; an employee mistakenly believes their relationship qualifies as a domestic partnership, an employee goes below full time hours, an employee goes through a divorce but “forgets” to notify company, an employee’s dependent child turns 26, but benefits were mistakenly continued, and the list goes on. But barring cold hard proof of intentional fraud by the employee connected to that ineligible dependent, employers will be on the hook to pay for benefit expenditures without the ability to retroactively cancel benefits.
…barring cold hard proof of intentional fraud by the employee connected to that ineligible dependent, employers will be on the hook to pay for benefit expenditures without the ability to retroactively cancel benefits.
Preventing Ineligible Claims and Expenses
The best tool to prevent ineligible claims and expenses against company benefits is to verify eligibility of ALL plan participants. Once you’ve achieved a clean participant pool for your benefits plan, a maintenance mechanism ensures ongoing savings. A good maintenance plan will guard against divorces, overage children, other disqualifying events, and includes verification of all new dependents added to your benefits plan.
Rescission might be going the way of the DoDo bird or Dinosaurs, but proactive steps to manage your member eligibility makes the loss of Rescission irrelevant.