May 5, 2010 BCBSTX Responds to Capitol Hill Request to Change
Rescission Practices Responding to a request from Capitol Hill that insurers end the
practice of rescinding member coverage except in cases of
fraud or material misrepresentation, Health Care Service
Corporation, which operates in Texas as Blue Cross and Blue
Shield of Texas (BCBSTX), outlined the company’s standard
practice already in place that individual policies are rescinded
only in the case of fraud or material misrepresentation.
The request from Congress was made in a letter signed by
several House Committee Chairs and released publicly. In their
request, the Chairs also asked that insurance companies
institute an independent third-party review whenever a policy
is to be rescinded or canceled. BCBSTX is actively working to
implement a third-party review process as soon as possible. To help you answer customer questions, we have created the
following FAQs. Please contact your BCBSTX account
representative if you have additional questions. Q: What is rescission?
A: Rescission allows health insurers the right to revoke
coverage for individuals who have fraudulently or intentionally
misrepresented information pertinent to the terms of their policy.
When we offer coverage, we do so based on our understanding
of the individual’s situation – if that has been intentionally
misstated, we have the right to rescind the policy. An analogy
might be, if someone signs a contract to buy a house, but the
inspection shows the house has problems that hadn’t been
disclosed, then the contract is null
and void. Q: How frequent are rescissions?
A: They are rare – a recent National Association of Insurance
Commissioners study shows they occur in approximately
one-tenth of one percent of individual market policies each year. Q: What are the PPACA requirements around
rescissions, and how is the federal government
implementing them?
A: Effective Sept. 23, 2010, the Patient Protection and
Affordable Care Act of 2010 (PPACA) prohibits health plans
from rescinding coverage of an enrollee, except in instances
where the individual has acted fraudulently or intentionally
\misrepresented a material fact. Prior notice must be provided
in the event of such a cancellation.
However, leaders in the House of Representatives have
requested an earlier implementation, and also requested an
independent third-
party review of such cancellations, which is not required under
PPACA. Q: What impact does this PPACA provision and the
House request have on BCBSTX operations?
A: BCBSTX’s current policy is to rescind coverage only in
cases of fraud or intentional material misrepresentation – we are
operating according to that provision. While not a mandate, we
are currently working toward a date when we will provide third-
party review of such rescissions. Q: What is the timeframe for notice to the member?
A: Health and Human Services (HHS) has not yet defined that.
We will comply with the timing requirements once they are
finalized. Q: What is the timeframe and scope for the external
review?
A: We will implement a third-party external review process as
soon as possible. Since third-party external reviews are not
required under PPACA, there is not a specific date that such
reviews must begin. Q: If a member has previously had his/her coverage
rescinded, does the PPACA provision allow them to have
that rescission overturned?
A: Because BCBSTX’s policy has been to rescind coverage
only in cases of fraud or intentional material misrepresentation,
there would be no change in that rescission. | 
