Can my health insurance company cancel my policy for any reason?

As a general proposition, a health insurance company cannot cancel an individual’s coverage under a health insurance policy or plan arbitrarily. However, a health insurance policy can be canceled (rescinded) if there are material omissions or misrepresentations made by the insured or member in the application for health insurance coverage.

Situations that Warrant Cancellation

Health insurance policies or plans can be canceled (rescinded) if there are material omissions or misrepresentations made by the insured or member in the application for coverage. When you apply for health insurance and sign an application, you answer questions and provide information about the medical history of anyone who will be covered under the health insurance policy or plan. In doing so, you must reveal any serious medical condition or treatment that might reasonably affect the decision by the insurer or plan to undertake the risk associated with providing the coverage.

Even if the health insurance policy or plan is issued and premiums are paid, the health insurer or health service plan can cancel or rescind the policy later if they discover that the policyholder or insured did not disclose in the application significant medical history. The result is that the insurer or plan does not pay for the care that was rendered, the health insurance policy is canceled and the premiums that were paid on the policy are returned to the policyholder less a reasonable cost of insurance associated with the period of time during which the policy was in force.

Reduction or Elimination of Benefits

A limited form of cancellation can occur involving reduction or elimination of health insurance benefits. Other than a requirement of reasonable notice, insurers and plans may reduce or eliminate benefits, unless the contract or health service plan prohibits it or limits it. In some states there is a major exception known as “vesting,” which means that if the insured or member already has a claim or has received benefits for a particular injury or illness, they may continue to receive the health insurance benefit even if it is otherwise canceled.

For questions about whether a particular a health service plan or policy can be cancelled by the health insurance company, or if facing cancellation of health insurance coverage, contact an experienced attorney for assistance.

Case Studies: Health Insurance Policy Cancellations And Benefit Reductions

Case Study 1: Material Omissions in Application

Mr. Anderson applied for health insurance coverage and failed to disclose his previous diagnosis of a chronic medical condition. The insurance company issued the policy based on incomplete information. Several months later, when Mr. Anderson required medical treatment related to his undisclosed condition, the insurance company discovered the omission.

As a result, they canceled his policy and refunded the premiums paid, excluding a reasonable cost of insurance for the period it was in force.

Case Study 2: Reduction or Elimination of Benefits

Mrs. Thompson had an existing health insurance policy that covered a specific illness. However, the insurance company decided to reduce or eliminate benefits for that particular condition.

According to the terms of the policy, they were within their rights to do so. However, due to a “vesting” provision in her state’s regulations, Mrs. Thompson continued to receive coverage for her condition despite the policy change.

Case Study 3: Fraudulent Misrepresentation

Ms. Ramirez intentionally provided false information in her health insurance application. She concealed a pre-existing medical condition that required ongoing treatment. The insurance company issued the policy based on her fraudulent misrepresentation.

After a few months, Ms. Ramirez filed a claim for medical expenses related to her undisclosed condition. During the investigation, the insurance company uncovered her deception. As a result, they promptly canceled her policy and denied coverage for the fraudulent claim.