The Affordable Care Act is the most comprehensive health insurance legislation in the United States in decades. One of its most important provisions restricts the practice of rescission, which health insurance companies use to cut down on costs. Rescission is used to retroactively cancel a health insurance policy holder's coverage due to inaccurate information on the policy holder's application. It's often used to prevent a policy holder from lying on an application to get a lower rate or to avoid denial of coverage. Rescission also saves a health insurance company from paying out on a claim when they didn't have enough information to price a policy accurately from the beginning.

The practice of rescission is very controversial, as there's potential for abuse. Before the affordable care act, there were few restrictions on the practice, and coverage could be rescinded for almost any reason. Some lawmakers and insurance policyholders have accused insurance companies of canceling perfectly good policies to avoid paying hefty claims. There have certainly been cases in which insurance providers have retroactively canceled a policy for something like a misspelling, and although this type of practice isn't widespread in the insurance industry, a single case can have serious financial consequences for the insurance policy holder. Sudden rescission can mean an immediate lapse in coverage and thousands of dollars or more of health care costs.

Health insurance companies have defended rescission by explaining that the practice is absolutely necessary when an omission affects the chances of a claim. Insurance providers base their rates on complex actuarial statistics, and when these statistics are inaccurate, they can't properly assess their potential costs. This leads to higher overall costs for insurance providers, and to stay profitable, the insurers must raise policy holders' rates. Health insurance companies can therefore argue that fair rescission helps to keep the average cost of health insurance down.

The Affordable Care Act puts strong controls on rescission and prevents health insurance companies from rescinding policies due to minor omissions. Under the AFA, only a direct omission of information related to a preexisting condition can be grounds for rescission. As people with preexisting conditions also gained new protections through the Affordable Care Act, the legislation aims to effectively outlaw the practice while discouraging consumers from lying on their health insurance applications by making health insurance more attainable. Rescission is being banned by the AFA because it puts too much power in the hands of health insurance companies and their ability to cancel or suspend payments on claims. By controlling rescission rights, the United States Congress hopes to fix a glaring problem in American health care.