If an insurer cancels an individual health plan, what happens to the unearned premium?

When an insurer cancels an individual health plan, the unearned premium is typically refunded on a pro rata basis. This means that the insurer will calculate the portion of the premium that corresponds to the coverage period that was not utilized by the policyholder and refund that amount.

Premiums are collected in advance for future coverage, and if the policy is canceled, the premium for any period beyond the cancellation date is considered unearned. Refunds based on a pro rata basis ensure that policyholders are treated fairly by getting back the money they paid for coverage they no longer have. This practice aligns with the principles of fairness and equity in the insurance industry.

In contrast, the other options discuss scenarios that do not align with typical insurance practices. Forfeiting the unearned premium would be unjust to policyholders, diverting it to a state fund does not reflect common procedures, and the notion of rolling over the unearned premium to another policy is not standard practice. Consequently, refunding unearned premiums on a pro rata basis is the most reasonable and standard approach following the cancellation of an individual health plan.