Colleges say new health law may imperil student policies

Kaiser Health NewsAugust 23, 2010 

WASHINGTON — Colleges and universities say that some rules in the new health law could keep them from offering low-cost, limited-benefit student insurance policies, and they're seeking federal authority to continue offering them.

Their request drew immediate fire from critics, however, who say that student health plans should be held to the same standards that other insurance is.

Among other things, the colleges want clarification that they won't have to offer the policies to non-students.

Without a number of changes, it may be impossible to continue to offer student health plans, says a letter that the American Council on Education sent Aug. 12 to Health and Human Services Secretary Kathleen Sebelius, signed by 12 other trade associations that represent colleges.

Additionally, the colleges say that some provisions of the law don't apply to their policies, including those that require insurers to spend at least 80 percent of their revenue on medical care and that bar them from setting annual coverage caps.

Many of the provisions at issue don't go into effect until 2014, but the colleges say they need clarity soon because they're negotiating long-term contracts with insurers now.

HHS spokeswoman Jessica Santillo said Sebelius had received the letter and "looks forward to sending a response." Santillo added that the health overhaul law allows many young adults to stay on parents' policies until age 26.

The request comes amid continued scrutiny of student health plans, including an ongoing investigation by New York Attorney General Andrew Cuomo, who said in April that some of the plans left students "at risk while providing massive profits for insurance companies."

His investigation has found that policies offered to New York students were inexpensive, ranging from as little as $100 a school year to more than $2,500, but that the benefits also vary widely, with some capping annual coverage at $25,000 or setting per-illness caps as low as $700.

"Buying these kinds of low-quality products with low premiums enables colleges" to keep students' costs down. "But the problem is the protection provided students under the plans isn't sufficient," said Mark Rukavina of the Access Project, an advocacy group in Boston that's studied student health plans. "If you are a student who needs care, given the caps on benefits, you are in trouble."

More than half of colleges nationwide offer student insurance plans, according to a March 2008 study by the Government Accountability Office. While 80 percent of college students were insured, often through their parents' coverage, only 7 percent bought their own policies or purchased school-based plans, according to the GAO.

Starting in 2014, the new health law bars annual caps such as those in student health plans. Starting this year, insurers must offer at least $750,000 in coverage per year, although insurers or employers can apply for waivers from that restriction.

Colleges say their plans don't fall under the annual cap requirement because they're considered "limited duration" policies, meaning they expire after a certain number of months, generally the school year.

They also say that such limited duration policies don't have to meet rules that require insurers to spend an average of at least 80 percent of revenue on direct medical care, rather than administrative costs or profits, or issue rebates to policyholders.

Law professor Bryan Liang disagrees.

"That sounds like wishful thinking on their part," said Liang, a critic of student health plans who's the executive director of the Institute of Health Law Studies at California Western School of Law in San Diego. Even if the plans are considered limited duration policies, he said, such policies are regulated by states, which can set similar spending rules.

Many student plans would flunk the spending test. A recent report by Massachusetts state officials, for example, found that spending on medical care among the 13 insurers that offer student plans in the state ranged from 46 percent to 89 percent, with the average at 69 percent.

Requiring them to meet even some of the new rules could drive up premiums, colleges say. Premiums could increase, for example, if regulators determine that student health plans are considered "individual" policies rather than group plans, which often get a better rate, said Steven Bloom, the assistant director of federal relations at the American Council on Education.

Additionally, the colleges fear that they'd be required to offer the plans to anyone who applied for one, even if the applicant wasn't a student, Bloom said.

Liang, the law professor, doubts that colleges would be forced to offer insurance to anyone who walked into a campus health center.

"That's like saying I, as a non-IBM employee, could go to IBM and say, 'You need to give me insurance,' " said Liang, who sent a letter Aug. 17 to Sebelius in response to the education council's request.

He doesn't think that school plans should be offered any special protection in the regulations that are being developed to implement the health care law.

The school-based policies "financially benefit the school and their insurance company partners over the student ... are poor in coverage and may violate consumer protection law and public policy," his letter says.

In another letter sent to Sebelius last week, a grass-roots group made up of college health directors, doctors and others involved with student insurance say that the secretary should require poor-quality plans to improve their benefits.

Jim Mitchell, a spokesman for the Lookout Mountain Group, said that its members agreed with some of the education council's requests, including its concern that colleges not be required to offer coverage to non-students. The group disagrees, however, with the council's position that student health plans are exempt from some rules that go into effect this year, including the restriction on annual limits.

"Student insurance plans can't be the only insurance unaffected by these health reform laws," said Mitchell, who's also the director of the Student Health Service at Montana State University.

ON THE WEB

The American Council on Education's letter to Health and Human Services Secretary Kathleen Sebelius

New York Attorney General Andrew Cuomo's investigation into college student health insurance plans

The Access Project, an advocacy group in Boston

Government Accountability Office study of student health plans

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