Students on college-sponsored health-insurance plans would receive protections similar to those that last year’s health-care reform law is providing to the general population, under regulations proposed on Wednesday by the U.S. Department of Health and Human Services.
Amid public confusion over how the reform would affect college-sponsored plans, the department proposed 80 pages of regulations that classify the plans similarly to those on the individual market, a move that higher-education groups had said would drive up costs and jeopardize colleges’ ability to offer health insurance.
The proposal to extend consumer protections represents a victory for college students and their families, said Aaron Smith, executive director of Young Invincibles, an advocacy group for students. “Insurance companies will actually be forced to provide the care we pay them for,” he said in a news conference.
Approximately 2,000 colleges contract with insurers to offer health plans, which cover about three million students nationwide. The new regulations, if they take effect, will drastically alter a large market whose policies vary widely in their benefits.
Under the proposed regulations, which would take effect on January 1, 2012, college-sponsored plans could not exclude students based on pre-existing conditions, nor could they impose lifetime caps on coverage. Annual caps would have to be at least $100,000 for plans begun before September 23, 2012, and no less than $2-million thereafter, according to the proposal. (A few years ago, a report by the Government Accountability Office found that 24 percent of college-sponsored plans imposed annual spending limits; they ranged between $15,000 and $250,000, with a median of $50,000.)
Preventive care would be free of cost-sharing measures like co-payments under the new proposal. It also discusses a “loss ratio” for insurers—a measure of what they cover in benefits as a percentage of what students pay in premiums—of at least 80 percent, as the federal reform law set for the individual market. (Young Invincibles has cited student-plan ratios as low as 35 percent, with profit margins in the college market up to five times greater than the industry’s overall average.)
In proposing these regulations, the federal government echoed concerns raised in a report last year by Andrew M. Cuomo, the governor of New York who, as the state’s attorney general, spent a year and a half investigating the student-health-insurance industry. Mr. Cuomo concluded that many college-sponsored plans were inadequate, offering extremely limited coverage for students.
Young Invincibles, which students founded in 2009, mounted a grassroots campaign with organizations such as Campus Progress and the state Public Interest Research Groups to advocate for more-comprehensive benefits. They pointed to examples like a student named Paula, who had a rare form of cancer and whose health-insurance exclusions left her with $80,000 in medical bills.
Under the proposed regulations, students who needed medical attention couldn’t be subject to low annual limits, said Stephen L. Beckley, a consultant to colleges on health care. “There is a big portion of the student-insurance marketplace that is truly junk insurance,” he said. “That is destroyed.”
Increasing Premiums
Higher-education leaders had worried that health-care reform would threaten even high-quality college-sponsored plans, but Wednesday’s proposal allayed some of their fears. It would allow institutions to limit coverage to enrolled students and their dependents, and to continue charging an annual student-health fee without violating the federal law’s prohibition on cost-sharing requirements for preventive care.
The proposed gradual transition would also help colleges adapt to new standards, said Steven M. Bloom, director of government relations for the American Council on Education. Still, he worried about costs.
“Insurers may use this as a pretext to increase premiums,” Mr. Bloom said.
Some advocates for comprehensive student health care have accused not only insurers but colleges of profiting from current policies; Mr. Bloom insisted that was generally false. In rare cases, he said, small fractions of premiums helped to finance student health services. Mr. Cuomo’s investigation also found limited evidence of kickbacks to colleges.
Federal officials cited research predicting that insurers would not raise premiums under the proposed regulations. “We certainly do not expect any impact of consequence,” Steve Larsen, director of the Center for Consumer Information and Insurance Oversight in the Department of Health and Human Services, said in a news conference.
Campus health officials were dubious, estimating increases of up to 400 percent. If that happens, colleges whose existing policies offer limited coverage may decide to stop sponsoring health plans altogether, said Jim Mitchell, director of student health services at Montana State University at Bozeman and spokesman for the Lookout Mountain Group, an alliance of health officials in higher education.
“The kind of coverage that those schools have is so bad that that would be a good thing,” he said.
Over all, campus officials agreed that colleges already offering high-quality student health plans would have less of an adjustment to make.
About three dozen colleges now offer self-insured plans, which would remain unregulated under the proposed rules. Those plans were already increasing in popularity because of their low overhead costs and high flexibility, Mr. Mitchell said, and may now become more common.
‘Next Frontier’
Comments on the Department of Health and Human Services’ proposal will probably discuss the prospect of regulating of self-insured plans. “They should not be exempt,” said Bryan A. Liang, executive director of the Institute of Health Law Studies at California Western School of Law and co-director of the San Diego Center for Patient Safety at the University of California at San Diego School of Medicine. “That’s our next frontier.” (Self-insured plans in the general insurance market are regulated under the Employee Retirement Income Security Act.)
Student plans’ internal limits, such as caps on prescription-drug benefits and laboratory expenses, also need more scrutiny, Dr. Liang said. And the loss ratio for student plans should be 85 percent, as it is on the large group market, said Mr. Beckley, the consultant.
The loss ratio promises to generate debate, as federal officials specifically invited comments on it. Student health insurance plans, because of their customization, may have “unique administrative expenses” that warrant examination of the 80-percent standard, the proposal said.
Aetna Inc., one of the largest insurers in the student market, has already questioned any such provision. “We remain concerned about the application of medical-loss ratio requirements to the student health market,” Brian St. Hilaire, the company’s vice president of market relations, wrote in an e-mail on Wednesday to more than 200 higher-education clients.
Among other questions unresolved in the proposed regulations is whether college-sponsored plans that rely on federal funds must therefore not cover students’ abortions. When and where student health-plan benefits can be used (On winter break? At home?) and which provisions apply specifically to international students are also undetermined.
Still, campus officials are grateful for more guidance, as a climate of uncertainty had strained their negotiations with insurers.
“Until these regulations came out ... it was a challenge working with insurance companies,” said Alan I. Glass, president of the American College Health Association and director of student-health services at Washington University in St. Louis. Moving forward, he said, “I’m optimistic that things will be easier.”
The 60-day comment period on the proposed regulations will begin on Friday, when they are published in the Federal Register. The Department of Health and Human Services will then evaluate comments before issuing final rules.
Correction (2/10, 12:45 p.m.): This article has been updated to correct several references to the “loss ratio” for insurers—a measure of what they cover in benefits as a percentage of what students pay in premiums. The proposed regulations did not set that ratio at 80 percent, but only discussed it.
