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How to Pay for Student Health Care

June 16, 2009

As colleges try to get a handle on the cost pressures associated with providing health care to students, health officials, college administrators and even legislators are weighing in with ideas – which aren't always consistent with proposals in Washington.

A position paper released Monday by the Lookout Mountain Group, a non-partisan study group of college health professionals, makes several recommendations for the future of campus health programs, not the least of which is a push for continuation of the "capitated" – one flat rate per student – model of student health care. Historically, universities gravitated toward capitated models because of their efficiency, said Jim Mitchell, director of student health service at Montana State University and part of the Lookout Mountain Group. In addition to providing health care, this model also provides extra money to promote public health – say to support the development of pandemic flu procedures.

With health care costs rising, though, more colleges are looking to fee-for-service models for their campuses because of a perceived potential for monetary gain from insurance payments, he said. At some colleges, that includes requiring that students have health insurance as a condition for enrollment and then billing that insurance whenever service is provided. In Texas, legislation awaiting the governor's signature would make Texas the first state to require its high-enrollment colleges -- those with 20,000 or more students -- to bill students’ insurance for care they receive.

“All the presidents and chancellors are worried about their funding realities,” said Texas State Rep. Fred Brown, R-Bryan, author of the legislation. And there is money to be had in billing students’ insurance, he added. State taxpayers, he said, are footing the bill for campus health centers despite the fact that 70 percent of Texas students have independent health insurance. Not billing that insurance is like “going out and buying a new car and not driving it.”

HB 103 also mandates that universities offer or sponsor health benefit plans for its uninsured students, with at least one being a high-deductible plan. Students are not, however, required to have health insurance as a condition of enrollment.

By Brown’s estimation, there is $6.8 million a year to be retrieved from billing students’ health insurance. A portion of that, of course, would have to cover the administrative costs of either hiring and training personnel to handle the billing or contracting a third-party agency – the rest, Brown said, could be reinvested in the campus health centers or used to cover the fees or deductibles associated with insurance billing.

To his critics who suggest the big winner in this scheme would be the private companies that specialize in handling insurance claims, Brown said the bill allows universities to set up their own collection services if they believe it would be more efficient. And as for students paying double the fees – once in a tuition bill for general health services and again with a copay when services are provided – Brown said the income generated by billing insurance could be turned around to cover either or both. Officials of the University of Texas System told local reporters the system would have no comment on the legislation as it's being reviewed.

For Brown, billing students’ insurance is simply a matter of “fiscal responsibility.” This sentiment is echoed by Kent Smith Jr., vice president for student affairs at Ohio University – which requires all students to have insurance and, last year, signed a contract with insurance billing specialist Highland Campus Health Group to handle the administrative aspects of third-party billing for its campus health center.

“The final decision in terms of bringing a third party vendor in was that I spoke with several other college health directors who had attempted to implement their own [billing system] and had failed,” Smith said. “It’s natural to say, let’s do it ourselves. But it’s not that easy.”

He’s happy with his decision. According to Smith, in its first year of operation the insurance-billing system brought in $200,000 of income, and he expects double that for next year.

“Our long term goal is to be 90 to 100 percent self-sufficient,” Smith said. “That was one of the reasons to implement third-party billing … so that we’d have little reliance on the general fee [that students pay into annually].”

In the meantime, though – and critics of the third-party billing model are quick to point this out – students at Ohio University are paying the standard general fee they always had, part of which goes to the campus health center, and they are also paying any copay fees associated with their visits. The university is working to alleviate that strain, offering students the opportunity to opt into a $40 fee per quarter that would exempt them from making copays at their health center visits.

It’s a legitimate business practice, said James Turner, president of the American College Health Association, but billing insurance providers could be difficult for colleges with students who come to the university from various states with hundreds of different insurance providers. A state university could identify a handful of health plans as in-network, he said, but at colleges like his – the University of Virginia, where 900 different insurance plans are represented on campus -- billing could be incredibly inefficient.

But, at least according to Mitchell and the Lookout Mountain Group, that kind of financial inefficiency is not the only reason fee-for-service models are not beneficial for colleges in the long run.

More importantly, Mitchell said, a fee-for-service model does not encourage healthy behavior.

“If you listen to what those in Washington are saying about health care reform, fee-for-service is the last thing they’re talking about,” he said. “[Health care providers] would benefit when people are sicker and sicker and keep coming back. Their incentives are not to keep people healthy.

It’s kind of strange that, for one reason, college health programs are being pushed toward fee-for-service models because of financial pressure when, over the long run, it’s more efficient to keep a capitated system.”

 

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