Is Something Better Than Nothing?

In the months leading up to the federal government’s announcement that colleges’ student health insurance plans would indeed be subject to new, more stringent regulations under President  Obama’s health care overhaul legislation, higher education associations and student advocacy groups were hardly on the same page. In fact, they spent much of that time bickering over whether and how student plans should be regulated.

But now, amid reports of colleges dropping their plans because the required premium hikes would be too much financial burden to bear, the two factions agree: this repercussion, in theory at least, isn’t really the worst thing.

That’s because the plans being dropped were, relatively speaking, rather flimsy.

“Those plans are extremely low-quality plans – they’re not typical of many college health plans,” said Aaron Smith, co-founder and executive director of Young Invincibles, an advocacy organization that has pushed for better student health plans. “It’s not really a surprise that plans that have such low quality, which really are not real insurance at all, are going to have to make pretty drastic changes.”

Whereas other, and in most cases larger, institutions may have to change little to nothing in their plans to come into line with the Affordable Care Act, the institutions that are dropping their plans provided so little coverage that to make them qualify under ACA just wouldn’t be practical – nor would it really make sense. The distinction is important, health experts say, because some critics of the Obama administration's policies have suggested that colleges that are dropping plans are a sign of its flaws.

As they apply to student health plans, the new federal regulations are essentially meant to ensure not only that students are well-covered, but also that those who are, don’t get ripped off. Among other things, the law's regulations prohibit insurers from dropping students if they suddenly fall ill, ban exclusions based on pre-existing conditions, and prohibit lifetime coverage limits, meaning insurance companies cannot cap the amount they spend on health benefits in the student plans.

Most of the plans being dropped were never intended to provide comprehensive coverage – and the colleges providing them made no secret of it, often telling students right on their website. However, that didn’t stop some students using the supplemental plans as their primary or sole source of insurance – and those are the students for whom this transition could really be problematic, said Heidi Levine, dean of students at Cornell College in Iowa, which is among those institutions discontinuing their plans.

“I think for most students, it may be an inconvenience but is not going to be that negative a thing. But I think for a small number of students, this has the potential to be devastating,” Levine said. “If they become ill and they haven’t been able to find other coverage, this could really be catastrophic not only for their health, but also for their academic career.”

About 40 percent of Cornell students were enrolled in a student health plan at year’s end – quadruple the national average of 7 to 10 percent. To keep up with the phasing in of the regulations, which first will require plans to have a minimum $100,000 payout limit – 10 times that of Cornell’s plan, whose premium was $264 annually – the college would have had to agree to raise its premium to just under $2,500.

“That’s pretty high,” Levine said. In the next few years the regulations will require the payout caps to be upped to a half-million dollars before ultimately being eliminated, which would have brought increasingly higher premiums.

In dropping the plans, Cornell also decided to drop its requirement that all students be insured. Previously, the college operated under a “hard waiver” structure, in which any student who could not provide proof of insurance would be automatically enrolled in the institution’s plan. (That’s partly why a high share of the college's students were on the plan. Its student body comes from all over the country; college plans can be particularly important for those students who may not be able to find in-network providers when they go away to school in a new state.) That caused problems when students forgot to fill out a waiver and saw an extra $264 charge on their tuition bill – problems that would be multiplied about ninefold had the university kept the plan.

“It’s certainly not ideal for students to be effectively forced to buy substandard, extremely low-quality plans,” Smith, of Young Invincibles, said. “I wish, frankly, that these schools would work with the students to try to provide a real comprehensive plan that provides decent quality.”

When Cornell gathered feedback, students largely supported dropping the plan rather than being forced to pay the premium or, in the case of the other option, enrolling in a new self-funded institutional plan. That would have forced every student, regardless of need, to pay up to $132 in annual fees for what would amount to worse coverage than the previous plan provided.

But the college hasn’t yet considered one other option: a consortium, in which several institutions band together to get better plans, in higher quantities, at lower rates. The only downside is, in consortiums, it’s more difficult to tailor the plan specifically to one campus’s needs.

“The more students that are insured, the lower the costs can be because they’re insuring more people. It’s just the way insurance works,” said Steven M. Bloom, director of federal relations at the American Council on Education. “You’re likely to see some of the smaller schools enter into consortiums.”

It’s difficult to say how many colleges will drop their plans, Bloom said, other than the handful that already have, including Bethany College, Lenoir-Rhyne University, and the University of Puget Sound. (Others, such as Ave Maria University, have done so for religious reasons, because the ACA requires employers to cover contraceptive services.) But it’s clear that those that are doing so were providing very limited plans.

“What it takes to manage the cost of health care has just gotten increasingly difficult for everyone, so looking at these low-benefit, low-cost plans is maybe a means to do that,” said Jennifer Haubenreiser, director of health promotion at Montana State University and president of the American College Health Association. “It appears that students are losing their coverage, but again, we’re advocating for good coverage and access to good coverage, and doing everything possible to ensure the coverage is high-quality and low-cost.”

Beginning in 2014, anyone who is not insured risks facing a financial penalty. So what of those students being dropped? They will have a couple of options.

First, of course, is to enroll on their parents’ plan, which is now permitted for young people through the age of 26. But, as Bloom pointed out, most if not all of the students who qualify to do that are probably already doing it.

It’s more likely  that students will either turn to Medicaid, which will also be more accessible to students, or enter into the state-run individual insurance exchange that must be set up by 2014. But again, it’s unclear at this point what those products will cost and how comprehensive they’ll be, Bloom said. (Smith, though, said both these options will be higher-quality and higher-value than what the institutions that are dropping plans offered.)

“It really is about choice, but high-quality choice,” Haubenreiser said. “I think as a whole, we’re moving toward something of great value in terms of this level of comprehensive coverage for all students.”