This week the Department of Health and Human Services (HHS) issued proposed regulations that clarify how the Affordable Care Act applies to student health plans offered at colleges and universities.1 By classifying student health plans as individual market plans, the new regulations ensure that students will enjoy most of the consumer protections provided by the Affordable Care Act, but provide some flexibility to health plans so that they continue to offer coverage to students. Millions of current and future students stand to gain from these new protections, which will apply for policy years beginning on or after January 1, 2012.
Student Health Plans: Important but Variable in Quality
College and university health insurance plans have long provided some measure of protection for students who do not have access to other forms of coverage. The Commonwealth Fund Survey of Young Adults found that 11 percent of 19-to-29-year-olds, or an estimated 1.6 million young adults, were enrolled in a health plan offered through their college or university in 2009. An additional 18 percent of that age group who were no longer in college, or about 2.2 million young people, said that they had been enrolled in such a plan while in school. But many plans offered by universities and colleges offer only limited benefits and have low annual or lifetime limits on the amounts the health plans will pay. A study by the Government Accountability Office of a sample of student health plans found that 96 percent had a maximum benefit amount.2 Among plans with a maximum benefit amount on a per-condition, per-lifetime basis, more than one-quarter (27%) had a maximum benefit of less than $20,000. Another 25 percent had a maximum benefit of between $20,000 and $29,000.
Such limited plans put college students and their families at risk of catastrophic medical bills if they experience a serious illness or injury. The Commonwealth Fund Survey of Young Adults found that 15 percent of young adults between the ages of 19 and 29 who had been enrolled in a student plan said that they had had expensive medical bills not covered by their plan. Nearly one- quarter (23%) said that their doctor had charged them a lot more than their plan would pay and they had to pay the difference.
Student Health Plans Under the Affordable Care Act and the Proposed Rule
The Affordable Care Act includes several new consumer protections—many of which have already gone into effect—that will greatly improve the quality of health insurance policies offered in the individual and employer group markets. Such protections include bans on lifetime benefit limits and rescissions of insurance policies when someone becomes ill, a phase-out and eventual ban of annual limits, bans on preexisting condition exclusions for children under 19, and requirements on the share of premiums devoted to heath care. But the law states that some provisions should not apply to student plans if they prohibit colleges and universities from being able to offer the plans at all.
In the new proposed regulations, HHS clarifies how student health plans will be regulated under the new law and which of its provisions apply to them.
What is a student health plan? HHS explicitly defines student plans as individual health insurance coverage, with the exception of plans that are self-insured by colleges and universities. This means that student health plans under the Affordable Care Act would follow the same requirements that apply to other individual market policies, such as the bans on lifetime benefit limits and rescissions. In addition, in order to be considered a student plan, health plans must:
- Offer coverage to all students and dependents, regardless of their health status, medical conditions (both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability.
- Provide coverage only to students who are enrolled at an institution of higher education and their dependents. Coverage that is extended to students on break between academic terms, on temporary leaves of absence, or who have recently graduated would also qualify.
- Provide insurance through a written agreement between an institution of higher education and a health insurance issuer.
New requirements for student plans offered as "short-term limited-duration insurance" policies. Insurance policies that are provided for less than 12 months fall under the definition of short-term limited-duration insurance. These plans are not considered individual market insurance by law, and enrollees are not protected by the provisions in the Affordable Care Act and other laws. However, HHS notes in its rule that some of these policies have fallen a day or even hours short of the 12-month limit in order to maintain their status as limited-duration policies, even though students often renew at 12 months, or universities automatically re-enroll them. The new proposed regulations clarify that if limited-duration policies offered to students are renewable each year at the option of the student, the coverage would not meet the definition of limited-duration insurance and would thus be defined as individual market coverage, subject to the protections of the Affordable Care Act.
Exemptions from Affordable Care Act provisions. The proposed regulations clarify that student health plans are subject to all of the protections accorded to consumers with individual market plans by the Affordable Care Act, with the exception of the following:
- Phase-out of annual limits on benefits. Under the Affordable Care Act, health plans must phase out annual limits they place on what their plans will pay in a year. Until September 2011, annual limits may be no less than $750,000; no less than $1.25 million until September 2012; and no less than $2 million until January 2014, after which they are banned completely. The new regulation provides a transition period for student health plans to meet this requirement. Student health plans could have annual limits of no less than $100,000 for policy years beginning on or after January 2012 until September 23, 2012. They must meet the general requirements for phase-out after that.
- Preventive services. While student health plans, like other insurance carriers, would have to cover preventive services without cost-sharing, extra fees that students pay to cover the cost of student health services would not be considered cost-sharing and thus would still be allowed.
- Guaranteed availability and renewability. The Health Insurance Portability and Accountability Act, also known as HIPAA, requires individual market carriers to offer coverage to certain eligible individuals, such as those who have recently lost group coverage. The proposed regulations exempt student health plans from this requirement because the plans are to be limited to students and their dependents.
Medical loss ratio requirements. Under the Affordable Care Act, plans sold in the individual insurance market must spend at least 80 percent of their premium dollars on medical care and quality improvement activities as opposed to administrative costs and profits. A recent study by the state of Massachusetts of 13 insurance carriers selling college plans in the state found that the plans spent from 46 percent to 89 percent of their premiums on medical care, with the average around 69 percent. The new proposed regulations do not exempt student health plans from this requirement, but explicitly call for comments on whether the requirement would make it difficult for health plans to continue offering coverage.
Striking the Right Balance
The new regulations ensure that student health plans will provide far greater protection from catastrophic health care costs for students and their families. Student health plans will be banned from imposing lifetime limits on what they will pay and will be required to phase out annual limits. In addition, the plans will be required to cover recommended preventive services without copayments, including cervical cancer screening, screening and vaccines for sexually transmitted diseases, and screening for depression. And student health plans must offer coverage to students regardless of health status. Finally, the regulations attempt to close a loophole for short-tem limited-duration plans that will help ensure that students purchase plans with the full protection of the Affordable Care Act, though this will require monitoring.
Still, the regulations give health plans flexibility that will help these plans remain an option for students, particularly until 2014 when the major provisions of the Affordable Care Act go into effect and students will have far more choices of affordable coverage.3 Specifically, HHS allows a transition period for compliance with the law's new restrictions on annual benefit limits and clarifies that student health fees are not considered cost-sharing for preventive services. And while the proposed regulations do not adjust the requirement on the share of premiums that student health plans must spend on medical care and quality improvement activities, the proposed regulation suggests that this might be possibility. It is vitally important, however, that the premiums students pay for their health insurance provide sufficient value in health benefits to justify their costs.
1 Department of Health and Human Services, Student Health Insurance Coverage, Proposed Rule, Feb. 9, 2010, https://www.gpo.gov/fdsys/pkg/FR-2011-02-11/pdf/2011-3109.pdf.
2 "Health Insurance: Most College Students Are Covered Through Employer-Sponsored Plans and Some Colleges and States Are Taking Steps to Increase Coverage," Report to the Committee on Health, Education, Labor, and Pensions, U.S. Senate, U.S. Government Accountability Office, March 2008.
3 S. R. Collins and J. L. Nicholson, Realizing Health Reform's Potential: Young Adults and the Affordable Care Act of 2010 (New York: The Commonwealth Fund, Oct. 2010).