HIGHER ED WATCH: Proposed Rules on College Health Plans Provide Mostly Good News for Students

Our colleague Maggie Severns, of the Education Policy Program, has been covering the issue of school-sponsored health insurance plans for a few month now, analyzing how generally low-quality campus insurance plans will change with the passage of the Affordable Care Act.  To catch-up with the debate, read her earlier posts here, here, and here. The following post originally appeared on the Higher Ed Watch blog.

On Wednesday, the U.S. Department of Health and Human Services issued long-awaited proposed rules that seek to clarify the types of changes that colleges must make to the school-sponsored health insurance plans (SHIPS) they offer students to comply with the health-care overhaul bill Congress passed last year. The proposed regulations are not perfect, but they offer a lot in the way of reform.

Currently, accessing health care on campus is costly and restrictive for many students. As Higher Ed Watch has reported, colleges tend to strongly encourage and sometimes mandate students to buy school-sponsored student health insurance plans (SHIPS) even if the students or their families have alternative health insurance that offers more comprehensive coverage. At many schools, students are allowed to opt out but are charged higher fees when they try to use their insurance at their campus health centers.

Though some colleges do provide high-quality, low-cost health insurance to students, many offer extremely inadequate coverage — with low annual and lifetime caps,  restrictions for certain services and conditions, and paltry pay-out rates. For example, an investigation by New York’s then-Attorney General Andrew Coumo found plans with annual caps of $25,000 or lower, and others that had per-illness annual caps as low as $1,000 to $2,500.

The proposed rules seek to force colleges to improve these plans by:

• Barring SHIPS from denying coverage to students with pre-existing conditions. The proposed regulations state that, “coverage could not condition enrollment on any health status-related factor of a student or dependent” — meaning that all college students would remain eligible for student insurance plans no matter what their health status.

• Prohibiting these plans from imposing life-time caps on coverage to students for specific illnesses. The proposed rules would also bar SHIPS from setting annual caps any lower than $100,000 for plans begun between January 1 and September 23, 2012, and $1.25 million for those started after that date.

• Requiring SHIPS to be classified as “individual plans” under the health-care law. This provision is expected to be the most controversial for colleges because plans on the individual market are among the most costly to provide under the health care law. These plans are required to have the highest medical loss ratios (which denote the amount money an insurer pays out in benefits versus the amount of money paid to insurers in premiums)—80 to 85 percent. The proposed regulations, however, leave a window for changing the “individual plan” classification, if colleges can prove that the costs of compliance with this standard are “prohibitive.”

While all these changes are very positive, they fail to address a core concern of students: Under the proposed rules, colleges would apparently still be able to refuse to allow students who choose to remain on their parent’s health insurance or who are on Medicaid to use their insurance at on-campus health centers, without paying a fee for doing so. At Higher Ed Watch, we think it is absolutely scandalous that colleges require students on Medicaid to purchase separate college-sponsored health insurance plans or face higher charges.

Still, the proposed rules are a big step in the right direction. And the Obama administration still has the opportunity to improve them before the Department finalizes the regulations later this year. Higher Ed Watch will be watching as this debate unfolds.