Health Affairs

Editor’s Note: This is the latest in a series of posts by Timothy Jost on the implementation of the Affordable Care Act.  Earlier posts have analyzed some important guidances, as well as provisions governing premium review, medical loss ratios, insurance exchanges, coverage for pre-existing conditions, appeals of coverage denials, coverage for preventive services, a patient bill of rights, grandfathered plans, tax-exempt hospitals, the small employer tax credit, the Web portal, reinsurance for early retirees, and young adult coverage.

The latest proposed Affordable Care Act rule to emerge from HHS affects only a small insurance market, but one that will be of interest to many Health Affairs readers—student health insurance.  According to a 2008 Government Accountability Office report, most college students are insured through their parents’ health plans.  Even more will be covered through their parents’ plans now that coverage has been extended to age 26. Many other students are uninsured, particularly part-time or older students, or students from racial and ethnic minorities or lower-income families.  But over one million young Americans are insured through student health plans.

Most four-year public and private colleges offer student health plans.  These plans vary tremendously in their cost and benefits.  Many exclude preventive coverage, which is often available through student health services programs.  Virtually all, according to the GAO report, impose lifetime, condition-specific, or annual limits, some as low as $2500 per condition per year.  A 2010 New York Attorney General report identified per-illness caps as low as $700.  A 2009 Massachusetts investigation found that student health plans had lower medical loss ratios (69 percent), higher administrative expense ratios (20 percent), and higher profits (10 percent) than private insurance plans generally.

Student health plans have occupied a gray area in terms of regulation.  Some states regulate them as individual plans, some as association “blanket coverage” or non-employer group coverage.  Their regulatory status became even fuzzier under the Affordable Care Act.  The ACA only recognizes two types of insurance coverage—individual and group coverage.  Section 1560(c) of the ACA, however, provides that:

Nothing in this title . . . shall be construed to prohibit an institution of higher education . . .from offering a student health insurance plan, to the extent that such [plan] is otherwise permitted under applicable Federal, State or local law.

The puzzle has thus been, therefore, what the status of student health plans is under the ACA and which of its requirements, if any, apply to student health plans.

Some student health plans have taken the position that the ACA does not apply to them at all.  The ACA only applies to insurance coverage that was subject to the Health Insurance Portability and Accountability Act, and HIPAA does not apply to “short-term, limited duration coverage.”  This exception was meant to apply to insurance purchased to cover brief gaps between longer-term coverage, but the term is defined in the federal regulations to include any non-renewable coverage of less than one year’s duration.  Some student plans were explicitly written to cover a minute less than one full year to slip within this exception, but student coverage is usually renewable as long as the student remains in school; thus, it never really was short-term coverage.

What The Proposed Rule Does

The proposed rule attempts to clarify how exactly the ACA applies to student plans as well as what exactly is meant by the ACA not prohibiting student health plans.  The regulations first clarify that student health plans are individual health insurance and not short-term limited duration coverage.  Under the rule, however, student plans are a new special category of individual coverage to which particular rules apply.

The proposed rule defines student insurance coverage as coverage that is provided pursuant to an agreement between an institution of higher learning and an insurer to cover students and their dependents that 1) only covers students and their dependents, 2) does not condition coverage on health status, and 3) meets state law requirements.  The rule does not cover self-insured student plans.  These are, however, apparently quite rare;   most student plans are insured.  The rule also does not apply to other individual coverage that incidentally covers students, to which the general ACA rules apply.

What Parts Of The ACA Apply To Student Health Plans?

The proposed rule specifies that certain requirements of the ACA do not apply to student plans because applying these requirements would effectively prohibit student health plans.  First, the guaranteed availability and renewability requirements of HIPAA — and presumably those of the ACA once they go into effect in 2014 — do not apply to student health plans, because student plans are not available to persons who are not or are no longer students.

Second, student health plans are allowed to impose lower annual limits than other individual plans.  For plan years beginning after January 1, 2012, when the proposed rule will go into effect), nongrandfathered student health plans can impose annual limits as low as $100,000. (For most schools, this means the plan years beginning with the 2012-2013 academic year.)  However, for plan years beginning after September 23, 2012 (academic year 2013 -2014), nongrandfathered plans must meet the $2 million annual limit minimum otherwise imposed on individual health plans.  After 2014, they can have no annual limits. 

Third, administrative fees imposed by schools to cover the cost of student health services programs, which often provide preventive services, will not be considered preventive services cost-sharing, which is prohibited by the ACA. 

Student health plans must, on the other hand, comply with other ACA requirements that apply to individual coverage, including the prohibition on lifetime limits.  Presumably per-condition lifetime limits would also be banned, although this is not expressly stated and should be addressed in the final rule.  Plans cannot rescind coverage for innocent mistakes or deny or exclude coverage for students under 19 years of age because of pre-existing conditions.   They  must also include a conspicuous, 14-point bold-type notice, informing purchasers that they may not comply with all of the requirements of the health reform law, and specifically have lower annual limits than those otherwise permitted for individual plans. 

The proposed rule requests comments on whether the ACA’s provision allowing consumers to choose any available primary care provider in their plan’s network should apply to student health plans, and whether student health plans should be permitted to have medical loss ratios below the 80 percent minimum imposed generally on individual plans.  Presumably these issues will be addressed by the final regulation.   The plans will have to meet these requirements unless the regulation explicitly exempts them.   Finally, the preamble clarifies that states may continue to regulate student health plans as long as state regulations do not “prevent the application” of the ACA.

On the call introducing the proposed rule with Steven Larsen, the recently named head of the newly named Center for Consumer Information and Insurance Oversight, was Aaron Smith, the Executive Director of Young Invincibles.  Young Invincibles is emerging as an important voice for the rights of young Americans to health coverage, and has scored a major victory in bringing student health insurance firmly under the umbrella of the Affordable Care Act.

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This entry was posted on Thursday, February 10th, 2011 at 9:18 am and is filed under All Categories, Coverage, Health Law, Health Reform, Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.