College-sponsored health insurance plans charge excessive premiums, provide low coverage limits and impose inappropriate exclusions, according to an investigation revealed today by the New York Attorney General’s office.
In fact, some of the exclusions are inconsistent with federal consumer protections contained in the recently enacted healthcare reform law, state Attorney General Andrew Cuomo says.
At the same time he disclosed the probe’s findings, state Attorney General Andrew Cuomo announced that he has subpoenaed the records of the 10 largest insurers of students in the nation as well as those of five large brokers, agents and consultants.
He says that was done because the investigation found “troubling and conflicted relationships” between agents and health insurers.
These involved undisclosed contracts that created incentives for the agents to work against the best interests of students and to persuade schools to take and maintain overly costly plans, Cuomo says.
He says the investigation also found that, in addition to providing limited coverage, many school-sponsored plans are unnecessarily costly.
“In many cases, the amount of claims paid out by the insurance company is only a fraction of the premiums students pay, resulting in excessive profits for the insurance companies,” Cuomo says.
Cuomo also says he has sent a letter to more than to more than 300 colleges, universities, professional schools, and trade schools.
In the letter, Cuomo writes he advised them to review their sponsored student health insurance plans and alter potential problems that add gratuitous expenses and put students at risk. The letter was sent to schools across New York and to certain out-of-state institutions attended by New York residents.
He says the investigation, a spinoff of a probe of the student lending industry he launched in 2007, found that many colleges and universities require students to purchase a school-endorsed, private health insurance plan unless students prove that they have comparable insurance coverage.
“Many of the sponsored health care plans looked at during our investigation leave students at risk while providing massive profits for insurance companies,” Cuomo says.
“It is important for students to have adequate health care coverage to protect themselves during times of illness or injury, but a bad health insurance plan can have catastrophic and long-lasting effects on a young person’s life,” he says.
“By being informed of the problematic practices that currently exist in the industry, schools can negotiate for better health plans, and students and their families can be better equipped to select the coverage that is best for them,” he adds.
He estimates that the school-sponsored student health insurance industry generates over $1 billion of revenue per year. Approximately 1,000,000 college students obtain their health insurance through school-sponsored plans nationwide, he says.
He also says that the probe is ongoing.
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, says that it “must be kept in mind that colleges have a lot of flexibility in the type of coverage they can offer to students. Often, these plans are designed to complement existing services, such as onsite health clinics. They are highly customized insurance designed to meet the unique and varying needs of schools.”
Zirkelbach also notes that some costs may stem from the “high turnover” and “volatility” in the products.
The insurance companies whose records were subpoenaed include those of Aetna Inc.; United Healthcare Insurance Company; Gerber Life Insurance Company; Markel Insurance Company; Beech Street Corporation; U.S. Fire Insurance Company; Combined Life Insurance Company of New York; National Union Fire Insurance Company of Pittsburgh, Pa.; Security Mutual Life Insurance Company of New York; and Commercial Travelers Mutual Insurance Company.
Also subpoenaed were the records of: University Health Plans, Inc., a broker; Niagara National Inc., an agent; Haylor, Freyer & Coon, Inc., an agent; the Bailey Agencies, an agent; and Mercer Health & Benefits LLC, a consultant.