The health insurance industry should avoid getting into direct fights with seriously ill college kids.
The topic came up in March, when an arm of the U.S. Department of Health and Human Services issued a final rule on how the Patient Protection and Affordable Care Act of 2010 (PPACA) will apply to the student health plans at colleges and universities.
PPACA is phasing out annual benefits limits and lifetime benefits limits. The PPACA minimum medical loss ratio (MLR) provision requires large group plans to spend 85% of revenue on health care and quality improvement efforts, and individual and small group plans to spend 80% of revenue on care and quality.
The law is clearly a poor fit for college students, who often have little money to pay premiums, rarely come down with any condition more serious than mono, and may be able to go to a free or cheap clinic for routine care, anyway. Annual premiums for typical student coverage might be about one-third the cost of comparable employer-sponsored coverage.
At one point in the preamble to the final rule, HHS officials note (maybe, in ever-so-official language, whine) that there’s nothing they can do about the PPACA statutory language. The law is the law.
Their way of giving student health plans a little relief was to let the plans multiply their claims expenses by 1.15 in 2013 to meet the MLR requirements and to let the plans cap annual benefit limits at $500,000 up until 2014.
During the 2009-2010 school year, 57% of student health plans had annual benefit limits, according to America’s Health Insurance Plans, Washington.
MLRs at the plans tend to run from 18% to 30%, even though the administrative costs tend to be relatively low, simply because the premiums are also low. One Washington state university, for example, says its insurance for a single student costs less than $1,600 per year for a plan with a maximum benefit of $100,000 for each sickness or injury.
The text of PPACA states that PPACA is not meant to interfere with the ability of colleges and universities to offer health plans, and AHIP warned that imposing the kinds of rules that HHS included in the final rule could prevent some schools from offering student health coverage.