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Colleges: Split students from main individual risk pool

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Colleges and health insurance groups seem to agree that regulators ought to let health insurers keep student health insurance risk pool and the general individual health insurance risk pool separate.

Commenters have expressed that view in letters sent in response to drafts of regulations that the U.S. Department of Health and Human Services (HHS) is developing to implement the Patient Protection and Affordable Care Act of 2010 (PPACA).

In a packet of PPACA draft regulations  – ”PPACA: Health Insurance Market Rules; Rate Review” (CMS-9972-P) —  that came out in November, HHS officials asked whether the final version should let health insurers maintain separate student health insurance risk pools.

Jennifer Haubenreiser, president of the American College Health Association (AHCA), wrote to ask HHS regulators to let insurers keep the student health and regular individual health risk pools separate.

Preventing insurers from putting the low-risk, low-cost student health plans in separate pools  ”would greatly threaten the viability of these plans by rendering premium pricing cost prohibitive,” Haubenreiser wrote in the ACHA comment letter. “This would essentially diminish institutions’ ability to offer comprehensive coverage tailored to the needs of college students.”

Many colleges that sponsor health plans have submitted similar comment letters.

If PPACA takes effect on schedule and works as drafters expect, it will give individuals the ability to buy coverage on a guaranteed-issue basis starting Oct. 1, 2013. The first coverage sold under the new rules would take effect in 2014. PPACA would let plans charge older enrollees more than they charge younger enrollees, but the limit on the ratio between rates for the oldest enrollees and rates for the youngest would be 3 to 1. In many states, the ratio is now 4 to 1, or 5 to 1.

The composition of the individual market risk pool is an issue because insurers generally want the flexibility to make risk pools as small as possible, so that they can price coverage to fit actual claims risk more accurately, and consumers generally want HHS and states to make risk pools as big as possible, to reduce the likelihood that some residents in a state will pay much higher rates for coverage than other residents pay.

HHS has proposed limiting a state to splitting its market into seven or fewer rating areas, unless the state gets special permission from HHS.

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 A health insurer is supposed to put all of its non-grandfathered individual business in a state in one risk pool.

Representatives for America’s Health Insurance Plans (AHIP) have written in a comment letter that PPACA Section 1560(c) appears to give HHS the flexibility to avoid applying a PPACA provision to student health insurance plans if applying the PPACA provision would effectively eliminate student health insurance.

AHIP would like to see HHS keep student health coverage viable by continuing to let states choose whether to keep the student health and individual risk pools separate and whether to apply individual market rating rules to student health coverage, the AHIP reps said. 

“This coverage has historically been treated as a type of group coverage for rating purposes,” the AHIP reps noted.

Representatives from the American Academy of Actuaries (AAA) also wrote in support of the idea of splitting off the student health coverage risk pool.

HHS already has excluded student health plans from the new PPACA minimum medical loss ratio (MLR) program, and it already has proposed excluding student health plans from the programs that are supposed to protect health insurers from PPACA-related shifts in claims risk, the AAA reps wrote in their comment letter. 

Given how HHS has been handling student health plans up until now, “it would be inconsistent to pool student health coverage with individual coverage for rating purposes,” the AAA reps said. 

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