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by Tony Novak, CPA, MBA, MT, December 23, 2009
The Boston Globe reported that Stephen McCabe, Massachusetts' interim commissioner of the Division of Health Care Finance and Policy is considering increasing the health insurance requirements of students who attend it's colleges and universities. The effort is apparently supported by Governor Patrick's administration. If the effort is successful, students can expect health insurance costs to rise by thousands of dollars per year. Some students who manage costs through college loans fear the increase could make collage unaffordable. On the other side, adults who are forced to pay much higher rates feel that the price break offered to students is unfair.
Right now the state's commercial student insurance is primarily issued by Aetna and Nationwide Insurance. For a premium of less than $1,000 per student per year, these companies team up with colleges and universities to coordinate insurance enrollment with the school's registration process. Enrollment is automatic unless the student opts out and shows proof of other coverage. The coverage is adequate for the majority of students but in rare situations a student's medical expenses exceed the maximum benefits of the policy. Students are eligible to purchase higher levels of insurance but most do not. Freedom Benefits insurance exchange currently offers four supplemental insurance policies that may be added to Massachusetts basic major medical insurance. Other more affordable policies are available to foreign students attending MA schools that may be used to replace and upgrade the standard student health insurance plan. Because students generally have lower overall medical costs than older adults, the total combined price of these policies is significantly lower than the cost standard health insurance plans in Massachusetts.
Public comment has been largely critical of the proposed change. All 14 editorials posted in the Globe's comment section in response to recent coverage of this proposal indicated that the government's proposal is unlikely to adequately address the real concern. Many several readers pointed out that health care costs, rather than the design of the insurance plan, are the real problem. One editorial accurately pointed out that the state's actuarial analysis of these students plans is based on flawed logic. Lower priced insurance always has higher overhead and problems than other insurance when measured as a percentage of premium simply because of its lower cost. This measurement should not be used to compare the value of low cost insurance to more expensive policies.
In most states college students either remain on their parents' policy or purchase one of these low cost commercial policies. Massachusetts is the only state that currently requires all residents to have health insurance.
Freedom Benefits believes, as always, that governments should focus consumer protection on education and disclosure efforts but allow consumers to choose their own level of coverage. The Commissioner should abandon this plan to further regulate college students' insurance coverage. We also think that growing public criticism of Massachusetts' experiment to control the Commonwealth's health insurance market may actually boomerang to provide real life evidence against further health insurance reforms on a national level.
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