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by Tony Novak, CPA, MBA, MT August 26, 2012
Students returning to campus this fall may find an unpleasant surprise when they enroll in their schools student health insurance plan. Rates have increased dramatically. While health insurance rates have increased everywhere for almost everyone in the U.S., student insurance rates are rising at a much faster pace. Forbes reports that some student health plans have increased more than ten-fold since the passage of Obamacare and The Wall Street Journal reports that this has even caused some colleges to drop their student health plans for 2012-2013.
In 2006 Freedom Benefits published a survey indicating that the average rate of student health insurance was about $55 per month. Over the past seven years the rate has grown to more than $150. Although we have limited data on 2012-2013 plans, it appears that most plans have tripled in price over the past decade. The University of California Berkeley Visiting Scholar Benefit Plan increased its rate from $109 per month in the 2011-2012 school year to $145 per month for the 2012-2013 school year. This 33% annual rate increase is much higher than the 10% threshold established by the health insurance reform law. Yet the California Department of Insurance does not currently have the authority to intervene because this insurance is outside of the state's normal rate review process. New York University also had a 33% rate increase, according to Crain's New York Business.
Students elsewhere find more of the same story. Penn State's student health plan through Aetna is now $178 per month for the current school year. Other schools that we spot-checked showed a similar pattern of sharp increase in rates for the year ahead.
We have previously written that universities are partly responsible for the increased cost. Over the past few years a growing number of U.S. colleges and universities have added specific insurance requirements in advance of the national "individual mandate that requires everyone to have insurance by 2014. A 2010 federal law allows most students to remain on parent's health insurance plans but these policies often do not meet tougher university standards. For example, the typical deductible on an employer-provided parents' family policy is about $5,000 per year. Universities may require insurance with a deductible as low as $250. Students are sometimes forced to buy additional and often overlapping insurance simply to meet the university's requirement.
Freedom Benefits noticed and reported on two distinct consumer reactions to the changes in student health insurance. First, students who shop for their own coverage gravitate to the cheapest coverage that provided the lowest level of protection. Second, parents with high deductible insurance are more likely to purchase a supplemental insurance like Core Health Plans for their student who moved away from home. This second trend seems driven by the intent to allow the student to access medical care independently without the need to worry about not having money for a deductible or co-payment. We were also surprised to see a growth in dental insurance for students even through the recent years of recession that stalled enrollment in other supplemental health insurance. Insurance professionals are more likely to recommend a supplemental accident insurance or emergency visit insurance for families with high deductible insurance.
Two large insurance companies - Aetna and UnitedHealthcare - issue the bulk of U.S. university-sponsored student insurance. In recent years, the trend has been to ask the university to set specific insurance benefit requirements that are designed into the plan these carriers wish to sell but is not available in less expensive policies in the commercial market. Armed with the tougher new benefit requirement, these university-endorsed create an effective monopoly on their student's insurance. Since the university sets the specific insurance requirements and then shares in the revenue from the sale of the insurance that meets that requirement, there is a clear conflict of interest. Aetna and UnitedHealthcare have made announcements that they anticipate specialty insurance like student health plans to be more profitable than regular major medical insurance.
Insurers tend to blame healthcare reform laws and the university's requirements for the high rate increases. Yet it is clear that by eliminating price competition and designing student plans that bypass cost-saving features used elsewhere, the policies are designed to increase more rapidly in cost.
One student health insurance marketer with UnitedHealthcare commented that rates increase simply because students are not in a position to resist. Health insurance is only a small part of the total cost of attending college. Costs are typically rolled into an overall college budget that may be paid by parents or student loans. Student insurance rates are still lower than rates for the U.S. population overall.
Some lawmakers including West Virginia Senator Jay Rockefeller has been critical of student insurance and would prefer to see them banned. Other lawmakers in California and elsewhere have begun considering the issue of universities selling health insurance. Freedom Benefits has joined in the recent interest by some U.S. legislators to remove universities from the conflict of interest created by setting specific insurance requirements and then participating in the sponsorship, sale and revenue sharing of health insurance sold to students. It appears that universities have no motivation to change their current procedures.
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Opinions expressed are the sole responsibility of the author and do not necessarily represent the opinion of Freedom Benefits Association or any other person, company or entity mentioned. Tony Novak operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator" is not an agent, broker, producer or navigator for any federal, state or commercial health insurance exchange but may be compensated as an accountant, adviser, consultant, reviewer, endorser or referrer to any firm or product named. Information is from sources believed to be true but cannot be guaranteed.
This web site is independently owned and managed by Tony Novak operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator". Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not an agent, broker, producer or navigator for any federal or state health insurance exchange but may provide uncompensated advice, reviews and referrals to these official resources. Novak is compensated as an accountant, adviser, affiliate consultant, marketer, reviewer, endorser, producer, lead generator or referrer to some of the other commercial companies listed on this site. Information is from sources believed to be reliable but cannot be guaranteed.