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Getting Real Health Insurance On Campus

When a student chooses a college, he or she often is selecting a health plan as well. And that plan may not be as good as the classes.

More than half of U.S. colleges offer a school-sponsored health insurance plan. Many require that students buy the insurance unless they submit a waiver indicating they are already covered through another plan. In some cases, even students with other coverage do not have the choice to opt out.

At first blush, it seems inappropriate for colleges to force students to carry insurance. Colleges are not in the business of selling insurance, and they are not exactly transparent about the methods and criteria they use to select the products they force-feed to a captive audience.

But it probably is safe to assume that most college administrators want to do right by their students. Those students, for the most part, are just entering adult life and have little wherewithal to arrange their own coverage.

Without the universal coverage requirement, students with pre-existing conditions would happily snap up the insurance while healthy individuals, who make up most of the population on a college campus, would be more likely to skip it. The ratio of claims to premiums would be abnormally high, forcing insurers to raise rates. Higher premiums then would make healthy students even less likely to participate and would put the plan out of reach of many who might need it.

While there may be good reasons for colleges to require students to be insured, these reasons only apply if the college’s insurance offers real coverage. Many college-sponsored plans are so flimsy as to barely qualify as insurance. Some come with benefit ceilings as low as $2,500, and many limit coverage of high-cost procedures such as chemotherapy. Other college plans are better. Students and their families should take a close look at the details.

For healthy young people, the main purpose of an insurance plan is to protect against extremely high costs that can result from a serious accident or sudden illness. Plans that don’t cover these expenses are little more than pre-paid health care vouchers that make people mistakenly think they have true insurance. Students and their parents often fail to do enough research to learn that the limitations of the coverage they’re purchasing.

In a worst-case scenario, a student who has saved or borrowed a large sum for college may instead be forced to use that money to cover medical bills, leaving nothing for tuition. Colleges doubtless want to keep such cases to a minimum.

Colleges are not the only ones providing deceptively limited insurance. Many large retail companies, including McDonald's, Home Depot, CVS, Staples and Blockbuster, offer such “mini-med,” or limited benefit, plans to hourly workers. The plans generally come with low lifetime and annual benefit caps, meaning that, after a few days in the hospital, a policyholder could find himself footing the bulk of a giant bill. "It's not really insurance the way most people think of insurance," Sabrina Corlette, a research professor at the Georgetown University Health Policy Institute told PBS. "It will help you get a strep test, things like that. But if you had a health condition or needed real care, you would find them woefully inadequate."

The Affordable Care Act that President Obama signed this year will make it harder for companies to offer this sort of limited insurance by immediately doing away with lifetime benefit caps and phasing out annual benefit caps. The act also sets a benchmark requiring plans to put at least 80 percent of premium revenue toward paying claims. Limited benefit plans receive lower premiums from each policyholder, creating a higher ratio of administrative costs per premium dollar. Effectively, the new requirements make limited benefit plans impossible.

But the companies and colleges that offer “mini-med” plans are arguing that they ought to be exempt from the requirements. The colleges say their plans should be considered “short-term limited-duration policies,” rather than regular individual or group plans, putting them beyond the reach of the regulations. Many companies that offer mini-med programs have asked the Department of Health and Human Services to waive the new law’s requirements.

The colleges and companies argue that if they are forced to improve their plans, students and low-paid workers will be unable to afford them. The stark reality is that the Affordable Care Act does little to reduce the costs of medical care. Mandating additional policy benefits does not make medical coverage affordable. For many people, the mandates would make buying coverage impossible.

This does not mean colleges should go on offering pointless medical plans. If real coverage is too expensive for students and their parents to buy, colleges should stop forcing them to buy it. Yes, students will be left without coverage, but those with limited benefit plans already lack coverage for the situations in which they will need it most. The only real difference will be that students will know they’re not covered. In some cases, that may prompt them to remain on a parent’s plan, seek out an individual plan, or just not sign up for intramural ultimate fighting.

And, sadly, in a few cases it will mean that students will end their college years with medical debt rivaling their student loans.

Real coverage costs a lot of money. It’s one thing to say that everyone ought to have it, but it’s another thing entirely to figure out how we are going to pay for it. That is something the health care reform act did not do. Insurance plans that don’t really provide insurance won’t help. Neither will a law that says it does away with such plans, but really doesn’t.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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