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Student health insurance: required reading

How Obamacare has improved students' health coverage options; PLUS 5 considerations when seeking coverage for new graduates

It’s graduation season, and time for the newest group of high school grads to take their next big step. For many of them, that will involve heading to college in the fall. And while there will be a long list of preparations to consider over the summer, health insurance deserves special attention.

Before Obamacare, coverage for students tended to be hit or miss. Eligibility to remain on a parent’s health plan was often contingent upon being enrolled in school full-time, and the cut-off age was typically 22.

University-sponsored health plans were widely available, but tended to have shockingly low benefit maximums. Individual health insurance was medically underwritten, creating a significant hurdle for students with pre-existing conditions. And even healthy students sometimes struggled to afford the premiums.

How ACA changed student health coverage

Thanks to the Affordable Care Act, a lot has changed for students’ health insurance coverage options:

  • One of the first ACA regulations to be implemented in 2010 allows young adults to stay on their parents’ health insurance plan until they turn 26. This applies regardless of whether they’re enrolled in school, and regardless of whether they’re counted as their parents’ tax dependent.
  • The ACA also made individual insurance guaranteed issue regardless of medical history, and created subsidies to make premiums affordable for low and middle-income enrollees. Eligibility to remain on a parent’s health plan or purchase student health insurance through a university does not eliminate eligibility for subsidies in the exchange.
  • The ACA called for the expansion of Medicaid, and 29 states plus Washington, DC have expanded Medicaid coverage to adults with incomes up to 138 percent of the poverty level (currently a little over $16,000 a year for a single individual). Thus Medicaid is available for many students with limited incomes, thanks to the ACA.
  • Many universities offer student health insurance plans. These plans are now regulated by the ACA, so they cover the ten essential health benefits with no annual or lifetime benefit maximums. (Note that not all plans marketed to students are considered “student health plans” in the eyes of the law. For example, a short-term policy that’s advertised as “perfect for students” wouldn’t have to be ACA-compliant.)

University-sponsored student health plans were given some leeway in terms of compliance: they didn’t have to begin meeting the ACA’s medical loss ratio (MLR) requirements until 2013, and their annual benefit limits were allowed to be much lower than plans in the individual market until the end of 2013. But since January 1, 2014, new student health plans have been required to cover the essential health benefits with no dollar limits on annual or lifetime benefits.

Low annual and lifetime benefit maximums used to be standard on student health plans. That typically worked out, because most students are young and healthy. But it sometimes resulted in disastrous outcomes, as we saw in the highly-publicized and tragic death of Arijit Guha, an Arizona State University student whose cancer treatment maxed out his student health plan.

While the new, reformed student health plans offered by universities are dramatically better than they were in the past, it’s also true that the new plans cost more than the old ones. Prior to the ACA, some student health plans had benefit caps as low as $5,000, but only cost a few hundred dollars a year in premiums. Given the cost of healthcare, those plans were not functioning as real insurance, but rather as pre-paid health plans for relatively minor ailments.

And yet, they provided a modicum of security for students, and were very inexpensive. The inevitable result of making the plans much more robust is that their premiums are now in line with the rest of the insurance market. As a result, some schools have opted to direct students to the exchange rather than offer student health insurance.

The upside of course, is that subsidies are available in the exchanges for students who qualify based on income, and for eligible enrollees, subsidies cover a large portion of premium costs.

5 coverage considerations

Clearly, students have a lot more coverage options as a result of the ACA. But how do you decide which option is best?

Is a parent’s plan more affordable?

If the parents’ group health insurance plan includes additional children, the payroll-deducted premium is likely the “family” rate, and it won’t go down if one child is removed from the plan. In that case, staying on a parent’s plan might be the best alternative, since there would be additional premiums associated with a university-sponsored plan or coverage purchased in the individual market.

Studying out of state?

If the student will attend college in another state, network restrictions on the family plan could result in little or no access to healthcare where the student will be living. In that case, it probably makes more sense to get a new health plan – either in the exchange or through the university – that includes providers in the area where the student will be living.

Eligibility for exchange subsidies

If the student is a dependent on the parents’ tax return, the parents’ income is included when the subsidy eligibility determination is made. But students who file their own taxes may qualify for significant subsidies if they’re on a limited income. Or they may qualify for Medicaid if they’re in a state that has expanded Medicaid.

Maternity care

The ACA allows young adults to remain on their parents’ health plan until they turn 26, and group plans with at least 15 workers have covered maternity care since the 1970s. But there is no requirement that those plans cover maternity care for dependents.

HHS clarified earlier this month that dependents must have access to preventive prenatal care with no cost-sharing, but young adults who remain on a parent’s plan may not have coverage for labor and delivery. If this is a concern, students can purchase individual coverage (on or off the exchange) or obtain student insurance through the university, as both of those options include maternity benefits.

Studying abroad?

Most health insurance plans generally don’t cover foreign travel. (Emergency care is often covered, although patient and insurer definitions of “emergency” aren’t always the same, and medical evacuations are rarely covered.)

But there are a plethora of travel health insurance plans available, many of which cater specifically to students. Travel plans are not regulated by the ACA, but they provide a good supplement to students’ U.S.-based health insurance during the time spent abroad.

Whether you’re heading off to college yourself, or sending your child out into the world, rest assured that there will be a health insurance plan that’s just the right fit.