As universities contemplate dropping health coverage, brokers step in to advise

Some universities that provide health insurance to their students are stopping the practice, as they say the Affordable Care Act’s minimal essential health benefits requirements have led to unsustainable cost increases. Those that remain are turning to their brokers to determine the best way to continue offering coverage to their students.

Starting with the 2012-2013 academic year, the Centers for Medicare and Medicaid Services determined the minimum essential coverage requirements of the ACA apply to student health plans, and that’s when the exodus began, says Teresa Koster, division president of Gallagher Student Health and Special Risk in Quincy, Mass.

Smaller universities in particular saw costs go up 30%-40% on such plans, Koster says. As a result, many of these universities — including nine Gallagher clients — “decided they couldn’t continue to [offer] insurance. …. They were concerned about the affordability question.”

Most recently, four of New Jersey’s 11 state public colleges and universities stopped selling health insurance to their students this past fall and all six of Washington state’s four-year colleges and universities made the change at the same time, The Associated Press reports.

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Universities are looking to brokers to help navigate the choices open to them in the aftermath. For example, Sheri Alexander, senior vice president and employee benefits division lead at Indianapolis-based Gregory & Appel, had a community college client stop offering coverage and send people to the exchanges instead. “Advisers like us have individual marketplace resources,” Alexander says. “We help our colleges with part-time or adjunct [professors]. We help those folks navigate, and that may move to the student level next.”


Meanwhile, advising schools that are maintaining student health plans has become much more consultative due to the complexity of the ACA and specific state insurance requirements, adds Koster. “It’s really daunting,” she says.

Until the mid-1990s, the business was price-driven and many of the plans had a well-deserved reputation of providing inadequate coverage to students, Koster says. Now, the minimum essential health coverage requirements mean student plans are looking more and more like those offered to university faculty, adds Bob O’Brien, a consultant in Hartford, Conn., and former head of Aetna’s university business.  He adds advisers and universities now need to make sure plan offerings not only meet the needs of students but, “more importantly, are compliant with [regulations] out there.”

These student plans, he says, now must include certain prescriptions and maternity care. “The price points just jumped significantly,” he explains. “It changes the risk profile, which drives the risk pool, which changes prices.”

Koster says there is still a real value proposition in the student health insurance market, however, since the rates can be set for a preferred demographic — students. At large private universities that have buying power, the student plans can cost up to one-third less than those on the market and meet gold or platinum level of coverages.

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Gallagher, which works with more than 400 universities across the country, has expanded its college services to work with institutions to determine if they should continue to buy coverage or explore alternative funding arrangements. While the ACA has been great for the consumer, it has led to a narrowing of the insurance market, Koster says.

Because some insurance companies that used to underwrite the college student market have exited the business post-ACA, brokers like Koster are now exploring uniting schools across the country to create a “critical mass and more of a market presence by combining similar schools to buy together,” she says. “It allows us to pool people together and standardize plans and rates.”

To date, many public and private universities in states, including New York, California and Massachusetts, have joined forces.

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