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Colleges wary of student health coverage

Schools drop subsidies due to reform law rules

Colleges wary of student health coverage

The University of Missouri's decision to discontinue, and then quickly reinstate, health insurance subsidies for graduate students brought national attention to the lack of clarity in regulators' application of rules for colleges and universities.

Several schools have stopped offering health insurance to undergraduates — some due to minimum coverage requirements under the Patient Protection and Affordable Care Act and others because of religious objections to the mandate in the health care reform law to provide cost-free prescription contraceptive coverage.

At the University of Missouri, administrators said their August decision was based on informal IRS guidance classifying graduate teaching and research assistants as employees, meaning the university could have been fined up to $36,500 per student per year for subsidizing individual-market health insurance, which includes school-sponsored plans.

The university reversed itself a week later, telling graduate students it would “defer implementation” of its decision while a task force develops a longer-term solution.

“Most of the schools at this point are waiting to see what the IRS' final ruling will be before decisions are made,” said Karen Kline, manager of student health insurance at Pennsylvania State University in State College, Pennsylvania, and chairwoman of the American College Health Association's Student Health Insurance/Benefit Plans Coalition. “We're trying to get them to understand that these are students, not employees.”

Colleges and education lobbyists have been pushing the IRS and Congress to allow schools to continue subsidizing health coverage for graduate teaching and research assistants, many of whom are older than 26 and no longer eligible for coverage under their parents' health insurance plans.

“We think that this informal guidance is based on a misperception of the law,” Barbara Carroll, associate vice chancellor of human resources at North Carolina State University in Raleigh, told a joint congressional committee in June. “Without clarification, however, the informal guidance is causing great concern on campuses, because it interferes with longstanding practice intended to enhance access to higher education and lower the cost of graduate education.”

A bill introduced in the U.S. House in January that would exclude student workers, including graduate assistants, from being counted as full-time school employees is awaiting a hearing by the House Ways and Means Committee.

“I'm not sure where we're going to land on this one,” Ms. Kline said. “The financial impact on colleges and universities that subsidize health care for their graduate assistants is going to be very serious if this rule doesn't change.”

Also in August, administrators at Western Michigan University in Kalamazoo, said the school would no longer offer health insurance, underwritten by Aetna Inc., for U.S. students.

In a statement, the university said it decided to end the plan “in response to a changing health insurance environment and to meet student requests for affordable coverage.”

Four state colleges and universities in Idaho told their students in March that domestic undergraduate health plans no longer would be available for the 2015-16 school year after the State Board of Education struck a rule requiring state schools to offer the coverage, administrators at Idaho State University said in a notice to students and parents.

Similar situations unfolded in Washington and New Jersey in 2014, both of which no longer require public colleges and universities to offer student health plans.

“The problem is that over the last few years, that coverage went from about $150 per year (per student) to about $1,500 per year, and was becoming a greater percentage of the students' annual costs,” said Stephen Bolyai, vice president of administration and finance at William Paterson University in Wayne, one of four New Jersey public colleges that discontinued student health plans last year.

“We also learned that more than 50% of our students had health insurance anyway, mostly through their parents,” he said.

Several religiously affiliated colleges and universities also have terminated their student health plans. Wheaton College told students in July that the Wheaton, Illinois, school's health plan would be terminated for the 2015-16 year, after a federal appeals court denied the college's request for a temporary exemption from the contraceptive mandate.

“As we have shared previously, the college's concern is with its own actions in facilitating the provision of morally objectionable products on its own plans and with its right to constitutionally protected religious liberty,” college administrators said in a notice to students.

Experts say the erosion of student health insurance has been mostly limited to small and medium-size colleges and universities.

“Certainly some schools have decided that it's better for them to leave the market, but bigger schools are finding that the need for these plans is still there,” Ms. Kline said. “You still have a lot of young people who are uninsured or face really high deductibles under their parents' health plan.”