NY AG: Health Insurers Offering Expensive, Inferior Coverage to College Students

Health insurance plans that colleges, universities, and trade schools endorse or mandate for students cost too much for the coverage provided, and are running afoul of federal protections recently signed into law, according to a report released today by the New York Attorney General's Office.

"Many of the sponsored healthcare plans looked at during our investigation leave students at risk while providing massive profits for insurance companies," Attorney General Andrew M. Cuomo said in a media release. "It is important for students to have adequate healthcare coverage to protect themselves during times of illness or injury, but a bad health insurance plan can have catastrophic and long-lasting effects on a young person's life."

In a letter to more than 300 colleges, universities, professional schools, and trade schools, Cuomo urged schools to review their student health insurance plans and fix problems that add needless costs and put students at risk. The letter was sent to schools in New York and about 30 out-of-state schools nationwide that are attended by New York residents.

Cuomo's letter also noted that students who purchase insurance are a generally healthy population, so schools can bargain with health plans to provide sufficient, fairly-priced coverage.

"By being informed of the problematic practices that currently exist in the industry, schools can negotiate for better health plans, and students and their families can be better equipped to select the coverage that is best for them," Cuomo said.

The AGs report said that the school-sponsored student health insurance industry generates more than $1 billion in revenue each year, and provides coverage for about one million college students nationwide. The students pay annual premiums that can range from $100 to more than $2,500.

More than two-thirds of private colleges and universities and almost one-quarter of public colleges and universities require their students to either purchase the school-sponsored plan or have their own "comparable" health insurance.

The AG's report found that many school-sponsored student health plans have limits and exclusions that put students and their families at risk of facing catastrophic costs for medical care. Some plans have exclusions for pre-existing conditions, leaving many students with such conditions completely uncovered for any related treatments.

Some plans require students with pre-existing conditions that are not covered to purchase the plan at its full price. Many plans also have extremely low coverage limits. For example, some plans cap all coverage at less than $25,000, while others have per-illness caps of as low as $700. Additionally, many plans either fail to include prescription drug coverage or limit such coverage to an inadequate level.

In addition to providing limited coverage, the AG's investigation found that many school-sponsored plans are unnecessarily costly. In many cases, the amount of claims paid out by the insurance company is only a fraction of the premiums students pay, resulting in excessive profits for the insurance companies, according to the AG.

Cuomo's office issued subpoenas to some of the nation's largest insurers of students, including Aetna Inc.; UnitedHealthcare Insurance Co.; Gerber Life Insurance Co.; Markel Insurance Co.; Beech Street Corp.; United States Fire Insurance Co.; Combined Life Insurance Co. of New York; National Union Fire Insurance Co. of Pittsburgh, PA; Security Mutual Life Insurance Co. of NY; and Commercial Travelers Mutual Insurance Co..

In response, UnitedHealthcare said, "We continually strive to improve access to quality, effective health care for all Americans, including students.  We have been actively working with the New York Attorney General on this issue and remain committed to providing colleges and universities with affordable coverage that gives students meaningful access to healthcare services."

Robert Zirkelbach, spokesman for America's Health Insurance Plans, says college health plans aren't like the regular commercial market.

"First of all, colleges and universities have a great deal of flexibility in determining the type of insurance they are going to offer students," he says. "These are highly customized to meet the unique and varying needs of colleges and are oftentimes designed to compliment existing health resources on campuses such as health clinics. The insurance is supplementing what is already being provided to students."

Zirkelbach says premiums for student coverage are "quite affordable," especially considering the cost structure associated with the coverage.

"There is a lot of turnover, they are highly customized, and they have higher structural costs than other insurance products," he says.

The AG also issued subpoenas to insurance brokers, agents, and consultants, including University Health Plans, Inc.; Niagara National Inc.; Haylor, Freyer & Coon, Inc.; The Bailey Agencies; and Mercer Health & Benefits LLC.

James C. Turner, MD, president of the American College Health Association, says he isn't surprised by the AG's findings, because his organization has been pointing out the shortcomings of many college health insurance plans for years.

Turner, an internist who is also the director of the Department of Student Health at the University of Virginia, said the AG's letter to college presidents borrows heavily from the ACHA's recommendations that were issued in 2008.