Why are Student Health Insurance Plans Treated Differently Under the Affordable Care Act?

President Obama signed the Patient Protection and Affordable Care Act (“PPACA” or, more commonly, “Obamacare”) into law by on March 23, 2010.[1] Several provisions of this act, including the individual mandate and Medicaid expansion, were hotly debated[2] and litigated, resulting in a 5-4 Supreme Court decision upholding their constitutionality.[3] In the midst of this debate, the PPACA’s handling of student health insurance plans has gone almost completely unnoticed. This comment will analyze why student health insurance plans are unique and why Congress correctly singled them out for special treatment.

The PPACA mentions student health plans in a single sentence under the section heading “Rules of Construction.”[4] The provision states,

Nothing in this title (or an amendment made by this title) shall be construed to prohibit an institution of higher education (as such term is defined for purposes of the Higher Education Act of 1965) from offering a student health insurance plan, to the extent that such requirement is otherwise permitted under applicable Federal, State or local law.[5]

Student health insurance programs are the only class of health insurance programs that are exempted in the PPACA. The other three subsections under “Rules of Construction” establish that the PPACA does not supersede any of the antitrust laws,[6] does not modify or limit Hawaii’s Prepaid Health Care Act,[7] and does not modify any existing Federal requirements concerning the State agency responsible for determining program eligibility.[8] A search of the legislative history of the PPACA reveals no mention of this provision. No other statutes in the United States Code mention student health services. So why does the PPACA single out student health insurance programs?

In 2008, the Government Accountability Office (GAO) found that 80% of college students aged 18 through 23 had health insurance.[9] Among those, 7% of students (roughly half a million) were insured through “individual market and other group market plans, including student insurance plans.”[10] Over half of all colleges offer health insurance plans to their students.[11] Student insurance plans are highly tailored to the special populations they serve: college students tend to be young, healthy, low frequency users of healthcare, and tend to pay the entire cost of their insurance premiums.[12] Many colleges choose to set policy limits low and not to cover preventive services in order to keep premiums low.[13] However, there is a great deal of variability amongst student health insurance plans, with annual premiums ranging from $30 to $2,400.[14]

College students currently have five options when choosing health insurance. First, they can remain uninsured, which is an attractive option for a population that is young, healthy, struggling to stretch their student loans, and unlikely to need medical care. This is exactly the “moral hazard” that the individual mandate of the PPACA was enacted to avoid.[15] Additionally, this option leaves students open to devastating consequences in the event of a medical emergency or unexpected illness. Second, some student may have the option of remaining insured under their parents’ health insurance plan.[16] Prior to 2011, the age of dependency varied depending on the policy and the state in which it was effective, leaving some college students uncovered.[17] The PPACA changes this to mandated coverage of unmarried dependents until they reach 26, which allows an larger number of college students to remain covered under their parents’ plan.[18] Furthermore, this type of coverage is only available to students whose parents have health insurance, which becomes less likely the lower the parents’ income.[19] Third, some students may qualify for coverage under COBRA, but such coverage is typically prohibitively expensive.[20] Fourth, students may opt to purchase individual health insurance, which again is typically very expensive.[21] Finally, students can opt into the student health insurance plan offered by their school.[22]

On March 21, 2012, the Department of Health and Human Services published its regulation regarding the administration of § 1560(c) of the PPACA.[23] This regulation defines student health insurance as a type of individual health coverage that is provided by a health insurance issuer through an institution of higher education, and is available only to current students and their dependents.[24] Such insurance policies are prohibited from refusing health insurance coverage based on pre-existing conditions.[25] The regulation also exempts student health insurance plans from the guaranteed availability and guaranteed renewability provisions of the PPACA and sets a different schedule for compliance with the annual limits provisions of the PPACA.[26] The regulation also explains that student administrative health fees are not to be considered cost-sharing requirements under the PPACA with respect to student administrative health fees.[27] Finally, the regulation requires notice to policyholders that their policy is exempted from the above provisions of the PPACA.[28]

Because of their unique role in the delivery of healthcare services, and the unique nature of the population from which their policyholders are drawn, student health insurance programs differ from other types of health insurance. If these insurance programs were subject to the PPACA, especially the community rating[29] and annual limits provisions,[30] their costs would rise so precipitously that most colleges that currently provide them would be unable to continue to do so.[31] Congress recognized this problem when it enacted § 1560(c) of the PPACA, and the Department of Health and Human Services has responded by clarifying how and when the PPACA applies to student health insurance policies. Hopefully this will allow colleges and universities to continue to offer health insurance to their students, many of whom would otherwise have to go without coverage.

Michael Casner is an Executive Editor on MJEAL.  He can be reached at mcasner@umich.edu


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[1] Patient Protection and Affordable Care Act, PL 111-148 (March 23, 2010) (hereinafter “PPACA”).

[2] See, e.g., Carol D. Leonnig, Stark Divide on Effects of Health-Care Law, Wash. Post, Feb. 27, 2012, at A02; Susan Saulny, Few Minds Are Changed By Arguments in Court, N.Y. Times, Mar. 29, 2012, at A16; The Individual Mandate’s Growth in Unpopularity, Nat’l Pub. Radio Weekend All Things Considered, Mar. 31, 2012.

[3] National Federation of Independent Business v. Sebelius, 132 U.S. 2566 (2012).

[4] PPACA § 1560.

[5] PPACA § 1560(c).

[6] PPACA § 1560(a).

[7] PPACA § 1560(b).

[8] PPACA § 1560(d).

[9] General Accountability Office, Most College Students Are Covered through Employer-Sponsored Plans, and Some Colleges and States Are Taking Steps to Increase Coverage. GAO-08-389 at p. 10 (March 2008).

[10] Id.

[11] Id. at p. 17.

[12] Id. at p. 20.

[13] Id.

[14] Id.

[15] See, Thomas L. Greaney, The Affordable Care Act and Competition Policy: Antidote or Placebo?, 89 Or. L. Rev. 811 (2011).

[16] Kelly L. Wright, College Students Be Aware: Problems and Pitfalls in Student Health Insurance. 7 U. Miami Bus. Rev. 531, 534 (1999).

[17] Id.

[18] PPACA § 2714(a).

[19] GAO-08-389 at p. 12.

[20] Wright, supra n. 14 at 538.

[21] Id. at 539.

[22] Id. at 535.

[23] Student health insurance coverage. 45 C.F.R. § 147.145 (March 21, 2012).

[24] 45 C.F.R. § 147.145(a).

[25] 45 C.F.R. § 147.145(a)(1).

[26] 45 C.F.R. § 147.145(b).

[27] 45 C.F.R. § 147.145(c).

[28] 45 C.F.R. § 147.145(d).

[29] Community rating is a “rule that prevents health insurers from varying premiums within a geographic area based on age, gender, health status or other factors.” U.S. Dep’t of Health and Human Servs., www.healthcare.gov/glossary/c/community.html (last visited Feb. 27, 2013).

[30] Annual limits are “cap[s] on the benefits your insurance company will pay in a year while you’re enrolled in a particular health insurance plan.” U.S. Dep’t of Health and Human Servs., www.healthcare.gov/glossary/c/annuallimit.html (last visited Feb. 27, 2013).

[31] 77 F.R. 776701 at *7771.