Colleges getting out of health insurance business

The federal health care overhaul is leading some colleges and universities to get out of the health insurance business.

Experts are divided on whether this change will be good or bad for students. Some call it an inevitable result of health care reform and a money-saver for students since insurance in the marketplace is usually cheaper than the college plans. Others worry that more students will go without health insurance since their premiums won't be folded into the lump sum they pay for school, and they say college health plans offer more coverage for the money than other options.

The main driver of colleges getting out of the insurance business is a provision in the Affordable Care Act that prevents students from using premium tax subsidies to purchase insurance from their college or university, according to Steven M. Bloom, director of federal relations for the American Council on Education, a Washington, D.C., group representing the presidents of U.S. colleges and universities.

Add to that the provision that allows young people to stay on their parent's health insurance plans until age 26, plus the expansion of Medicaid in some states and the rising cost of student insurance. The result is cheaper health insurance available for students off campus.

But Bloom worries more schools will decide to drop insurance coverage.

"I've heard of instances where schools are thinking about it, but they are reluctant, particularly in instances where states declined to expand Medicaid," Bloom said.

An administrator who managed the process of dropping student health insurance at William Patterson University in Wayne, New Jersey, said he originally worried about vulnerable students not getting health insurance, but changed his mind after doing more research.

"I actually went into the exchange myself and did a bunch of 'what ifs' to see if this was actually a better deal for them. In many cases it is," said Stephen Bolyai, the school's vice president for administration and finance.

The change in New Jersey began with advocacy by community college leaders, who said health insurance was getting so expensive students couldn't afford it, Bolyai said.

Richard Simpson, who is the student health insurance manager at the University of Wisconsin-Madison, contends, however, that student health plans are a better deal for students.

College plans give students more coverage for their money, they usually have lower deductibles, and they are more flexible than some state plans bought on the exchange, said Simpson, who is also chair of the student health insurance coalition for the American College Health Association, an association of college health officers based in Hanover, Maryland.

"Student plans provide 'gold' or 'platinum' level coverage at a 'bronze' price," Simpson said. "We believe that in the vast majority of cases, student insurance is the best option."

As more states expand Medicaid eligibility — as a number of states are now debating — it's likely more colleges will push their students into the marketplace – a development being seen from coast to coast.

Four of New Jersey's 11 state public colleges and universities stopped selling health insurance to their students this past fall: Richard Stockton College, William Paterson University, Ramapo College and New Jersey City University, all four-year schools.

Meanwhile, three of Washington state's six four-year colleges and universities made the change at the same time: the University of Washington, Washington State University and The Evergreen State College.

In some states, student plans are still cheaper than individual plans that can be purchased through the exchanges. And students who work part-time and are not on their parents' insurance often can get covered for free in states that expanded eligibility for Medicaid.

Levi Huddleson, a telecommunications major at Ball State University in Muncie, Indiana, has not had health insurance since 2012. He looked into buying student health insurance, but found it would cost more than he could afford on the $6,200 he makes annually working part-time.

Huddleson said his parents are retired and cannot afford to pay for his health insurance, his tuition or other bills. If Indiana had expanded access to Medicaid, he would likely be eligible for free health insurance. He currently makes too much money for Medicaid but too little to afford the $166 a month premium he found by searching the federal exchange.

"I cannot afford it, so it is definitely not by choice," Huddleson said about his decision not to buy health insurance. "I considered buying it, but just taking the hit and paying the penalty was significantly cheaper than either option. Luckily, I'm young, and I don't have any serious pre-existing conditions."