Talk about bad timing: The same day that Independence Blue Cross in Philadelphia announced the launch of a new student preferred provider organization (PPO) plan designed to fit the lifestyle of college students in southeastern Pennsylvania (complete with a 24/7 nurse helpline, a student health website, healthy-living discounts and case management for students with complex conditions), the office of New York State Attorney General Andrew Cuomo accused the $1 billion school-sponsored student health insurance industry of raking in "massive profits" while leaving students and their families "at risk of facing catastrophic costs for medical care" due to limitations and exclusions. Insurers and universities generally defended the sponsored plans in the wake of these allegations, according to the New York Times. However, the news could inflame college students and their families now that the Patient Protection and Affordable Care Act will allow children to remain on their parents' policies through age 26.
Colleges and universities often require students to buy school-endorsed private health insurance if they can't prove they already have comparable coverage. However, exclusions for pre-existing conditions leave many students totally without coverage for treatments for those conditions, according to the AG's investigation. Further, some plans require students with uncovered, pre-existing conditions to pay the full purchase price for their partial coverage. Extremely low coverage limits are also a problem. For example, some plans cap all coverage at less than $25,000; others set per-illness caps as low as $700. Also, many plans either don't include prescription drug coverage or set inadequate coverage limits.
The AG's office charges that many school plans are too costly, noting that the claims paid out by insurers represent "a fraction" of student premiums. In addition, health insurers have set up "undisclosed contracts" that give agents an incentive "to work against the best interests of students and to persuade schools to take and maintain overly costly plans."
Cuomo sent a letter to more than 300 institutions of higher learning in New York and other states cautioning them to weed out unfair plans. Cuomo recommended that schools take the following steps: contract with plans that offer adequate medical and prescription drug coverage with no annual, lifetime, per-illness or per-injury caps; maintain an appropriate target loss ratio, preferably 85 percent or higher; set rules for working with insurance brokers, agents and consultants to limit conflicts of interest, including paying for services on a fee basis instead of commission; prohibit school employees from accepting payment or gifts from insurers or their intermediaries; clearly tell students about mandatory coverage requirements and costs; and not use plans that exclude coverage for pre-existing conditions or preventive care.
As part of this ongoing investigation, the New York AG's office has subpoenaed 10 of the largest student health insurers and five insurance brokers, agents and consultants. Insurers that have been subpoenaed include: Aetna Inc.; United HealthCare Insurance Company; Gerber Life Insurance Company; Markel Insurance Company; Beech Street Corporation (PPO); United States Fire Insurance Company; Combined Life Insurance Company of New York; National Union Fire Insurance Company of Pittsburgh PA; Security Mutual Life Insurance Company of NY; and Commercial Travelers Mutual Insurance Company.
For more information about the N.Y. AG's investigation:
- read this New York Times article
- read the AG's press release
- read the AG's letter to universities
To learn about the new student PPO in Pennsylvania:
- read the Independence Blue Cross press release