Delayed Release Of Student Health Plan Rule Scrambles Financial Aid Calculations

The federal government is behind schedule in releasing new rules for college student health plans, creating uncertainty over the price of policies and calculations of financial aid, according to higher education groups and insurers.

Seven groups, including the American Council on Education, urged Health and Human Services Secretary Kathleen Sebelius in a letter March 2 to “immediately issue the final version of these regulations or announce that implementation of the regulations will be delayed until the 2013-14 academic year.” The wait “has already had a negative [sic] affect on colleges and universities, and further delay will detrimentally impact the awarding of financial aid to incoming students for the 2012-13 academic year.”

Many schools require students to have health insurance, and an estimated 6 percent of all students purchase student policies. The cost, which can run to more than $1,000 a year, is sometimes factored into the annual cost of attendance. That figure is then used in calculations for how much financial aid students receive from the federal government, or from private or institutional awarders, said Karen McCarthy, a policy analyst with the National Association of Student Financial Aid Administrators.

Schools have already begun the admissions cycle and some have sent out financial aid packages. But they have done so based on estimates that might later need to be significantly revised. The need to update the information sent to students and their families “only gets worse,” McCarthy said, as the financial aid cycle progresses through the spring.

The new federal rules, which will include stricter federal regulation and new coverage requirements meant to boost benefits, are designed to bring student plans into conformance with consumer protections included in the 2010 health law. In the past, some student plans have been criticized for insufficient coverage and high costs.

HHS told Kaiser Health News in an e-mail that the department “is closely reviewing comments [on the proposed rules] and finalizing this policy.” Proposed rules were released in February 2011, and public comments were due last April. Final rules were expected in Jan. 1.

Insurers aren’t sure how they’ll adjust premiums for the next year when they have to meet the new requirements, such as a higher dollar limit for coverage. Such changes could lead to significantly increased prices.

Some insurers are already “hedging their bets,” said Steven Bloom, director of government relations for the American Council on Education, which represents presidents and chancellors of higher education institutions. A number of schools negotiating next year’s insurance plans have reported receiving estimates that would increase premiums by 30 percent over last year, he said.

The education groups’ letter warned that incorrect financial aid calculations could leave some students short of funds and others having to repay some of the assistance they received. “A failure by HHS to act now could thus harm students, particularly lower income students,” the organizations wrote.

America’s Health Insurance Plans, the insurance industry’s trade association, echoed some of these concerns. “Students and their families need information soon on their fall semester coverage options (ideally by the end of the school year) so they can make the most informed decisions,” according to an e-mailed statement from an AHIP spokesman.

Possible Reasons For The Delay
Among the issues that could be addressed in the final rule is a requirement that some school plans cover contraception. Some stakeholders speculate that this may be one of the reasons behind HHS’ delay in releasing the final regulation.

“It’s certainly a possibility” that HHS wants to avoid the ongoing contraception controversy, said Anita Barkin, president of the American College Health Association. “That might be the case [for the delay].”

ACE’s Bloom said it’s unlikely that HHS would change its birth control coverage requirement, but the department is likely holding off on the final rule “because it’s so controversial.”

In addition, insurers have warned that their costs could go up significantly under the new rules. HHS may be reconsidering the cost estimates of new coverage requirements for student plans, said Jim Mitchell, director of the Student Health Service at Montana State University and a co-organizer of the Lookout Mountain Group, an organization of college health professionals.

Even if HHS releases the regulations immediately, it could be a few months before financial aid is no longer in flux, McCarthy said. Once requirements are known, insurers will have to adjust plan costs, then negotiate new contracts with schools.

At this point, groups are increasingly hoping that HHS simply decides to delay implementation of the regulations. But that would also mean a delay in potential benefits from the 2010 health law. “If [the regulations] get delayed, it’ll make student health insurance the only kind of insurance untouched by health care reform,” said Stephen Beckley, a student insurance consultant and a co-organizer of the Lookout Mountain Group.