The Exchange Reality
By Michael Babore, Executive Vice President, Ascension Collegiate Solutions
I have worked in the student insurance marketplace for over 15 years. With the implementation of the Affordable Care Act (ACA), the past three years have been the most challenging for our clients and the marketplace in general.
The first challenge was understanding how the ACA would affect student health insurance plans (SHIPS). SHIPs aren’t like employer plans, and also aren’t like other types of individual plans, so we worked hard with our underwriting partners to understand the new regulations and make the necessary policy adjustments.
But that was only the first step. Next came implementing plans with expanded benefits and higher premiums. For some colleges and universities that had historically offered low-cost, limited-benefit plans that suited a young and healthy population, the higher costs associated with ACA-compliant plans was shocking. At the same time, the state insurance Exchanges came online, offering an option previously unavailable to college-age students. There was also a strong push by the Exchanges to get younger people on these plans with targeted marketing campaigns.
However, now that we have a clearer view of the ACA in terms of the both its regulations as well as what kinds of plans are being offered through the Exchanges, we have a lot more information to help determine what is the best option for students at higher education institutions.
Let’s take a closer look at the Exchanges versus SHIPs.
– Plans are generally affordable and priced based on health history as well as income. This seems like an advantage for the “young and healthies” that typically make up college populations. However, students that access the Exchanges for an affordable option often just select the cheapest Bronze option, a High Deductible Health Plan. From the student’s perspective, they are covered and can forget about it. The reality is that the student will still have to satisfy a large deductible ($6,600 for most Bronze plans). Too many students do not understand this, and find themselves paying out-of-pocket for day-to-day accidents or illnesses. Many, if not most, students don’t have the money required to satisfy the first $6,600 of their medical expenses, which could result in students having to decide whether to pay for their education or pay for medical treatment. Since 98% of all medical claims are under $5,000, this puts the responsibility of paying for their healthcare squarely on the student’s shoulders.
– The subsidies offered to people in certain income brackets may sound appealing to students, as they perceive that subsidized Exchange plans are more affordable than the student health plan offered by their school. However, a recent study by the Kaiser Family Foundation that focused on IRS penalties in 2014 found that over 50% of individuals who accepted a subsidy for health insurance were not eligible for the amount they received. We hear frequently that students are going to the Exchanges and answering the income questions accurately from their perspective, only to find out that mom and dad are claiming the student as a dependent on their tax return. Since subsidies are based on the total household income, families will be required to pay back the subsidy a student received in error. In this instance, what originally seemed to be a great value to the student has turned into a tax burden for their family.
– Not only can the Exchanges be confusing for international students, but this population is not eligible for subsidies or Medicaid, since those are for U.S. Citizens or permanent residents only. Without guidance from foreign student advisors or insurance professionals, these students are unassumingly accepting subsidies without fully understanding the ramifications for doing so. In the past year our firm has seen a large increase of international students being deported for violating the terms of their visa.
– While Exchange plans have access to national PPO networks, the networks affiliated with Exchange plans are often limited networks, especially in non-metro areas. What’s happening is that national PPO networks will offer a much smaller network carve-out to Exchange plans. We’ve heard reports (and seen first-hand) of signs in doctor’s waiting rooms saying they don’t participate in the Exchange PPO network. The result is that students are left with few choices of in-network providers near campus, and end up paying the higher out-of-network prices – including coinsurance, deductible, and out-of-pocket max – for services they need.
SHIPs help the school’s bottom line.
Our consultants have reported that many colleges and universities no longer see the value of providing a comprehensive health insurance plan to their students. The simple truth is that requiring students to have a health insurance plan is in the best interest of the college or university; keeping students healthy and enrolled has a significant impact on the school’s bottom line.
SHIPs are usually the best deal for students.
Many think the Exchanges are good enough for their students. However, as I pointed out earlier, Exchange plans often include really high deductibles which may be financially overwhelming to a student trying to pay for college. SHIPs, on the other hand, generally have low deductibles, coinsurance, and copays. That means a student enrolled in a SHIP can get the care they need right away, without the need to pay for all expenses out-of-pocket until they meet a (generally unattainable) deductible.
Health Center Tie-In (and Buy-In).
A lot of students are going off-campus to seek medical care, rather than utilizing the on-campus health center. SHIPs can coordinate with student health centers, which can help bring more students in and increase revenue for the campus, as well as keeps insurance costs down for students. It’s a win-win.
SHIP premiums are competitive
Sometimes we hear that SHIP premiums are high compared with Exchange premiums. However, a lot of the low-priced plans on the Exchanges have high deductibles and limited networks (therefore a lot of the charges are being paid at the out-of-network prices). The reality is that, if you are making an apples-to-apples comparison, SHIPs are often less expensive than Exchange plans or than students being insured as dependent on a parent’s plan. Since SHIPs now offer full coverage (rather than limited benefits with low benefit maximums that they did in the past), SHIPs are more expensive than they used to be; however, the value of SHIPs has increased as well.
The bottom line is that a quality insurance plan can cover the costs of high medical expenses that could otherwise prevent a student from continuing his or her education. It’s important to consider all the ramifications to students of sending them off to the Exchanges. For many students, the Exchange reality is very high out-of-pocket expenses, few in-network doctors, and not much coverage in the absence of extreme illness or injury. SHIPs might not be the answer for every campus, but I truly believe that in most cases, they can offer students and schools a much better option.
Michael Babore has worked with colleges and universities since 2000, developing roadmaps for successful student health insurance programs. His goal is to deliver the service each and every client requires. Prior to joining the Ascension team, he worked as the Head of Sales for HTH Worldwide in their international student insurance division. Michael is a member of NAFSA,ACHA, URMIA, NAICU and the FORUM. He is a regular presenter at many industry-related events and has traveled to 22 countries in his career. For more information, contact Michael at 310-255-2061 or [email protected].
 Claims data based on breakdown of claims for students insured through Ascension for the 2013-2014 and 2014-2015 academic years.
 Cox, Cynthia, et al. “Repayments and Refunds: Estimating the Effects of 2014 Premium Tax Credit Reconciliation,” March 24, 2015. Kaiser Family Foundation. Web. <http://kff.org/health-reform/issue-brief/repayments-and-refunds-estimating-the-effects-of-2014-premium-tax-credit-reconciliation/>