August 20, 2009 in Insurance

Campus health insurance or family plan?

College students often feel invincible, but it’s wise to be prepared financially in case of an accident or illness.

The hard part is in trying to determine what kind of health insurance coverage is best — the family plan perhaps already in effect or the campus plan offered at the school.

It’s not as if insurance is a luxury item that’s rarely used: 75 percent of 500 college students responding to a 2008 Center for Student Health and Life survey said they had visited a campus health center.

That’s one reason an estimated 30 percent of colleges and universities made health insurance a requirement for enrollment in the 2007-2008 school year, and other states and institutions are considering the same, according to a 2008 U.S. Government Accountability Office, or GAO, study of 340 institutions.

More than half of U.S. colleges offer student health insurance plans, the study found, and many require enrollment or a signed parental statement that the student has comparable insurance elsewhere, says Bryan A. Liang, executive director and a professor in the Institute of Health Law Studies at California Western School of Law.

What’s the better way to go — the family insurance or the college-offered plan? It’s a question as loaded as an SUV on move-in day.

College plans: what works, what hurts

College-offered health plan benefits vary, but the GAO study concluded that schools seem to aim at making premiums affordable while providing coverage that meets student needs. The average annual premium? About $850.

Programs for this younger, healthier population tend to be less expensive, says Andrew Rubin, host of HealthCare Connect on Sirius XM radio and a vice president at New York University Langone Medical Center. But they also tend to be limited, with high deductibles and co-insurance.

Besides affordability, these plans are designed to complement services offered through the campus health center, says Dale Grenolds, a senior vice president at Aetna Student Health.

Another benefit is the convenience of being “‘spoon-fed’ a plan that will be OK to use at the campus health center,” says James Boyle, president of College Parents of America.

On the other hand, Boyle points to low ceilings for catastrophic coverage, high deductibles, short coverage windows (i.e., only during the school year) and the lack of portability when the student moves to another school or into the work force.

What’s more, the GAO study found:

Liang feels internal coverage limits are important. A maximum benefit of, say, $500,000 might sound high, but the fine print may reveal a $5,000 limit on surgeon’s fees or inpatient per-day costs, or outpatient coverage for all “episodes of care” limited to an amount that wouldn’t cover a significant chronic disease for the year. 

A provision, for example, that services are restricted to the campus health center could mean a student who needs to be hospitalized can be “stuck with a lower quality, more restrictive policy,” says Rae Lee Olson, a principal at Mountain View, Calif.-based Vita Benefits Group. Worse yet, a student with an illness that necessitates moving back home for family support would not be covered, she says.

Last year, Annie Kohut put her freshman daughter, who has a pre-existing condition, on the University of Maryland’s health plan, which had pricey premiums but no co-pays or deductibles. “I was pleased that she was able to see a doctor here in Atlanta a few times this past year and the insurance covered it,” says Kohut.

But this year, the plan was changed. A student first must visit the campus health center and from there get a doctor referral — or get the insurance company to approve the visit, Kohut says.

Otherwise, “You pay out-of-network costs even if the doctor you see is in the network. Out-of-network only pays 60 percent,” she says. Since Kohut, an owner of a public relations firm, is self-employed, affording health insurance for her daughter on her own isn’t a viable option. “I feel pretty stuck between a rock and a hard place,” she says.

Still, these plans can be the only option for some, such as graduate students (who often aren’t eligible to receive benefits through their parents) or international students (who must, under federal regulation, have coverage), Grenolds says.

Those selecting a college plan must consider postgraduate life as well. With other group plans, benefits can be purchased for up to 36 months based on COBRA law. College plans “don’t extend benefits once your relationship with the school ends,” says Amir Mostafaie, consumer health insurance expert at eHealth, parent company of the Web site eHealthInsurance.com.

Family plans: what works, what hurts

Olson sees the COBRA option as the most important benefit of a student staying on a family insurance plan. Unfortunately, many graduates are no longer eligible as dependents under those plans.

Another major advantage applies to families with two or more children: Premiums typically are charged for “one or more” children, Olson says. So removing a college-aged child from the policy wouldn’t reduce the premium at all.

“Being able to actually utilize the insurance coverage they already have bought and paid for” would be a major pro of staying on the family plan, says Boyle — “if schools accepted private health insurance (and unfortunately, very few do)” at the campus health center.

Making sense of apples to oranges

No matter what, choosing a plan requires doing your homework. Check:

Determine if the policy covers travel to and from school, study abroad programs and possible internships. Besides reviewing the school’s literature and Web site, visit its health center and consult school health insurance staff for guidance.

Keep in mind that campus health centers vary in structure, Rubin says. A large university’s center may run like a regular doctor’s office, billing students’ insurance companies. A smaller college may have more of an infirmary, sending any student who’s really sick out to a doctor’s office.

Also speak with the family’s insurance provider to confirm that the child would remain covered while in college, says Tracey Baker, a Certified Financial Planner and co-author of “Navigating Your Health Benefits for Dummies.”

When considering a lower premium plan, which might seem like the best way to save a few bucks, be sure to consider how much more you could potentially pay if something were to happen, says Baker, who is also the adviser to the health benefits education campaign Planforyourhealth.com.

“In any analysis, the devil will be in the details,” says Scott Golden, chief financial officer and co-founder of the Maryland-based health benefits firm Golden & Cohen. “If the price is very low, there is a reason.”

Annual premiums in the GAO study ranged from $30 to $2,400 and maximum benefits ranged from $2,500 per illness or injury to unlimited lifetime coverage.

“Just bring it down to benefits and try to compare apples to apples, as far as the benefits … and the comprehensive nature of the plans are concerned,” says Mostafaie. “If it’s cost-effective, the best bet is to stay on the parents’ policy.”

That’s the popular option. About two-thirds of the 80 percent of college students with health insurance in 2006 were covered through employer-sponsored plans, according to the GAO study.

Independent plans and dual coverage

With limitations in college-offered and family plans, why not just have dual coverage?

It’s an option parents recognizing gaps in their current coverage may choose to ensure comprehensive coverage, Grenolds says, but it’s not a common practice.

“Do you need two insurances? No,” says Rubin. “You need one or the other, unless neither insurance is good and you can afford both.” Parents may opt for dual coverage because of out-of-network problems, but Olson cautions, “Most individual insurance contracts typically restrict dual coverage.”

Although experts disagree over whether an independent insurance plan for a student is cost-effective — since the individual pays the full cost of the premium — it doesn’t hurt to explore this option. Typically sold by insurance carriers, these plans can sometimes be purchased directly through the college, says Baker. Seven percent of the students studied by the GAO were covered by a private health insurance plan in 2006.

“The cost might be slightly higher but the benefits outweigh,” says Wendy Gold, an agent and broker with Insurance for College Students in Boca Raton, Fla. “With an individual plan the student does not have to carry a minimum number of credit hours, … can take that plan from college to college … and can continue with the plan after graduation.”

Once again, however, the question is, will the student health center accept this insurance?

Mostafaie’s team recently looked at quotes from three cities for a healthy 21-year-old male. “We were able to find plans with deductibles of $2,000 or less with an annual premium of about $600,” he says, adding that there are also student-specific individual health plans to consider.

Choose something

On this the experts agree: Don’t go uninsured.

College students, or “young invincibles,” may argue they don’t need health insurance, but “I don’t buy it, and neither should parents,” says Baker.

“Assume the worst may happen,” says Olson, and get the policy that’ll serve in the long term if and when sickness or injury occurs. “Money pays the premium — but it’s health that ‘buys’ the policy.”

You can compare health insurance quotes on Insureme.com, a Bankrate company.

Melissa Ezarik is a Connecticut-based freelance writer