Inside Higher Ed on January 31, 2013
By Doug Lederman

WASHINGTON — The Obama administration on Wednesday proposed that student health plans self-funded by colleges (rather than operated by insurance companies) qualify as “minimum essential coverage” under the federal health care law’s requirement that individual Americans must participate in a qualified health plan. The proposed regulation essentially exempts such plans from the requirements that the Affordable Care Act imposes on other student health plans.

The proposal from the Department of Health and Human Services, which was unexpected, affects only about 30 institutions — mostly major private and public research universities — that self-fund their student health insurance plans. But consumer advocates have expressed concerns that more institutions, and their states, might move to self-fund their plans.

“Because the federal government only extended the ACA’s protections to fully insured student health insurance plans, we are concerned that institutions of higher education may begin to self-fund in an effort to avoid new requirements,” a set of health care advocacy groups wrote in a report last summer. “Without federal protections and only minimal state oversight, self-funded plans are free to discriminate based on preexisting conditions, offer limited coverage with low annual limits on benefits, and commit a number of consumer abuses that the ACA was designed to eliminate.”

The institutions that self-fund their student health plans, which include many of the Ivy League institutions and the University of California system, among others, do so because they are less costly to operate (by cutting out the middleman, the insurance company) and can be better tailored to their (and their students’) specific needs, their officials say. They maintain that the health plans they offer are typically of high quality, and that generally meet the health overhaul’s requirements.

In proposing that self-funded plans qualify as meeting the “minimum essential coverage” standard, the Department of Health and Human Services did not suggest that it had examined the existing programs to ensure that they comply with the ACA’s minimum requirements for other plans. The agency provided relatively little in the way of explanation for its action, saying only that “even though student health plans are not individual or group market coverage, they are subject to certain consumer protections,” presumably by state governments.

HHS officials had previously suggested that they did not believe they had the authority to regulate self-funded plans.

In their recommendations to legislators and policy makers last August, consumer groups said they anticipated that more and more colleges might self-fund their plans to avoid federal regulation. New York State, for example, has begun a pilot project to let four universities there experiment with self-funded plans.

And a group of students at the University of California are petitioning to urge the institution to drop caps that its self-funded plan imposes on health care coverage for individuals and things like prescription coverage, according to the San Francisco Chronicle, something that would not be permissible under fully insured plans.

“We’re worried about the impact of this [rule from the Obama administration] on the students in these plans now, and we wouldn’t want other institutions to move in that direction,” said Jen Mishory, deputy director of Young Invincibles, which advocates on behalf of young adults.

Steven M. Bloom, director of federal relations at the American Council on Education, said he did not envision a “stampede” toward self-funded plans, given the complexity of such programs and the fact that the health care market is in such flux over all, with more and more students coming to campuses under their families’ health plans and with other coverage.