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OFFICE OF THE ATTORNEY GENERAL
ANDREW M. CUOMO A TrORNEY GENERAL
April 6, 2010
The New York State Attorney General '5 Office bas been conducting an investigation of certain troubling practices in connection with student health insurance plans sold by the health insurance industry. The investigation has covered plans sold to students in post-secondary schools in New York State and to New York students attending out-of-state post-secondary schools. I want to share with you. some of the-findings of my investigation so that you may consider whether any health insurance plan you may be offering to your students should be reevaluated.
To address the problem ofuninsured students, marty colleges, universities, and professional schools require that students purchase a School-endorsed, private health insurance plan unless the student "waives out" by showing that he or she has comparable insurance coverage. Some schools do not permit waivers at all, even if the student has comparable insurance coverage through a parent, and still require that all students purchase the schoolendorsed plan. Unfortunately, our investigation has shown that many of theschool-spousored health insurance plans sold by the health insurance industry are not in the best interest of the schools' students in a number of respects.
The following non-exhaustive list describes some problems that our investigation has identified in connection with school-sponsored student health insurance plans sold by the health insurance industry:
• Dangerously Insufficient Coverage
Some of the plans provide woefully deficient coverage, with maximum overall caps or limits on particular types of services which can leave students with large, unreirnbursed medical bills. For example, some plans provide for an annual aggregate cap of only $25,000, and in some cases, even less. Some of these plans have per-illness caps ofas low as $1,000 - $2,500. Given the cost of even simple surgeries and the compounding
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costs ofa single serious illness, these caps are simply too low to protect students against the risk ofbecoming seriously ill. In addition, many plans provide no coverage at all for either the preventative services or the prescription drugs which college students typically need.
• Coverage That Is Too Costly
Many student plans payout far too little in claims compared to the premiums charged to the students, in some cases paying out less than 30 cents for each dollar in premium. As a result of these very low "loss ratios" ti.e., the losses paid out expressed as a percentage of the premiums paid in), students who purchase these plans are paying hundreds of dollars per year more for their health insurance than. they would if reasonable loss ratios were being met. As a result, health insurers issuing these low loss ratio plans are reaping excessive profits" In fact, New York law requires a target loss ratio of at least 65% per policy form for group health insurance as a bare minimum, and target loss ratios of at least 85% are now mandated by federal law for large group policies .
., Use of Conflicted Insurance Brokers, Agents, or Consultants
Some insurance brokers, agents or consultants retained by schoo Is may be paid exceedingly high commissions that raise the students' premium costs, or may even be paid commissions or bonuses, unbeknownst to the schools and students, for keeping "loss ratios" low or for ensuring that schools stay with their current insurer.
• Contributions Paid To Colleges and Universities
Some health insurance brokers, agents and consultants, as well as some health insurers, have made contributions to the schools or provided items of value to the schoolor its employees. In some cases these contributions are seemingly innocuous, such as meals at moderately-priced restaurants. In other cases, insurance agents have treated school employees to shows and expensive dinners, and brokers, agents, plan administrators and insurers have contributed thousands of dollars to school events, such as golf tournaments. To the extent that school personnel involved in selecting health insurers or brokers,
agents or consultants are receiving such contributions or items of'value, or are the conduit for such contributions to be paid to the school, these contributions may possibly call into question the schools' objectivity in hiring insurance brokers, agents or consultants and in selecting a health insurer for their school-sponsored plan that is in the students' best interest.
• Requiring students with Medicaid to Purchase the School-Sponsored Plan
When student health plans are mandatory, or where the plan must be purchased unless the student can show comparable coverage, some students who are recipients of Medicaid are nevertheless required to purchase the school-sponsored coverage at additional, unnecessary cost (sometimes by taking out additional student loans). Considering that these students may be the most financially-strapped studentsat the school, it may be inappropriate to require them to purchase the coverage.
• Duplicative Mandatory Coverage
At some schools, students are required to purchase the school-sponsored student health plan even where the student has comparable or better coverage under the student's own or the parents' health insurance plan. When the student health plan is mandatory (i.e., with no waivers permitted), students may be required to pay thousands of dollars over four (or more) years for a benefit they may not need. Although students may wish to consider this additional cost when selecting which schools to apply to or to attend" this cost often is not adequately disclosed during the admissions process.
Many of these policies exclude coverage for pre-existing conditions. Many student health plans have other exclusions which may be unlawful or otherwise improper. 1 And, as noted above, many plans provide no coverage at all for preventative services which college students typically need. As a result of these exclusions, students or their families are left to fend for themselves in finding ways to pay for critically needed medical care.
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With a generally healthy population purchasing the coverage, schools have strong bargaining power to ensure that school-endorsed plans provide sufficient, fairly-priced coverage to the schools' students. As you review your school's practices related to student health insurance plans for undergraduate and graduate students, and students in professional and vocational programs, you may want to consider the following suggestions:
• Provide adequate coverage: Schools that require or offer school-sponsored health insurance should require or offer a plan that provides adequate coverage with sufficient prescription drug coverage and no annual, lifetime, or perillness/injury caps.
• Provide preventative care: Schools that require or offer school-sponsored health insurance should require or offer a plan that provides for preventative services, such as those immunizations and screenings which students typically need and use.
• Maintain Appropriate Loss Ratios: Schools with plans that have consistently low loss ratios should insist that insurers provide better-priced coverage for their students with higher target loss ratios. Schools should look for coverage with a target loss ratio of at least 85% as now mandated by federal law.
• Control Relationships with Insurance. Brokers, Agents, or Consultants: When schools retain insurance brokers, consultants or agents to help in selecting and negotiating with student health insurers, schools should only retain brokers,
1 For example, many school plans exclude coverage for alcohol-related injuries.
consultants or agents who agree to work on behalf of the students' best interests and put those interests above their own.
In particular, it is recommended that the insurance brokers, agents or consultants agree to work for the school on a fee basis -- either hourly or flat. The insurance broker, agent Or consultant should agree to:
a. disclose to the school any quotes by student health insurers and any fees or commissions to be paid to the insurance broker, agent or consultant by the student health insurers proposing to issue a policy to the school; and
h. base recommendations on which student health insurer the school should
select solely on what is in the best interest of the school's students.
• Prohibit Remuneration to Employees and to the School: Schools should prohibit school employees involved in the selection of school-sponsored health insurers or health insurance brokers, consultants or agents from accepting anything of value, personally or on behalf of the school, from health insurers or health insurance brokers, consultants or agents. In addition, schools should not accept anything of value from health insurers or health insurance brokers, consultants or agents in exchange for any advantage or consideration provided to the health insurer or the health insurance broker,consultant or agent in connection with the school-sponsored student health insurance. plan.
• Provide Exemptions for Students on Medicaid: Schools should exempt students who are receiving Medicaid benefits from any requirement to purchase school-sponsored health .insurance, and should provide adequate disclosure to students who receive Medicaid benefits of their right to waive any schoolsponsored health insurance plan based on the exemption.
• Adequately Disclose Cost of Mandatory Coverage: Schools that do not allow students to waive out of the student health plan should clearly and conspicuously disclose, in both admissions and acceptance materials, the annual cost of the school-sponsored health insurance, as well as the fact that students are required to purchase the insurance and cannot waive out. Schools that require purchase of the school-sponsored health insurance should re-evaluate whether mandating enrollment in the school-sponsored plan is in their students' best interests.
• Reject Exclusions. Schools should not require or offer school-sponsored student health insurance that excludes coverage for pre-existing conditions or preventative care, or that includes unlawful or improper coverage exclusions.
As my office's investigation of the student health insurance industry continues, I am hopeful that you will find these suggestions helpful as you re-evaluate your student health plans. I also invite you to share concerns. you may have with particular insurers, brokers; agents and
consultants. We have developed the following website, www.NYStudentHealth.com. to assist students, parents and schools through the process of selecting student health insurance.
Thank you for your attention to this important matter.
Very truly yours,
Andrew M. Cuomo
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