Washington Update - April 2012

 Final student health insurance rule released, House Republican budget announced

Student Health Insurance Rule Provides Phase-In of Consumer Protections

On March 16, the U.S. Department of Health and Human Services released the final student health insurance coverage regulation. The rule provides a phase-in period for student health insurance to meet the consumer protections required in the Affordable Care Act. For example, current individual and group insurance policies are prohibited from having annual coverage limits lower than $1.25 million. Student health plans beginning before September 23, 2012 will be allowed to have annual coverage limits as low as $100,000. The limits for student plans must increase to at least $500,000 for plans beginning on or after September 23, 2013. All annual limits on coverage will be banned for plan years that begin on or after January 1, 2014 for all student, individual, and group health plans. The rule requires promotional materials for student health plans to clearly disclose that they do not meet the annual coverage limit requirements of the new health care law and advise students that they may be able to obtain coverage on a parent's plan if they are under the age of 26. HHS also provided a phase-in of the Medical Loss Ratio (MLR) requirement. In 2013, student health plans will be required to spend 70% of premium dollars on medical care and quality improvement. In 2014 and after, student health plans must meet the 80% MLR standard required of all individual health insurance plans. Insurers who spend less than the required percentages on care must send rebates to students.

Like other health plans, student health insurance will be required to cover preventive care, including contraceptives, with no cost-sharing. Religiously-affiliated colleges and universities have an additional year to comply with the contraception coverage requirement for student health insurance. The administration is developing new rules that are intended to allow religiously-affiliated institutions to avoid paying directly for contraception while preserving coverage for employees, and it is expected that these rules will apply to student health insurance plans as well. There is one exception; the small number of institutions that have self-insured student health plans will not be required to cover contraception for students.

House Republican Budget

On March 20, House Budget Committee Chairman Paul Ryan (R-WI) released the Republican FY2013 budget proposal. The budget does not contain specific funding levels for Pell Grants and other higher education programs, but does state a goal of limiting financial aid growth while focusing aid on low-income students. Ryan proposes to cut domestic discretionary spending by $20 billion below the spending caps agreed to as part of the Budget Control Act that lifted the debt ceiling last summer; it is not specified which programs these cuts would affect. One provision would change the way the government accounts for student loans. Currently, student loan programs are scored as profitable for the government, as the interest rates charged to students are slightly higher than the federal government's cost of borrowing. The proposed switch to fair value accounting would include the cost of foregone income as a result of charging below-market interest rates to students in cost-estimates of student loan programs. With the change, student lending would be scored as a net cost to the government, which would make it more difficult for Congress to enact expansions, such as President Obama's proposal to increase the size of the Perkins Loan program by $7 billion. Like the previously released President's budget proposal, the House Republican budget is a statement of the author's vision, and the final budget is likely to be very different. The Senate is not expected to produce a budget resolution, instead relying on the spending caps from the Budget Control Act to set appropriations levels.