Rockefeller: Student Plans Need MLR Enforcement, Other Reforms

Health insurers should be subject to medical loss ratio requirements for student health plans in addition to rules now being considered by the U.S. Department of Health and Human Services, Senate Commerce Committee Chairman Jay Rockefeller said.

"The minimum medical loss ratio requirement is one of the most important consumer protection provisions included in health reform and should be available to American students as it is to their nonstudent parents, spouses and peers," Rockefeller, D-W.Va., said in a letter to HHS Secretary Kathleen Sebelius.

A proposed HHS regulation would apply consumer protections of the Affordable Care Act, including limits on rescissions and bans of lifetime limits on care and denials of coverage for pre-existing conditions, to plans covering as many as 3 million college students. The regulation would define student health insurance as a type of individual health insurance policy.

Beginning this year, health insurance carriers must disclose how they spend premium dollars. By 2012, individual and small group health plans will be required to issue refunds to policyholders if they spend less than 80% of premium income on actual medical care and activities to improve the quality of care; the level is 85% for large group plans.

Insurance carriers advocate that student plans should be treated differently than other health products. They say the student market is volatile, has unique administrative costs and faces competitive pressures by being available in a relatively few schools per state.

"These are unique policies targeted to a very specific group of people," said Robert Zirkelbach, spokesman for America's Health Insurance Plans.

Applying current MLR requirements to student plans would "threaten" 61% of schools covered by Aetna and 36% of its state markets, the insurer said in its response to the proposed regulation.

"We want to ensure that the proposed student health rules under health care reform do not prevent schools from offering student health plans, increase the number of uninsured, or create obstacles for individuals looking to enroll in higher education," Aetna spokesman Matt Wiggin said in an email.

Student health plans have been a lucrative product for health insurers, Rockefeller said. While comprehensive data is lacking, "there is increasing evidence that these plans are highly profitable and meeting a minimum medical loss ratio of 80% is well within their capability," he said.

A.M. Best Co. recently downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to "bb" from "bbb-" of Commercial Travelers Mutual Insurance Company of Utica, N.Y. Factors included continued uncertainty of the impact of the federal health reform law on the company's core student medical business (BestWire, May 18, 2011).

A.M. Best Co. also recently revised the outlook to negative from stable and affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of Universal Fidelity Life Insurance Company of Oklahoma City. The revised outlook reflected Universal Fidelity Life's declining operating results and associated decrease in capital and surplus over the past two years, which resulted primarily from higher than anticipated claims in its student accident and health business and elevated expenses incurred in marketing new single premium whole life and youth camp and sports leagues products. A.M. Best believes the company will be challenged to achieve its near-term financial projections due to continued higher expenses associated with marketing new products (BestWire, April 12, 2011).

(By Sean P. Carr, Washington Bureau Manager: sean.carr@ambest.com)