Is Your Kid Covered?

Insurers make big profits from college students, but some families are left with huge bills

Marquis had $100,000 coverage but got stung by the fine print David Deal

by Ben Elgin and Jessica Silver-Greenberg

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In fall 2006, Ralph Giunta Sr. decided to buy his son Ralph Jr. a practical birthday gift: health insurance. The father, who owns a small financial-services company that lacks an insurance plan, phoned Palm Beach Community College, where his son was on the dean's list. The Lake Worth (Fla.) school recommended a policy provided by MEGA Life and Health Insurance, whose student business was acquired in late 2006 by giant UnitedHealthcare. Giunta wrote a check for $1,044 for one year. "They assured me he was well covered," he says.

Six out of 10 colleges and universities now recommend specific health insurance plans for their students, and three of 10 require them. But as the Giuntas discovered, many of the policies turn out to be scanty at best, and inferior to comparably priced alternatives. This can leave families exposed to crippling medical bills they thought they'd protected against. Insurers, meanwhile, have found that the student market can be quite profitable.

Ralph Giunta Jr. knew something was wrong in March, 2007, when the photography major and avid skateboarder felt pain in his legs and feet. Then 19, he lost all feeling in his lower extremities and was rushed to the hospital. The diagnosis: Guillain-Barré's syndrome, a rare disease of the nervous system that typically causes temporary paralysis. His father's anxiety was compounded upon learning more about the insurance he had purchased. Even with "major medical" coverage, the plan reimbursed only $22,800 of the $206,325 bill for 19 days of intensive care.

In the end, Ralph Jr. recovered, but the Giuntas owed $265,000 in hospital and doctor bills. As he juggles maxed-out credit cards and loans from friends to make minimum payments on medical debts, Ralph Sr. admits he didn't read the UnitedHealthcare plan closely. "I thought, well, the college is offering it," he says. "Why would it be a bad plan?"

More than half of the insurance plans recommended by colleges offer benefits of $30,000 or less, according to a survey published in March by the General Accounting Office, an arm of Congress. Many plans have further limits that prevent payout of even modest maximums. While two-thirds of the country's more than 17 million college students have coverage from a parent's employer or their own job, many of the rest may be vulnerable if they suffer a serious illness or accident. With premiums and restrictions increasing under employer-provided plans, a growing number of parents are shifting children to college-sponsored coverage. But "when a student gets gravely sick, $30,000 in benefits is unrealistically low," says Alan Sager, a professor at Boston University's School of Public Health.

Schools often arrange for a standard student plan, and some even bill for it automatically unless students or their families opt out. But the administrators negotiating multimillion-dollar insurance packages frequently aren't sophisticated or diligent enough to obtain the best deals in the marketplace, says Mark Rukavina, executive director of the Access Project, a nonprofit health advocacy group in Boston. "Unfortunately, most schools don't know how to secure the best coverage for students, and so what results is simply the illusion of coverage." Students and parents, for their part, often don't take the time to study the fine print.

IN WHOSE INTEREST?

In some cases, universities have comfortable relationships with carriers that reimburse the schools a small percentage of student premiums to cover administrative expenses. This raises questions about whether schools ought to serve as what amounts to a broker. The University of Alaska system receives 5% of premiums collected through its plan. With $2.3 million in premiums expected this academic year, the payment would come to about $115,000, according to a copy of the contract provided by the system. The Kansas Board of Regents receives 1.5% of its students' premiums to cover costs of administering the plan "or other uses as determined by the Board," according to its contract. That could mean a reimbursement of about $100,000 for 2007-08.