In Depth May 8, 2008, 5:00PM EST

Is Your Kid Covered?

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In previous semesters the benefits ratios dipped as low as 10.2% and 13.8%. This means the college's plan has been a veritable gold mine for UnitedHealthcare. At the University of South Florida in Tampa, which offers a plan from American Fidelity Assurance, the ratio this academic year is 35%, down from 71% and 61% the previous two years, respectively.

Asked about the ratios, Grace Truman, a spokeswoman for Palm Beach Community College, says: "We do not negotiate coverage with the insurance company. We are not an active player in what they cover and at what percentage." To choose its plan, the school relied on "positive comments" from other colleges about UnitedHealthcare, not on independent comparisons. Palm Beach has received only one complaint about the plan, she stresses. "We do tell students to read the plan carefully." Still, she continues, "it may be time to take a better look at this insurance plan." The University of South Florida acknowledges that it is seeking a more favorable benefits ratio. "During renewal negotiations there are lengthy discussions regarding benefit designs," says Marisol Amarante- Hernandez, manager of the school's insurance office.

James Breeding, director of risk management and insurance at Rutgers University, stresses that most students and their families are looking for low prices. Breeding recently negotiated a better deal for Rutgers students, upping the school plan's maximum from $50,000 to at least $100,000, after finding that three to six students exceeded the plan's old maximum each year. The new plan, provided by Aetna's Chickering, costs about the same as the former one: $424 per year. "The plan is designed to meet most of the needs of most students, not to meet all the needs of all students," Breeding says.

Apart from low maximums, insurers can contain payouts by imposing "interior caps" on coverage for particular types of treatment. Sean Marquis discovered the hard way how this works. After turning 26, Marquis, a medical student at Ross University in Edison, N.J., was bumped from his parents' plan. He signed up for the school-sponsored plan with UnitedHealthcare, comforted by its $100,000 overall maximum.

Last spring, Marquis became dizzy during class. He stepped into the hallway and collapsed, fracturing a bone near his jaw. He stayed in the hospital for 48 hours, and left owing $24,098. UnitedHealthcare covered only $6,260, because Marquis had hit the $2,500-per-day cap for room, board, and miscellaneous expenses. The hospital forgave more than $10,000, but Marquis still had to pay several thousand dollars and has set up an installment plan for remaining medical bills. "I bought insurance to cover something just like this," he says.

Peter Goetz, vice-president at Ross, declines to comment on the Marquis case, citing privacy concerns. The school looks for the best deal for its students, putting its insurance contract out to bid every two years, he says. Last fall, it switched from UnitedHealthcare to Chickering. "Our goal is to always find reasonably priced insurance that also covers catastrophic events," Goetz says. UnitedHealthcare won't discuss Marquis' case.

Interior caps aren't exclusive to the college market, but they appear to be spreading more quickly there, due to the lack of demanding buyers. "In the college market, things are more egregious," says Bryan A. Liang, executive director of the Institute of Health Law at California Western School of Law. "Insurers can do what they want and get away with it."

Elgin is a correspondent in BusinessWeek's Silicon Valley bureau . Silver-Greenberg is a reporter for BusinessWeek.com.