Insurance at a premium

In October 2003, USF graduate student Alexandro Castellanos Mier awoke with dizziness and muscular pain, particularly in his chest and arms.

As Student Health Services was closed for the weekend, the 36-year-old went to University Community Hospital, where doctors performed an electro-cardiogram and a tomography, took blood samples and multiple x-rays. Finally, a potassium deficiency was diagnosed. Castellanos Mier was given four potassium pills and discharged.

Two weeks later, he received a bill for more than $4,000. With the health insurance he bought through USF only covering $500 of emergency-room treatment, Castellanos Mier is facing a bill of more than $3,500.

“I was really shocked,” he said. “I’m a student, how can I get this amount of money?”

Castellanos Mier’s plight serves as a sharp reminder that, even with insurance, students can find themselves facing hefty medical bills. With health care costs outstripping inflation, university administrators are saying it is increasingly difficult to find affordable plans that provide adequate coverage for students.

From the outside, insuring thousands of healthy young people who can turn to campus health centers for day-to-day illnesses seems like an insurance company’s dream. But with health insurance optional for all but international students, companies are finding themselves insuring low numbers of students, many of whom need expensive treatments. The result has been rising premiums, reduced benefits and the departure of some underwriters from the student market.

Since 2000, premiums offered by USF have risen by 114 percent. In the same period, USF has used three different insurance underwriters. According to Student Health Services director Egilda Terenzi, the trend is widespread.

“(All the state universities) are having difficulties and everyone is finding that their costs are rising, that their benefits are shrinking,” she said.

For a plan to be viable, it requires a large pool of healthy people, something USF does not supply. The number of students insured through USF this year declined from 4,259 to just over 2,000. With the majority of younger USF students included in their parents’ policies and around one third of USF students electing not to buy medical coverage, too many of those purchasing the plan are older students requiring more health care, said Brian Mockler, associate director for SHS. In health insurance industry terms, it is known as adverse selection.

“All those who know that they are sick and need the insurance buy the plan,” Mockler said.

A further problem at commuter schools is people enrolling in classes just to be eligible to purchase the health insurance, Terenzi said.

“Some that came to our attention were older 50s, early 60s, who were not yet eligible for Medicare but were having a hard time getting insurance otherwise. They were really a burden on the plan,” she said.

The burden quickly became apparent to Guardian Life, who underwrote USF’s insurance for the 2001-02 academic year. The company paid out more than $3.25 million in medical claims, a loss of more than $1 million, prompting it to pull out of the student market.

Its successor, North Carolina Mutual, fared similarly, paying out almost $4 million to USF students in claims after receiving less than $2.5 million in premiums. Just four working days before the start of the 2003 academic year, the company told USF if it didn’t pull out, it would be bankrupt in three months.

With little time to shop around, USF accepted a costlier plan with less benefits from service agent Pearce & Pearce. A bailout payment of $500,000 from North Carolina Mutual meant USF could keep premiums at the $645 they had already advertised. But the change ushered in increases in deductible payments, the capping of hospital costs at $1,100 per day and the limiting of prescription benefits to $250 per day.

The reductions allowed Pearce & Pearce to rein in claim expenses. Terenzi estimates that once all claims are processed they will not exceed more than 77 percent of revenue from premiums.

That success, however, did not deter Pearce & Pearce from raising the premium for this year to $997. With no subsidy from North Carolina Mutual to cushion the blow, students were faced with a 27 percent increase, prompting many to shop around for cheaper policies.

“I think a lot of them have made some awful mistakes with the plans they’ve chosen,” Mockler said. “During this year if they get sick and they don’t have the staff that we’ve supplied to help them out, whether they’ll even be able to submit a claim properly is doubtful … it looks great, it looks cheap, until you get sick.”

Universities’ concerns over student health insurance is motivated by more than altruism. Students hit by high medical bills are often unable to afford tuition and drop out of school, adversely affecting retention and graduation rates.

In 2000, with around 40 percent of its undergraduates uninsured and with one quarter of its dropouts leaving for medical reasons, the University of California’s Board of Regents made health insurance mandatory. Students without adequate insurance would be required to purchase the policy offered by the university.

The University of Southern California adopted the same policy. With 19,000 students enrolled in its plan, the private institution is able to offer annual insurance for just $631, more than $350 cheaper than USF’s policy. In addition, the plan covers immunizations, vision care, a yearly gynecological exam and Pap smear and treatment for injuries sustained during NCAA sports, all of which are excluded from USF’s basic policy. Had Castellanos Mier been a USC student, his medical bill would have been a co-pay of 10 percent, around $400.

“If you have mandatory insurance, you can get a very cost-effective plan that really caters to students’ needs,” said Neinstein Lawrence, USC’s associate dean of student affairs. “We’ve put in every thing that students have suggested.”

With its high number of students with no health insurance, mandatory insurance at USF would almost certainly result in reduced premiums. But for state universities, forcing students to purchase health insurance could prove both legally and politically difficult, Mockler said.

But any changes in regulations would be too late for Castellanos Mier. Unable to pay his bill, the Mexican international student has applied for financial assistance.

“If I knew what would happen, I would have paid $600 and gone to Mexico for treatment,” he said. “I’m just trying to think what to do. I don’t make enough to pay that in two years.”