On Thursday, the first big pieces of the new health-care overhaul took effect. Among other things, the rules mandate that insurance companies offer coverage to adult children until the age of 26 and devote at least 80% of their revenue to health-care costs.

But one major player was notably absent from these new rule changes: colleges. They have managed to sidestep, at least for now, the regulatory clampdown that has sent hospitals, insurers and corporations scrambling.

How’d they pull it off? Since student plans for the 2010-11 school year were negotiated before Sept. 23, they aren’t subject to the regulations this year.

And if industry and university groups succeed, the plans will be exempted permanently from many elements of the new law. At a June American College Health Association conference, James Turner, executive director of student health at the University of Virginia and former president of the ACHA, told audience members that Nancy-Ann DeParle, director of the White House Office of Health Reform, had told him during an earlier meeting to “tell me what you want written into the regulations and we’ll make it happen.”

“The White House denies that Ms. DeParle ever said that,” says White House spokesman Nick Papas. “The administration is still working on this issue and is eager to hear from all parties.”

The health-care overhaul has major implications for young adults and their parents. For the first time, parents will have the choice of keeping their graduate-student children on their corporate insurance plans or opting for cheaper college plans.

They should think carefully.

There is broad consensus that, as a group, college health-insurance plans rank among the worst in the nation for consumers. Many college plans come with remarkably low benefit ceilings—in some cases as little as $2,500. Others limit areas of coverage, such as preventative services and chemotherapy.

The upshot: Students are often much less insured than they think they are. In extreme cases high-school seniors with health issues might be advised to consider a college’s health plan before attending.

“These plans have not been thoroughly scrutinized,” says Bryan A. Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego. “In some instances they offer very paltry care.”

The college health-care system is a hodgepodge of school plans and private insurance. According to the Government Accountability Office, more than half of the nation’s colleges offer school-sponsored plans. All told, about 80% of college students, nearly 7 million people, are covered by private or public health insurance.

Most schools aim to provide the best care for the lowest cost. Students tend to be healthier than the general population, so school plans don’t need the safety nets found in adult plans.

Yet these low-cost plans are a big business for insurance companies. All of the major players are active in the college market, with Aetna Inc. and United Healthcare leading the pack. According to a November 2009 study from the Massachusetts Division of Health Care Finance and Policy, profit margins for student health programs in the state were 10%, compared with 2% for other insurance plans.

When colleges fall short, say health-care experts, it is often because their administrators lack the savvy to negotiate with insurers and arrange the best terms for their students.

“Not every podunk university is going to have a health plan official who will look into these plans,” says Elizabeth Ritzman, director of Dominican University’s student health center in River Forest, Ill.

The health-care overhaul deals with individual and group insurance plans. In an Aug. 12 letter to the White House, the ACHA and other groups argued that school plans shouldn’t be considered group or individual plans but rather “short-term limited-duration” insurance policies. Such a designation would likely exempt them from many of the new regulations, experts say.

The letter also warned that certain reforms “could make it impossible for colleges and universities to continue to offer student health plans.”

The ACHA “is supporting regulatory clarification that would allow student plans to preserve the grouplike status that is vital to providing lower cost coverage to students,” says Jake Baggott, ACHA’s advocacy coalition chair. Dr. Turner, ACHA’s president until June, says the spirit of his conversation with the White House was that “they would be happy to include in the regulations the necessary language to assure preservation of the plans.”

Insurers seem to be confident they will get their way. According to three people familiar with the matter, Aetna has told colleges that they have nothing to worry about because their plans will be exempted.

Aetna says it never conveyed that message to its members. “We expect that all student plans that wish to be credible will comply with minimum coverage requirements as soon as possible,” says Ethan Slavin, a spokesman for the insurer.

Good insurance plans are marked by a few elements, among them benefit ceilings of at least $250,000, generous prescription drug plans and emergency room coverage. According to the GAO, more than half of all school plans have ceilings of less than $30,000.

Some schools boast excellent health plans, says Dr. Liang. Take Boston University’s program, offered through Aetna. Students pay $1,676 for coverage that includes a $500,000 benefit ceiling and pays 80% of any ambulance expenses.

Another indicator of a good plan is its “medical loss ratio,” or the percentage of the premium that the insurance provider pays out in claims. The health-care overhaul limits loss ratios to 80%; a lower ratio means students aren’t getting as much for the cost. Brigham Young University, which offers insurance through Deseret Mutual Benefit Administrators, had a loss ratio of 93% last year, meaning that for every $100 in premiums, students received $93 of care.

Other plans, however, are less generous.

Paula Villescaz, a senior at the University of California at Berkeley, says she never looked closely at the Anthem Blue Cross insurance policy she got through her college. The plan has a $400,000 ceiling, but also has some important limitations, as Ms. Villescaz found out recently.

The political-science major had always been healthy—until March, when doctors discovered she had Ewing’s Sarcoma, a rare form of cancer. Berkeley’s plan didn’t cover her first MRI, her PET scan or many blood tests her doctors required, she says.

In between chemotherapy treatments, Ms. Villescaz says she had to battle the insurance company, which refused to cover her last round of chemotherapy, declaring it medically unnecessary. Her chemotherapy has since concluded, but she is now undergoing radiation treatment.

Ms. Villescaz says she owes about $80,000 all told. Before she got sick, she worked two jobs to support herself and help out her single mother. “I’m going to be paying off these bills for the rest of my life,” she says.

Both Berkeley and Anthem declined to comment.

Students who don’t study the details of a plan before signing up can end up with nasty surprises, as Nia Heard-Garris, a 24-year-old medical student at Howard University Medical School, learned firsthand.

Ms. Heard-Garris in 2007 signed up for Howard’s standard health plan, administered by Summit America Corp. The plan, which now costs $476 a year and is mandatory for all students, came with a $5,000 limit per injury and sickness, and didn’t cover radiation and chemotherapy—though the plan now offers more coverage. (Howard also offers an enhanced plan that costs $699 a year and has a limit of $200,000 per injury or sickness.)

Last year, Ms. Heard-Garris went to the emergency room complaining of neck pain. She got a CT scan—then found out that her insurance wouldn’t cover the $1,600 bill. “I have absolutely no idea how I can pay this,” she says. “I think it’s kind of ironic that here I am learning how to help people, and I can’t even get care covered.” She says she is negotiating with Summit to cover her bill.

Howard doesn’t comment on specific cases. A spokeswoman says students receive a booklet detailing medical-care protocols, and “the student health center staff will take the appropriate steps to provide [students] with appropriate care.” A Summit spokeswoman says, “We’re always willing to work with any student to provide clarity.”

Some school plans limit their coverage of certain categories, such as mental health. Franklin College in Indiana offers a plan through Markel Insurance Corp. that covers $50 for every mental-health counseling visit—up to $250 per year.

“There’s admittedly very little coverage for mental health,” says Terri Nigh, coordinator of student health services at Franklin. While negotiating benefits and evaluating the plan each year, school administrators try to meet the needs of the majority of students, she says. “It’s a difficult process.”

That’s been a problem for Katie Todd, a sophomore at Franklin. A pre-med major, Ms. Todd says she has battled depression since she was 12. She says most private insurers considered her depression a pre-existing condition, and that the best quote she has gotten would cost a steep $310 a month.

With no alternative, she signed up for the Franklin plan, but is frustrated by its limitations. “It’s really vital for me to get this coverage, and the plan just mostly ignores it,” she says.

“The plan’s design is based on the specifications of the college, not the insurer,” says Mark Nichols, a managing director at Markel.

Parents and students can get the most for their money by carefully examining school plans before signing up. Health-care planning should come long before enrollment, says James A. Boyle, president of the College Parents of America, a Virginia-based nonprofit.

Anyone considering a school plan should ask a number of questions, say experts:

– What is the maximum benefit for the policy?

– Are prescriptions and mental health services included?

– What happens to coverage if you leave school, go abroad or graduate?

– What is the loss ratio?

– Do any on-campus services, such as checkups or flu shots, overlap with existing coverage?

Parents who are considering keeping their child on their personal insurance should ask their benefits representative or insurer about how coverage will be carried over on campus and off—especially at schools far from home. (This also applies to graduate students and to adult children under age 26.) They should also be ready to sign a waiver with the school so they’re not charged for automatic enrollment in a campus policy.

If, after getting all these answers, both the employer and school insurance options seem unappealing, parents should consider using a site like eHealthInsurance.com, which allows for comparison browsing among 10,000 plans from 180 carriers. The prices and coverage can vary widely depending on the state, but the site offers free access to licensed agents who don’t work on a commission basis and can answer specific questions about plans, says Carrie McLean, a consumer specialist at the company.

The key is to do the legwork now to avoid surprises later. Otherwise, says Aaron Smith, a founder of Young Invincibles, a nonprofit student group that seeks better care for college students, you could wind up “in a dangerous place, with insurance plans that don’t cover any real health-care costs.”

Source : The Wallstreet Journal