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N.Y. Universities to Test Self-Funding of Student Health Insurance

Allowing schools to self-insure their student plans, officials said, should reduce the expenses incurred by students while allowing schools to maintain adequate coverage.

August 1, 2012
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New York state is letting four of its largest universities test the waters of self-insurance in order to offer lower-cost health insurance coverage to students, according to the state's Department of Financial Services.

New York University, Columbia University, Cornell University and the University of Rochester—selected for their sizable endowments—will be permitted to transition their student health care plans from fully insured programs to self-funded models in a pilot program made possible through legislation signed into law last week by New York Gov. Andrew Cuomo, the department said in a statement Aug. 1.

Under current state law, colleges and universities in New York are not permitted to self-insure student health plans without first being licensed as underwriters. The law forces schools to choose between purchasing a fully insured plan from an insurance company and taking on the costs associated with securing and maintaining an underwriting license.

Either way, state officials said in the statement, the added costs often are passed on to students. Allowing schools to self-insure their student plans, the officials said, should reduce the expenses incurred by students while allowing schools to maintain adequate coverage.

"Working with the universities, we came up with a creative solution that allows the universities to self-insure, providing better value health coverage to their students," Financial Services Superintendent Benjamin Lawsky said in the department's statement. "Effectively, this bill creates a demonstration project that could eventually be extended to other colleges and more students."

The DFS will maintain regulatory oversight of the self-funded plans, and the schools will be required to establish reserve funds in order to guarantee claim payments. The new law also establishes a minimum medical loss ratio of 82 percent of premiums collected for the programs.

Depending on the schools' performance administering the self-funded plans, Lawsky said the department would consider allowing more universities to self-insure their student health care programs, though the department did not specify how long those evaluations might take to complete.

"As all of us in higher education are working to control our costs, this flexibility is an important element and has proven successful at schools in other states," Cornell University President David Skorton said in the statement.

While most states already permit private colleges and universities to self-fund student health benefit plans, only about 10 percent of students enrolled in school-sponsored insurance programs receive their benefits directly from schools, according to an April 2012 report by the American Council on Education.

Matt Dunning writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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