FAQ helps demystify health care options for graduate students

April 01, 2016

UNIVERSITY PARK, Pa. -- As graduate students begin planning for the new academic year, they will also need to consider their options for health insurance, which is required for all adults under the Affordable Care Act.

Below is a list of frequently asked questions regarding graduate student health insurance and the Penn State Student Health Insurance Plan offered to graduate students, visiting scholars and their families.

Additional information about the Penn State Student Health Insurance Plan, medical costs and medical services available to graduate and professional students is available from the Student Health Insurance Task Force and the Graduate and Professional Student Association.

Is health insurance required for graduate and professional students?

All adults in the United States are required to have adequate health insurance according to the Affordable Care Act (ACA). Failure to have health insurance coverage can result in penalties. For tax year 2016, the penalty will be 2.5 percent of your income, or $695 per adult and $347.50 per child, to a maximum of $2,085.

All students, except for those in a World Campus program, have the option of purchasing insurance from Penn State. Students may have other options for health insurance, including a family member’s employer-sponsored plan, the health insurance marketplace created by the ACA (see healthcare.gov for information on this), a state Medicaid insurance plan or the Veteran’s Administration, for example.

International students, their accompanying spouses and/or children are all required by Penn State to demonstrate that they are covered by health insurance that meets the University’s mandatory insurance waiver standards.

What is the Penn State Student Health Insurance Plan?

The Penn State Student Health Insurance Plan (SHIP) is underwritten by Aetna Student Health. Aetna was selected to continue as the Penn State SHIP provider after a competitive bidding process. SHIP is equivalent to the highest value plan allowable; this is called a platinum plan, as defined by the Affordable Care Act ‘metal’ plan tiers. Under the ACA, a platinum plan must pay out between 88 and 92 percent of the premium it collects as medical benefits to the insured individuals — that is, between 88 and 92 cents out of every dollar in premiums is used to pay for student health care.

What is the difference between the Penn State Health Insurance Plan and plans offered by third-party providers?

The Penn State Student Health Insurance Plan is the highest value plan allowed under the Affordable Care Act. Students considering third-party providers should not only consider a plan's price, but compare other factors such as deductibles, out-of-pocket expenses, services covered and available providers, all of which may drive up a student's overall health care costs. Complete information about the benefits of the Penn State Health Insurance Plan can be found at https://www.aetnastudenthealth.com/students/student-connection.aspx?GroupID=846513.

What impacts the costs of the Student Health Insurance Plan?

Many factors impact the costs of health insurance for graduate students. SHIP covers all Penn State students, which includes graduate students as well as undergraduate, medical and law students, and certain categories of visiting scholars.

The primary determinants of health insurance costs are the medical costs of students paid by the plan. As described above, under the ACA, a platinum plan must pay out between 88 and 92 percent of the premium it collects as medical benefits. Additional costs associated with the plan include taxes and fees that insurers must pay to support medical and health services research, charges for administration and marketing of the plan, and risk charges associated with the size of the group being insured. In addition, since insurers like Aetna in the United States are private companies, there are costs associated with the profits that the company earns to enable distribution to shareholders, research and development, and similar future expenses to be paid from retained earnings.

There are several ways that students and their families impact the overall costs. As health care consumers, the choices individuals make drive overall costs. If the group of students collectively make choices that lead to the insurer paying out more than 92 percent of the premium, than the insurer is going to increase the premium in future years. So, student choices about whether to use an in-network provider or out-of-network provider, whether to get good primary care or delay care in ways that might later require expensive emergency treatment, whether to get a flu shot, or whether to have a discussion with their doctor about the most cost-effective ways to address a health issue, all factor into the current and future health plan costs.

One of the other significant factors that impacts that cost of health insurance is the number of students that enroll in the plan. When a large number of students enroll in the plan, the statistical predictability of their overall health care costs becomes more reliable. When enrollments decline, actuarial models of health care costs will predict greater variability in those costs, and insurers will increase the risk charge to prevent a situation where they collect too little premium to pay for the medical costs. So, a smaller group of students enrolled in a plan drives up the cost of health insurance for all students. Enrollment in SHIP has declined University-wide, especially among international undergraduate students.

Does Penn State cover the costs of health insurance for graduate students?

Penn State subsidizes health insurance (medical, dental and vision) for graduate assistants and full-time graduate fellows and graduate trainees.

For 2015-16, the University contributes 80 percent of the annual medical premium for graduate assistants, fellows and trainees, and 75-76 percent for dependent coverage. The University contribution for graduate assistants on fall/spring appointments was $2,443.20 of the total annual premium cost of $3,054 for an individual plan, and $9,406.32 of the $12,216 premium to cover a family (a student plus spouse/domestic partner and two or more children).

The University also contributes 80 percent of the premium costs for individual and 70 percent for family plans for dental and vision insurance for graduate assistants (and typically for fellows and trainees, as well).

Who at Penn State makes decisions about the University’s Student Health Insurance Plan? Are graduate students part of this process?

Students have been part of the process for making decisions about health insurance for many years. While insurers make the decision to contract with the University, graduate students serve as representatives to two groups, the Student Insurance Advisory Board (SIAB) and the Student Insurance Administrative Council (SIAC). These groups provide input to University Health Services, who formally represents the University in its relationship to Aetna. SIAB and SIAC, including its student representatives, work with UHS and its Student Health Insurance Office regarding the SHIP at Penn State, including the selection of insurer, plan design and mechanisms to manage costs.

In 2014, as a result of the impact the ACA was having on student health plans, the Student Health Insurance Task Force was established by Provost Nick Jones. The task force was charged with exploring the interpretation of how the Affordable Care Act applies to the Penn State student health insurance plan, examining factors that contribute to the rising costs of coverage independent of ACA, and reviewing the longer term challenges and opportunities facing student health insurance at Penn State. The task force had 18 members comprised of students, faculty, staff and representatives from University Health Services and the Penn State Hershey Medical Group. There were seven graduate student representatives on the task force. The task force was chaired by Dennis Shea, professor of health policy and administration and associate dean for undergraduate studies and outreach in the College of Health and Human Development.

More information, including a full list of members and the task force’s recommendations to Penn State, as well as the provost’s response to the task force recommendations, are available at sites.psu.edu/tfonshi.

I understand Penn State self-funds its employee health benefits, and that this can lower costs significantly. Why doesn’t Penn State stop working with Aetna or other insurers and self-fund its student health insurance or include students in its self-funded employee health plan?

This was one of the issues explored by the Student Health Insurance Task Force.

Self-funding is primarily an option open to employee groups. Federal and state laws provide a clear and simple path for self-funding employee health plans. Students do not meet the ACA definition of eligible employees and cannot be included in Penn State’s self-funded employee plan. Self-funding other types of health plans, such as a stand-alone, self-funded SHIP, is much more complicated in Pennsylvania. In some states, there are laws that permit a self-funded student health plan, but Pennsylvania does not appear to have a law designed for this purpose.

Self-funding is also not an option without risks for students. The University of California self-funded student health insurance plan is facing a large deficit because it underestimated student health costs. Self-funded student health insurance plans also do not have to provide all the consumer protections that purchased insurance plans do under the ACA.

While self-funding does not appear to be an immediate solution, the University continues to monitor state and federal legal developments and advocate for the flexibility to create student health insurance plans that meet the needs of our student population. For example, in New York, where the law prevented self-funded health insurance plans, universities worked with the governor and state legislature to allow such plans for student health insurance at some universities.

Why can’t the University use funds from its endowments or other sources of funds to help mitigate the cost of health insurance for all students?

Mitigating the premium costs for all undergraduates, medical students, law students, as well as graduate students covered by the plan would cost several million dollars. Mitigating other costs, while not only potentially illegal under the Affordable Care Act, would cost several million dollars more. The idea of using endowment funds to cover these costs is fundamentally misleading, because the University is legally barred from using those funds for purposes other than those outlined in the donors’ guidelines. The University also cannot use income that comes from its agricultural federal funds, its hospitals/clinics, or its restricted funds (which includes endowments, grants, contracts, etc.). Its other primary sources of funding — state appropriations, tuition and fees — would represent asking all other students to pay for the health care of the students covered by the student health insurance plan.

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The Graduate School is committed to assisting graduate and professional students understand the ever-changing health insurance landscape. Earlier this year, the Graduate School and the Graduate and Professional Student Association held two Health Care Literacy 101 workshops, which were recorded and can be watched on demand.

If you have further questions or concerns, please contact the Student Health Insurance office, located in 302 Student Health Center, at 814-856-7467.

Last Updated April 01, 2016