Health Insurance Options and College Affordability

By Bill Kerrigan


Over the last decade health insurance premiums and the cost of college tuition have far outpaced general inflation.  For students struggling to understand and finance the direct costs of college (e.g., tuition, room, board, books), the reality of addressing their own health insurance is a complicated yet critical factor for degree completion.  Helping students to navigate the maze of available health insurance options is a priority for administrators seeking to minimize affordability and illness barriers that often sidetrack student success.

A requirement for full-time students to carry health insurance varies by institution. Prior to the passage of the Affordable Care Act (ACA) in 2010, matriculated students without mandatory institutional coverage requirements may have opted for no coverage.  Individuals under the ACA now must have a plan that qualifies as minimum essential coverage or be liable for the individual shared responsibility payment that in 2016 is the greater of 2.5% of household income or $695 per adult to a maximum of $2,085.  Although the ACA provides many exemptions, student status does not excuse individuals from this responsibility.

Health insurance eligibility and affordability vary based on age, family status, income, and geography of the student.  Available options for a student may include student health insurance, employer provided group coverage, the public marketplace with and without a premium tax credit, and Medicaid.

  • Student Health Insurance Plans: Colleges will often default students into a student health insurance plan with the ability to waive coverage if proof of other coverage is demonstrated. Under the ACA insured student health plans must comply with most of the individual market rules including prohibition on pre-existing condition exclusions and coverage of essential health benefits.  Self-funded student health plans in contrast are regulated by the states. As a result, these plans may lack comparable consumer protections and coverage required by the ACA.  Since the cost of student health insurance is experience-rated in a separate pool distinct from other individual market coverage, the premium rates reflect the health care costs of a student population.
  • Employer Sponsored Group Plan as a Dependent Child: The ACA required group health plans and plans offered in the individual market to expand coverage for an adult child up to the age of 26 regardless of student status, where the child lives, or marital status.  This expansion increased the total cost of employer provided health insurance plans.  From the perspective of an employee (i.e., parent), the cost or contribution to maintain a child/student on their employer group health plan is generally the difference between the Employee Only or Employee + Spouse coverage tier and the Employee + Child(ren) or Family tiers.  To the extent that the employee covers another dependent child under the plan, there is generally no additional contribution cost unless in the rare circumstance where the contribution structure is unitized by dependents.

Once a dependent child under a group health plan reaches the limiting age of 26, the dependent child may be eligible to purchase COBRA for up to 36-months under the group plan.  This option is likely to be very expensive as COBRA rates are set at 102% of the full premium for the employer group plan.  Since these plans are not age-rated, the underlying experience of the premium reflects the demographics of the group (e.g., older population profile than the typical student, poorer health risk) resulting in more expensive coverage than other options available to students.

  • Employer Sponsored Group Plan as an Employee or a Spouse: With the growing diversity of the college population, more and more students are eligible for health insurance through employment or a spouse.  According to The Kaiser Family Foundation and Health Research & Educational Trust Employer Health Benefits 2015 Annual Survey, employees with single coverage contribute on average $89 per month ($1,068 annually) or 18% of the premium for health benefits.[1]  Like other insurance plans, the cost of insurance is dependent on location, plan value, and characteristics of the plan sponsor.
  • Public Marketplace: The ACA created marketplaces (federally or state facilitated) provide individuals with access to a core set of essential health benefits with coverage for pre-existing medical conditions.  Individuals with income up to 400% of the federal poverty limit or FPL ($47,520 for an individual in 2016) are eligible for premium tax credits to reduce the premium cost.  Additional cost-sharing reductions are further available for individuals with incomes up to 250% of the FPL.

Students under the age of 30 are also eligible to purchase a Catastrophic health insurance plan through the marketplace that provides a lower premium for higher potential cost-sharing.  These plans expose students to greater financial risk if they fall ill or suffer an injury.

  • Medicaid: 32 states including the District of Columbia expanded Medicaid eligibility under the ACA.  Beginning in 2014, all adults under the age of 65 with income up to 133 percent of the FPL ($15,800 for an individual in 2016) became eligible for Medicaid.[2] If a student meets the eligibility requirements, then cost-sharing requirements (e.g., copays, coinsurance) are generally nominal varying by income depending on specific rules of the state.[3]

When health insurance premiums can add up to 10% on top of college tuition costs and many students and families rely on loans to make postsecondary education a possibility, the consequences of students making financial decisions with limited information are substantial.  Financial barriers and inadequate access to health care including mental health, lead to higher dropout rates.  Unfortunately, higher education administrators are already familiar with the high cost of providing health care benefits for their faculty and staff.  Expanding the scope of this focus to students is necessary to create a campus culture and environment that promotes both student success and health.  To help administrators understand the interrelationship among college affordability, completion, and health insurance further research is needed to inform institutional and public policy.

[1] Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999–2015.
[2] Centers for Medicare and Medicaid Services, Assuring Access to Affordable Coverage:   Medicaid and the Children’s Health Insurance Program Final Rule
[3] Medicaid,


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This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Kerrigan Reid’s preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Kerrigan Reid disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Kerrigan Reid reserves all rights to the content of this document.