Is Your Kid Covered? [View All]

[RedEarth]

Insurers make big profits from college students, but some families are left with huge bills
by Ben Elgin and Jessica Silver-Greenberg
BusinessWeek
May 8, 2008

In fall 2006, Ralph Giunta Sr. decided to buy his son Ralph Jr. a practical birthday gift: health insurance. The father, who owns a small financial-services company that lacks an insurance plan, phoned Palm Beach Community College, where his son was on the dean’s list. The Lake Worth (Fla.) school recommended a policy provided by MEGA Life and Health Insurance, whose student business was acquired in late 2006 by giant UnitedHealthcare. Giunta wrote a check for $1,044 for one year. “They assured me he was well covered,” he says.

Six out of 10 colleges and universities now recommend specific health insurance plans for their students, and three of 10 require them. But as the Giuntas discovered, many of the policies turn out to be scanty at best, and inferior to comparably priced alternatives. This can leave families exposed to crippling medical bills they thought they’d protected against. Insurers, meanwhile, have found that the student market can be quite profitable.

Ralph Giunta Jr. knew something was wrong in March, 2007, when the photography major and avid skateboarder felt pain in his legs and feet. Then 19, he lost all feeling in his lower extremities and was rushed to the hospital. The diagnosis: Guillain-Barré’s syndrome, a rare disease of the nervous system that typically causes temporary paralysis. His father’s anxiety was compounded upon learning more about the insurance he had purchased. Even with “major medical” coverage, the plan reimbursed only $22,800 of the $206,325 bill for 19 days of intensive care.

In the end, Ralph Jr. recovered, but the Giuntas owed $265,000 in hospital and doctor bills. As he juggles maxed-out credit cards and loans from friends to make minimum payments on medical debts, Ralph Sr. admits he didn’t read the UnitedHealthcare plan closely. “I thought, well, the college is offering it,” he says. “Why would it be a bad plan?”

More than half of the insurance plans recommended by colleges offer benefits of $30,000 or less, according to a survey published in March by the General Accounting Office, an arm of Congress. Many plans have further limits that prevent payout of even modest maximums. While two-thirds of the country’s more than 17 million college students have coverage from a parent’s employer or their own job, many of the rest may be vulnerable if they suffer a serious illness or accident. With premiums and restrictions increasing under employer-provided plans, a growing number of parents are shifting children to college-sponsored coverage. But “when a student gets gravely sick, $30,000 in benefits is unrealistically low,” says Alan Sager, a professor at Boston University’s School of Public Health.

http://www.pnhp.org/news/2008/may/is_your_kid_covered.php