The Big College Expense You Probably Didn’t Know About And Save For: Mandatory Health Insurance

Even though you may have solid health insurance for your family, the policy’s provisions may not meet the requirements set by the college your child attends. That means you may be forced to buy an entirely new policy the college sells or sponsors. At some colleges, the cost of the policy is over $5,000 for the 2019–2020 academic year (see the table below).

The way to avoid this charge is to get a waiver from your college by proving you have a health insurance plan that’s comparable to the one it sells. The process to do this for the academic year often occurs in July and August or the month before the tuition bills come out.

There is a good reason for colleges’ mandatory health insurance and its stringent requirements. Colleges are understandably concerned that students could face debt from medical expenses that dwarf even their student-loan debt. However, colleges need to improve their grade in making students and parents aware of this large mandatory additional expense. And while the cost of mandatory student health insurance is often a big surprise for many families, the college’s insurance policy can actually present both savings and a better plan in some situations.


My Surprise

About a month before receiving the bill for my daughter’s freshman year, I received a form email from the college stating that she was automatically enrolled in its student health insurance plan unless I completed an online application to receive a waiver. The cost of the policy was around $1,500. This cost was not listed in the college’s table and not part of the cost data that appears in various other websites and books as an expense of attendance for the college.

I’m a financial educator focused on equity compensation (stock options, restricted stock, ESPPs) through the website myStockOptions.com, which even has a section on financial planning for college funding. Thus I’m financially aware and had rigorously saved for my kids’ college education, mostly in 529 Plans. This new and large cost completely shocked and baffled me.
I run a small business and already pay about $12,000 per year for a family plan. I did not see the need to pay for another health plan. While I was able to obtain the waiver and opt-out of this additional expense for my daughter’s four years of college, for my son, now at another university, it’s more challenging and complex.

I soon discovered that many colleges have similar requirements. How did I fail to know about this expense? Why are colleges in the business of health insurance?

What I Learned

Your college student will receive healthcare from the student health center on campus as part of your pay tuition and health-services fee. The health insurance requirement kicks in for anything beyond the health services the school can provide. Health insurance that would cover emergency care for your child, which for most students would be the only reason they would need additional healthcare, may not meet the college sets’ requirements.

The Affordable Care Act (“Obamacare”) allows colleges to sell health insurance and set their own higher standards based on what the school determines its students need. They can make having health insurance comparable to the plan they offer a condition of enrollment. See FAQs from the American College Health Association, other resources on its website from the Student Health Insurance/Benefits Plan Coalition, and a discussion of regulations in the United States Federal Register.
Colleges’ standards dive deep into the minutiae of insurance plans. They are very specific about the insurance features they want students at their location to have before waiving the obligation to buy their plan. In addition, under either federal or state laws, colleges cannot sell short-term or supplemental plans that simply fill the gaps where your health insurance does not meet the college’s requirements.

What It Costs

The table below is the yearly mandatory health insurance fee I found on websites at selected colleges, showing a wide range in this cost. Most colleges do not offer a choice of plans or alternative insurers. Plus, these costs rise yearly, even faster than tuition costs. I selected colleges from the West, Midwest, East, and South (two per region). For each region, I selected one larger university and one liberal-arts college.
Colleges Need To Improve Disclosures About This Potential Cost

Below is an example that illustrates how colleges present their websites’ requirements yet leave the insurance cost out of the main table of college expenses. I selected from the table Northwestern University as an example of a college with information on its website about student health insurance in various places, but like other colleges, it seems to sidestep listing it clearly in a table of its costs of enrollment. (Disclosure: I’m a fellow Big Ten alum from the University of Michigan, a college that does not have mandatory health insurance but does offer a student plan.)

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