Money College: Four health insurance musts for students

student medical examA few years ago, a prominent insurance company ran a national television ad with the slogan, "Just because you're insured doesn't mean you're covered." The company quickly pulled the ad from the airwaves after someone realized the potential irony, but not before the spot let several million viewers in on one of the dirty little secrets regarding insurance: Coverage doesn't guarantee a payout for a claim -- and for a college student navigating the perilous waters of the health insurance industry, that secret could mean the difference between a healthy, debt-free stay at college and a small mountain of medical bills.
Although many universities now mandate that students have some form of health insurance, young people of college age (18-24) still had the highest rate of no health coverage in 2008, according to the most recent data compiled by the U.S. Census Bureau. Even more alarming, according to health benefits consultant Reese McFaddin, is that students who hold their own policies rarely know which conditions and treatments their plan covers -- and which ones could earn them a denied claim and a heap of financial trouble.

McFaddin, who owns the Charleston, S.C.-based benefits consulting firm Workplace Benefits and often counsels college students about health insurance policies, offered a few tips that could help students steer clear of financial ruin, and perhaps save a few bucks on health insurance while they're at it.

Know your policy, and pay attention to the fine print.

Students should keep an eye on the spending limits, both per claim and lifetime, that a plan specifies. A lifetime spending limit of $50,000 might sound like a lot, McFaddin said -- until the student suddenly burns through that amount with a catastrophic injury. She said that students who want to cut down their premiums can look for a plan with a higher deductible, but should hold out for a lifetime spending cap of at least $1 million, without limits for an individual claim or illness.

"You could be like, 'Oh great, I found this really cheap plan,'" McFaddin said, "and then you think you're covered, but that's when all sorts of weird wordings in the policies come into play. If it turns out that a plan only pays $10,000 per claim, and you have a $20,000 illness or injury, you're in $10,000 worth of trouble."

Scott Golden, owner and chief financial officer of the Maryland.-based health benefits firm Golden & Cohen, knows a horror story or two concerning students who didn't bother to learn what kinds of contingencies their limited school-sponsored plan wouldn't cover.

"We'll always get a call from someone who was penny-wise and pound-foolish," he said. "A student gets in a car accident somewhere off-campus, and then they go into their inexpensive student plan and find out it only covers accidents on their campus. There's just not much we can do for them at that point."

Students can use online resources like the health insurance FAQs at to help decipher the complex (and occasionally daunting) language of health care.

"View the decision to purchase health insurance as a research project," Golden added. "Don't just rubber-stamp it; it's a huge decision that can have life-altering consequences."

Use your resources, and shop around to find the best deal.

A school mandate for health coverage forced Richard Peterson, a first-year law student at George Mason University in Alexandria, Va., to buy his own health insurance policy last year. However, rather than sign up for the discounted plan the school offered him for $80 a month, Peterson took a tip from a friend and went online looking for a better deal. Using the online health insurance directory EHealthInsurance, he turned up a comparable plan through Aetna with a slightly higher deductible for only $46 a month.

"I just looked at the price of my school's plan," Peterson said, "and I knew I could do better as a healthy individual. Now I use the extra money to put toward my student loan payments."

McFaddin cautioned that students who don't understand the policies or don't have the time to read them carefully might be better off finding a local insurance broker rather than snapping up the first cheap plan they find online.

"If you don't know what you're doing," she said, "it's better to let someone take you by the hand, at least when it comes to health insurance."

She also questioned the hoary truism that says students should cling to their parents' health-care plan as long as possible. Instead, she suggested students work with their parents to figure out the most cost-effective way to get health coverage.

"The dependent costs on a group health insurance plan can get very expensive, especially for the first dependent," she said. "Most students never realize it, but nine times out of ten, it's cheaper for that student to get off and get their own plan early, and their parents could save money by helping them pay for it."

Take advantage of anything your plan will give you for free.

Almost all insurance plans provide for a certain number of free preventive office visits each year, but McFaddin said that in her experience, most students just let years worth of free physicals go to waste -- and she's especially looking at you, guys.

"Males, they just never go to the doctor unless they're dying," she said. "But it's free, so why not use it?"

McFaddin points out that these visits provide students a perfect opportunity to form a relationship with a preferred physician, whom they can come to know and trust, which could save them time and trouble later on. She also noted that women can often use these free visits to see their obstetrician/gynecologist at least once a year, and should do so.

Don't attempt to go without some form of health insurance, even for a few weeks or days.

Living without health insurance opens the door for a financial catastrophe, McFaddin said, and, as a result, she often advises students to get their own plan before graduation -- the time when students are most likely to let their coverage lapse as school-sponsored plans expire.

"Students are young and healthy," she said, "so they sometimes think health insurance is something they can look into tomorrow. But then you might go out west and get in a skiing accident, and suddenly you owe more than you took out to go to school. It's not just a matter of being healthy. You need to be a real responsible kid."
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