Student Health Insurance Coverage, 7767-7782 [2011-3109]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 76, Number 29 (Friday, February 11, 2011)]
[Proposed Rules]
[Pages 7767-7782]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3109]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144 and 147

[CMS-9981-P]
RIN 0950-AA20


Student Health Insurance Coverage

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This document contains a proposed regulation that would 
establish rules for student health insurance coverage under the Public 
Health Service Act and the Affordable Care Act. The proposed rule would 
define ``student health insurance

[[Page 7768]]

coverage'' as a type of individual health insurance coverage, and, 
pursuant to section 1560(c) of the Affordable Care Act, specify certain 
Public Health Service Act and Affordable Care Act requirements as 
inapplicable to this type of individual health insurance coverage.

DATES: Send your comments on or before April 12, 2011.

ADDRESSES: In commenting, please refer to file code CMS-9981-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9981-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9981-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:

    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For questions concerning this proposed 
rule, contact Lisa Campbell or Robert Imes, Center for Consumer 
Information and Insurance Oversight, Department of Health and Human 
Services, by phone at (301) 492-4489.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: https://regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010; the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) was enacted on March 30, 
2010. In this proposed rule we refer to the two statutes collectively 
as the Affordable Care Act. The Affordable Care Act reorganizes, 
amends, and adds to the provisions of Part A of title XXVII of the 
Public Health Service (PHS) Act relating to group health plans and 
health insurance issuers in the group and individual markets.
    The Department of Health and Human Services (HHS or the Department) 
is issuing regulations in several phases in order to implement 
revisions to the PHS Act made by the Affordable Care Act. Most of the 
previous regulations were issued jointly with the Departments of Labor 
and the Treasury. Interim final rules published in 2010 by the three 
Departments included those that implemented PHS Act sections 2711 
(regarding lifetime and annual dollar limits on benefits) and 2719A 
(regarding patient protections) (75 FR 37188 (June 28, 2010)), and 
section 2713 (regarding preventive health services) (75 FR 41726 (July 
19, 2010)). HHS published interim final rules implementing section 
2718, regarding medical loss ratio (75 FR 74864 (December 1, 2010)). A 
full list of the regulations, as well as guidance published by the 
Departments regarding various issues related to the implementation of 
the Affordable Care Act, is also available at https://www.hhs.gov/cciio 
and https://www.dol.gov/ebsa.
    Pursuant to the Affordable Care Act which requires that ``[N]othing 
in this title (or an amendment made by this title) shall be construed 
to prohibit an institution of higher education (as such term is defined 
for purposes of the Higher Education Act of 1965) from offering a 
student health insurance plan, to the extent that such requirement is 
otherwise permitted under applicable Federal, State, or local law,'' 
this proposed regulation would define the term ``student health 
insurance coverage'' as a specific type of individual health insurance 
coverage, and would render certain requirements of the PHS Act and the 
Affordable Care Act as inapplicable to student health insurance 
coverage, given their unique characteristics.

II. Provisions of the Proposed Rule

A. Introduction

    The U.S. Government Accountability Office (GAO) has estimated that 
most students enrolled in U.S. colleges and universities have health 
coverage through employer-sponsored plans, but approximately 7 percent 
of students between ages 18 and 23, around 610,000 individuals, were 
covered through other private insurance such as student health 
insurance plans in 2006.\1\ Industry estimates put the number of 
individuals

[[Page 7769]]

with student health insurance coverage significantly higher, at 1.1 to 
1.5 million individuals. This may be explained, in part, by the 
industry estimates counting university students of all ages, not just 
those between ages 18 and 23. Furthermore, older students may be more 
likely to have dependents enrolled under their student health insurance 
coverage. Altogether, according to industry sources, 1,500-2,000 
institutions of higher education offer student health coverage. While 
the same sources estimate that 200,000 individuals have coverage 
through student health plan arrangements that are self-funded through 
colleges or universities, the vast majority of student plans are 
insured.
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    \1\ U.S. Government Accountability Office, Most College Students 
Are Covered through Employer-Sponsored Coverage, and Some Colleges 
and States are Taking Steps to Increase Coverage, Report 08-389 
(March 2008).
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    This generally means that a health insurance issuer contracts with 
a college or university to issue a group or an association ``blanket'' 
health insurance policy at a negotiated cost for a defined set of 
benefits for each student who desires coverage. While the contract 
between the issuer and the college or university usually covers 
multiple years, the contract can be modified on an annual basis to make 
minor benefit design modifications and to adjust the price for 
inflation. The policy is generally rated on a group basis based on the 
total expected claims experience of the college or university's 
students enrolled in the plan. Students of the college or university, 
in turn, are eligible to buy into the policy either on an academic term 
basis or an annual basis.
    Insured student health insurance plans fall under the regulatory 
authority of the States and the Federal government pursuant to the PHS 
Act. Since these student health insurance plans are not employment-
based, they do not meet the definition of a group health plan under PHS 
Act section 2791(a)(1),\2\ even though some States regulate such plans, 
for purposes of State law, as types of group coverage (non-employer 
group coverage or association ``blanket coverage'').
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    \2\ The definition of ``group health plan'' in PHS Act section 
2791(a)(1) incorporates the definition of an employee welfare 
benefit plan under the Employee Retirement Income Security Act 
(ERISA) of 1974, section 3(1).
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    Concerns have been raised about the quality and value of these 
plans in some cases. For example, the Attorney General of New York in 
April 2010 released the findings of an investigation that concluded in 
part that some student health plans have such low coverage limits, 
exclusions, and limited benefits that they place students and their 
families at risk for catastrophic costs for medical care.
    The benefits provided by student health plans vary widely. For 
example, the GAO study found annual limits ranging from $15,000 to 
$250,000, with the median being $50,000.
    Given the variation in benefit designs for student health insurance 
coverage, premiums vary significantly. The GAO found annual premiums 
that ranged from $28 to $2,397, with the average being $850.
    With the passage of the Affordable Care Act, several issues have 
arisen regarding the applicability of the PHS Act and the Affordable 
Care Act to student health insurance plans. Section 1560(c) of the 
Affordable Care Act provides that ``[N]othing in this title (or an 
amendment made by this title) shall be construed to prohibit an 
institution of higher education (as such term is defined for purposes 
of the Higher Education Act of 1965) from offering a student health 
insurance plan, to the extent that such requirement is otherwise 
permitted under applicable Federal, State, or local law.'' Were certain 
provisions of the Affordable Care Act applied to student health 
insurance coverage, we believe it would effectively prohibit 
institutions of higher education from being able to offer these plans. 
Because section 1560(c) of the Affordable Care Act instructs HHS not to 
construe any provisions of the Affordable Care Act to have this effect, 
this rule discusses which provisions we propose construing not to apply 
to student health insurance coverage pursuant to section 1560(c).

B. Definition of Student Health Insurance Coverage

    The proposed regulation would define student health insurance 
coverage as a type of individual health insurance coverage provided 
pursuant to a written agreement between an institution of higher 
education (as defined in the Higher Education Act of 1965) and a health 
insurance issuer, which is provided to students who are enrolled in 
that institution and their dependents. In addition, the definition 
would require that the coverage only be made available to students 
enrolled at the institution of higher education and their dependents; 
that eligibility for coverage could not be conditioned on any health 
status-related factor; and that it would have to satisfy any additional 
requirement that may be imposed under State law.
    For purposes of the PHS Act, health insurance coverage that is not 
provided in connection with an employer-based group health plan is 
individual market coverage, notwithstanding that applicable State law 
might classify such non-employer group coverage as association blanket 
or discretionary group coverage. Previously, in the preamble to the 
interim final regulations implementing the individual market 
requirements of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA), the Department clarified that ``college plan'' 
coverage for students was individual market coverage, as distinguished 
from the group health plans provided to college employees. 62 FR 16985, 
16992 (April 8, 1997).
    As noted earlier in the introduction, it is believed that there are 
a small number of self-funded student health plans. The PHS Act and the 
Affordable Care Act give HHS regulatory authority over health insurance 
issuers in the group and individual markets and over non-Federal 
governmental group health plans. Because self-funded student health 
plans are neither health insurance coverage nor group health plans, as 
those terms are defined in the PHS Act, HHS has no authority to 
regulate them. Nonetheless, these self-funded student health plans may 
be regulated by the States. The Department invites comments on the 
prevalence, structure, and State regulation of these self-funded 
student health plans.
    Under the proposed regulation, the term ``student health insurance 
coverage'' would be defined to include only insurance provided pursuant 
to a written agreement between an institution of higher education and a 
health insurance issuer. As proposed, the agreement could be evidenced 
by the health insurance issuer issuing the master insurance policy to 
the institution of higher education. If the institution of higher 
education is not the policyholder (that is, the students themselves are 
the policyholders), we proposed to require that in order to meet the 
definition of student health insurance coverage, there would have to be 
a separate agreement between the issuer and the institution of higher 
education clearly indicating the institution of higher education's role 
with respect to factors such as selecting, terminating, and replacing 
the health insurance issuer; choosing or negotiating policy terms; 
setting student and dependent eligibility terms; publicizing, 
endorsing, or recommending the policy to students and dependents; and/
or providing students and dependents with assistance with obtaining 
benefits or appealing denials under the coverage. Under the proposed 
rule, if there were no written agreement between the institution of 
higher education and the health insurance issuer, such coverage would 
be subject to all of the individual

[[Page 7770]]

market requirements in the PHS Act and the Affordable Care Act.
    The definition of student health insurance coverage in this 
proposed regulation would be intended to ensure that student health 
insurance coverage is offered only to students enrolled in an 
institution of higher education. Student health insurance coverage also 
could cover students' dependents such as their spouses and children, as 
defined by the plan terms.
    In addition, we propose that coverage that otherwise met the 
definition of student health insurance coverage could still meet the 
definition even if it also provided coverage for limited periods of 
time to individuals who are on breaks between academic terms, on 
temporary leaves of absence for medical or other reasons, or have 
recently graduated or otherwise ceased enrollment in an institution of 
higher education. The institution of higher education and the issuer 
would specify in the documents governing the student health insurance 
coverage which individuals could be viewed as being enrolled in the 
institution of higher education for purposes of eligibility for the 
student health insurance coverage.
    Past research suggests that institutions of higher education vary 
in the extent to which part-time students are offered student health 
insurance coverage.\3\ This proposed regulation would not set any 
minimum threshold for determining student status under student health 
insurance coverage (for example, require that students take a minimum 
number of course hours each term or be seeking a degree), leaving such 
eligibility decisions to each institution of higher education and the 
issuer.
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    \3\ For example, U.S. Government Accountability Office, Most 
College Students Are Covered through Employer-Sponsored Coverage, 
and Some Colleges and States are Taking Steps to Increase Coverage; 
Stacey Pogue, Covering Uninsured Students in Texas: The Role of 
Student Health Insurance Coverage (2005).
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    The proposed regulation would provide that coverage offered to non-
students seeking individual market coverage would not meet the 
definition of student health insurance coverage. Other individual 
market coverage that incidentally covers a student (such as under a 
parent's family policy) would not meet the definition of student health 
insurance coverage under this proposed regulation.
    Lastly, under this proposed regulation, in order to meet the 
definition of student health insurance coverage, the coverage could not 
condition enrollment on any health status-related factor of a student 
or dependent. The term ``health status-related factor'' or ``health 
factor'' is proposed to have the same meaning as that term has in 45 
CFR 144.103, incorporating 45 CFR 146.121(a), which applies with 
respect to group health insurance requirements. That term includes 
health status, medical condition (including both physical and mental 
illnesses), claims experience, receipt of health care, medical history, 
genetic information, evidence of insurability, and disability. 
Incorporation of this non-discrimination requirement is modeled on the 
definition of bona fide association coverage in 45 CFR 144.103. HHS 
believes that this requirement will have a minimal impact on student 
health insurance plans because the Department understands that, in the 
past, student health insurance coverage offered by institutions of 
higher education receiving Federal funds generally has not 
discriminated against individual students or dependents on the basis of 
health status due to requirements under section 504 of the 
Rehabilitation Act of 1973 and related regulations issued by the U.S. 
Department of Education that prohibit discrimination based on 
disability.\4\
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    \4\ ``No qualified handicapped student shall, on the basis of 
handicap, be excluded from participation in, be denied the benefits 
of, or otherwise be subjected to discrimination under any * * * 
health insurance * * * to which this subpart applies.'' 34 CFR 
104.43(a).
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C. Student Health Insurance Coverage and Short-Term Limited Duration 
Insurance

    45 CFR 144.103 defines short-term limited duration insurance as 
``health insurance coverage provided pursuant to a contract with an 
issuer that has an expiration date specified in the contract (taking 
into account any extensions that may be elected by the policyholder 
without the issuer's consent) that is less than 12 months after the 
original effective date of the contract.'' Short-term limited duration 
insurance is available to individuals to fill in gaps of coverage that 
otherwise might occur, such as when they are between jobs and without 
employer coverage. Since short-term limited duration insurance is 
specifically excluded from the definition of individual health 
insurance coverage in 45 CFR 144.103, the individual market protections 
of the PHS Act and the Affordable Care Act do not apply to short-term 
limited duration insurance.
    In many student health insurance plans, the term of the coverage is 
for a period less than 12 months--sometimes for only a day or even 
minutes less than 12 months--suggesting an intent to claim short-term 
limited duration insurance status and avoid PHS Act and Affordable Care 
Act requirements.\5\ However, we understand that some of these policies 
are also renewable at the option of the student so long as the student 
continues enrollment at the school. In fact, in some instances, the 
student's college or university will automatically re-enroll the 
student in such coverage without any affirmative action on the 
student's part.
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    \5\ For example, the Department noted one student health 
insurance policy that was effective from 12:01 a.m., August 1, to 
11:59 p.m., July 31 of the following year. Other policies had 
similar policy periods.
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    It is our understanding that, in the past, student health insurance 
coverage was considered in some cases by issuers and institutions of 
higher education to be short-term limited duration insurance if the 
initial term of the coverage was less than 12 months in duration, even 
if it renewed automatically. Accordingly, many student health insurance 
plans do not provide some important protections of the PHS Act and the 
Affordable Care Act that apply to individual health insurance coverage. 
The proposed regulation would clarify that if the coverage is renewable 
each year at the option of the student as long as the student remains 
in school, the renewals would constitute ``extensions that may be 
elected by the policyholder without the issuer's consent'' that would 
not expire within a year, and that the coverage would not, therefore, 
meet the definition of short-term limited duration insurance. We 
understand that the right to renew the insurance coverage, provided 
that the student remains in school, is a common practice for student 
health insurance coverage. Thus, this proposed regulation would clarify 
that student health insurance coverage that is at least 12 months in 
duration, including any potential extension that may be elected by the 
student, is individual health insurance coverage generally subject to 
the individual market requirements of the PHS Act and the Affordable 
Care Act. This proposed regulation would not amend the existing 
definition of short-term limited duration insurance. HHS invites 
comments on the prevalence of existing student health insurance plans 
that meet the definition of short-term limited duration insurance and 
whether such plans should be subject to certain requirements of the PHS 
Act and the Affordable Care Act.

D. Application of the PHS Act and the Affordable Care Act

    In clarifying the general applicability of the PHS Act and the 
Affordable Care

[[Page 7771]]

Act to student health insurance plans, this proposed regulation would 
also specify that a limited number of requirements of the PHS Act and 
the Affordable Care Act are inapplicable to student health insurance 
coverage. Section 1560(c) of the Affordable Care Act provides that 
``[N]othing in this title (or an amendment made by this title) shall be 
construed to prohibit an institution of higher education (as such term 
is defined for purposes of the Higher Education Act of 1965) from 
offering a student health insurance plan, to the extent that such 
requirement is otherwise permitted under applicable Federal, State, or 
local law.'' The Department interprets this provision of the Affordable 
Care Act to mean that if particular requirements in the Affordable Care 
Act would, as a practical matter, have the effect of prohibiting an 
institution of higher education from offering a student health plan 
otherwise permitted under Federal, State or local law, such 
requirements would be inapplicable pursuant to the rule of construction 
in section 1560(c).
    The Department has identified several provisions in the PHS Act and 
the Affordable Care Act that we believe would have this effect and 
several others that might have this effect.
    For example, the PHS Act guaranteed availability and guaranteed 
renewability requirements are incompatible with plans that, by 
definition, are restricted to individuals enrolled as students in 
institutions of higher education and their dependents. As explained 
below, the proposed regulation would construe these provisions as 
inapplicable to student health insurance coverage, for purposes of 
Federal law, so as to avoid conflict with section 1560(c) of the 
Affordable Care Act. The PHS Act and implementing regulations make 
clear that guaranteed issue and guaranteed renewability requirements 
are inapplicable to bona fide association plans that, like student 
health plans, are limited by definition to a defined pool of 
beneficiaries. This rule proposes to construe student health insurance 
coverage to be offered through a bona fide association for this 
purpose.\6\
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    \6\ See 45 CFR 148.120(g)(2) and 148.122(c)(5), which exempts 
bona fide associations from the guaranteed issue and guaranteed 
renewability requirements, respectively.
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    Under this proposed regulation, student health insurance coverage 
would be subject to the individual market requirements of the PHS Act 
and the Affordable Care Act, with the exception of those specific 
provisions that are identified in this proposed rule. The specific 
provisions which would be inapplicable to student health plans are 
discussed below. We also discuss other Affordable Care Act requirements 
that may so impede the offering of student health plans that they may 
also be found inapplicable pursuant to section 1560(c) of the 
Affordable Care Act. We solicit comments as to whether this is the case 
with respect to these latter requirements.
1. Guaranteed Availability and Guaranteed Renewability
    Section 2741(a) of the PHS Act generally requires health insurance 
issuers that offer coverage in the individual market in a State to 
offer coverage to certain eligible individuals,\7\ and prohibits 
imposing any preexisting condition exclusion with respect to such 
individuals.\8\
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    \7\ For purposes of PHS Act sections 2741 and 2744, an eligible 
individual is defined in PHS Act section 2741(b). These eligible 
individuals, also referred to as ``HIPAA eligible'' individuals, 
meet certain criteria including having recently lost group health 
coverage and having at least 18 months of prior creditable coverage. 
See 45 CFR Sec. Sec.  148.103 through 148.128.
    \8\ We note that the guaranteed availability requirement of PHS 
Act section 2741(a)(1) does not apply in States that are 
implementing an acceptable alternative mechanism for HIPAA eligible 
individuals under section 2744 of the PHS Act. In those States, 
State law provides alternative ways to guarantee coverage to 
eligible individuals. We doubt that such mechanisms require student 
health insurance coverage to be sold to HIPAA eligible individuals 
who otherwise would not qualify. However, if they do, we encourage 
such States to revise their mechanisms so that it would not be 
required.
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    Section 2742 of the PHS Act requires a health insurance issuer that 
provides individual health insurance coverage to any individual to 
renew or continue the coverage in force at the option of the 
individual. This requirement applies regardless of whether the 
policyholder obtained the coverage as an eligible individual.
    As previously indicated, both the guaranteed availability and 
guaranteed renewability requirements provide an exception for coverage 
that is offered through a bona fide association. (See PHS Act sections 
2741(e)(1) and 2742(b)(5) and Sec. Sec.  148.120(g)(2) and 148.122 
(c)(5).) \9\
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    \9\ Section 2741(e)(1) of the PHS Act provides that ``the 
provisions of subsection (a) of this section shall not be construed 
to require that a health insurance issuer offering health insurance 
coverage only * * * through one or more bona fide associations * * * 
offer such health insurance coverage in the individual market.'' 
Section 2742(b)(5) of the PHS Act provides that, in the case of 
health insurance coverage that is made available in the individual 
market only through one or more bona fide associations, the 
membership of the individual in the association ceases but only if 
such coverage is terminated under this paragraph uniformly without 
regard to any health status-related factor of covered individuals.
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    Because application of the guaranteed issue and guaranteed 
renewability requirements would be inconsistent with the provision of 
student health plans, this proposed regulation would construe student 
health insurance coverage for purposes of Federal law as falling within 
the bona fide association exception as provided in PHS Act sections 
2741(e)(1) or 2742(b)(5). Such plans, by definition, meet the criteria 
described in sections (2) through (5) of the definition of a bona fide 
association, contained in 45 CFR 144.103. This is because student 
health insurance coverage is provided in a manner similar to a bona 
fide association since it only offers enrollment to a closed class of 
similarly situated individuals (that is, students and their dependents) 
and is only renewable to individuals who remain enrolled in colleges 
and universities as students and their dependents.\10\
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    \10\ The full definition of a bona fide association is as 
follows: Bona fide association means, with respect to health 
insurance coverage offered in a State, an association that meets the 
following conditions:
    (1) Has been actively in existence for at least 5 years.
    (2) Has been formed and maintained in good faith for purposes 
other than obtaining insurance.
    (3) Does not condition membership in the association on any 
health status-related factor relating to an individual.
    (4) Makes health insurance coverage offered through the 
association available to all members regardless of any health 
status-related factor relating to the members (or individuals 
eligible for coverage through a member)
    (5) Does not make health insurance coverage offered through the 
association available other than in connection with a member of the 
association.
    (6) Meets any additional requirements that may be imposed under 
State law.
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    In construing student health insurance coverage as bona fide 
association plans for purposes of these two sections of the PHS Act, we 
do not propose to apply the first criterion in Sec.  144.103, which is 
that the association must have been actively in existence for at least 
five years. That criterion is designed to reinforce the requirement 
that an association has been formed for purposes other than obtaining 
insurance. However, since it is highly unlikely that an institution of 
higher education would, or even could, be formed only for the purpose 
of obtaining insurance, we do not believe it is necessary to bar 
institutions of higher education that have not yet been in existence 
for five years from providing student health insurance coverage.
    We would also note that the sixth criterion (meets any additional 
requirement imposed by State law) simply duplicates one of the criteria 
under the proposed definition of

[[Page 7772]]

student health insurance coverage, so it would also be construed to be 
satisfied for this purpose.
    This would be an automatic, construed status for purposes of 
Federal law, intended solely to allow student health insurance coverage 
to be limited to students and their dependents, without imposing any 
availability requirements for non-students, or renewability 
requirements after an individual has ceased to be a student, similar to 
how bona fide association coverage is limited to association members. 
This construed status does not require health insurance issuers 
offering student health insurance coverage to revise or amend their 
current business or marketing agreements and practices.
2. Annual Limits
    Section 2711 of the PHS Act prohibits group health plans and health 
insurance issuers offering group or individual health insurance 
coverage from establishing lifetime limits on the dollar value of 
essential health benefits \11\ and restricts annual dollar limits on 
such benefits before 2014 for group health plans and non-grandfathered 
individual market plans. For plan or policy years beginning on or after 
January 1, 2014, annual dollar limits will be prohibited on essential 
health benefits. Interim final regulations published on June 28, 2010 
implement the prohibition on lifetime dollar limits and set forth 
restrictions on annual dollar limits that apply prior to 2014 (75 FR 
37188). Under the annual limits interim final regulations, annual 
limits on the dollar value of essential health benefits generally 
cannot be lower than: $750,000 for plan or policy years beginning on or 
after September 23, 2010 but before September 23, 2011; $1.25 million 
for plan or policy years beginning on or after September 23, 2011 but 
before September 23, 2012; and $2 million for plan or policy years 
beginning on or after September 23, 2012 but before January 1, 2014.
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    \11\ Section 1302(b) of the Affordable Care Act defines 
essential health benefits to ``include at least the following 
general categories and the items and services covered within the 
categories: ambulatory patient services; emergency services; 
hospitalization; maternity and newborn care; mental health and 
substance use disorder services, including behavioral health 
treatment; prescription drugs; rehabilitative and habilitative 
services and devices; laboratory services; preventive and wellness 
services and chronic disease management; and pediatric services, 
including oral and vision care.''
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    Many issuers that have provided student health insurance coverage 
customarily imposed low annual limits on the student health insurance 
coverage, and this practice apparently continued after the enactment of 
the Affordable Care Act and publication of the interim final rules 
because of the view by issuers that many of these policies were not 
subject to the Affordable Care Act because they were short-term limited 
duration insurance. As noted above, for plan years beginning after 
September 23, 2011, the minimum annual limit is $1.25 million, a level 
which, if applied immediately to student health insurance coverage, is 
so much higher than many current limits that it could serve to 
``prohibit an institution of higher education * * * from offering a 
student health insurance plan.'' In order to avoid this and be 
consistent with section 1560(c) of the Affordable Care Act, HHS is 
proposing to provide a transition period for issuers of student health 
insurance coverage to comply with the annual limits requirements in 45 
CFR 147.126. The transition period would be for policy years beginning 
before September 23, 2012. For that period, however, students and their 
dependents should have protection from being subjected to extremely low 
annual dollar limits on essential health benefits. Accordingly, student 
health insurance coverage would be required to have an annual limit of 
no less than $100,000 on essential benefits for policy years beginning 
on or after January 1, 2012 but before September 23, 2012. HHS believes 
that issuers of student health insurance coverage should be able to 
fully comply with the annual dollar limits requirements of not lower 
than $2 million for policy years beginning on or after September 23, 
2012 without incurring undue financial hardship or without disruption 
to the student health insurance market given the period of time 
provided under this proposed rule for them to comply with the 
requirements. HHS is requesting comments on the applicability of the 
annual dollar limits requirements to student health insurance coverage, 
and the proposed phase-in of the annual dollar limits requirements.
    Lastly, under the proposed regulation, the prohibition on lifetime 
limits under section 2711 of the PHS Act would be applicable to student 
health insurance coverage.
3. Coverage of Preventive Services
    Section 2713 of the PHS Act requires that a group health plan and a 
health insurance issuer offering group or individual health insurance 
coverage provide benefits for specified recommended preventive services 
and prohibits the imposition of cost-sharing requirements with respect 
to such services. Interim final regulations published on July 19, 2010, 
implemented rules for preventive health services (75 FR 41726). 
Concerns have been raised as to whether certain administrative fees 
charged to all students to help cover the cost of student health clinic 
operations and care delivery (separate from the purchase of student 
health insurance coverage by a subset of students) constitutes ``cost-
sharing,'' the imposition of which could violate the no cost-sharing 
requirements for certain preventive services. Such student health fees 
can be charged by the college or university to all students on a 
quarterly, semester or annual basis, regardless of whether a student 
utilizes a designated clinic or enrolls in student health insurance 
coverage. This type of student health fee is different from premiums 
and cost-sharing for group health plans and health insurance coverage 
in that it is charged to all students enrolled at the college or 
university, regardless of whether the student has student health 
insurance coverage. As a type of individual health insurance coverage, 
student health insurance coverage must comply with the requirements for 
preventive health services under section 2713 of the PHS Act, 
pertaining to the prohibition of cost-sharing for preventive services. 
However, because of the unique nature of the student health fee, the 
proposed rule would provide a definition of a student administrative 
health fee and clarify that such fees are not cost-sharing requirements 
under PHS Act section 2713.
    HHS is requesting comments on the applicability of section 2713 to 
student health insurance coverage and the interaction of the college 
health fee and the no cost-sharing requirement for preventive services.
4. Choice of Health Care Professional
    Section 2719A of the PHS Act provides that if a group health plan, 
or a health insurance issuer offering group or individual health 
insurance coverage, requires or provides for designation by a 
participant, beneficiary, or enrollee of a participating primary care 
provider, then the plan or issuer must permit each participant, 
beneficiary, or enrollee to designate any participating primary care 
provider who is available to accept the participant, beneficiary, or 
enrollee. Interim final regulations published on June 28, 2010 
implemented rules for choice of health care professional (75 FR 37188). 
Concerns have been expressed by stakeholders representing colleges and 
universities that the provisions relating to choice of health care

[[Page 7773]]

professional could be disruptive to the college health service system 
since it is a unique system which, although it is generally not 
indemnity coverage, is not structured like a traditional HMO or a PPO.
    The proposed rule does not provide that the requirements of section 
2719A would be inapplicable to student health insurance plans, but HHS 
is requesting comments on the applicability of the requirements for 
choice of health care professional to student health insurance coverage 
and the interaction with the college health service system.
5. Affordable Care Act Provisions Effective in 2014
    HHS does not address in this proposed rule the applicability of PHS 
Act section 2702 (guaranteed issue) and section 2703 (guaranteed 
renewability) to student health insurance coverage, both of which are 
effective in the individual health insurance market for policy years 
beginning on or after January 1, 2014. HHS believes, however, that the 
general policy rationales supporting the inapplicability of PHS Act 
sections 2741 and 2742 to student health insurance coverage in this 
proposed regulation also would apply with respect to PHS Act sections 
2702 and 2703. In addition, HHS could address in future regulations 
whether it would be appropriate to specify that these provisions would 
be inapplicable to student health insurance coverage provisions through 
the authority under section 1560(c) of the Affordable Care Act. Since 
student health insurance coverage is designed to be available and 
renewable only to students of colleges and universities (and their 
dependents), it is likely that requiring student health insurance 
coverage to be available and renewable to individuals other than these 
students could prevent the design and development of student health 
insurance coverage.
    HHS requests comments on the applicability of PHS Act sections 2702 
and 2703 and other 2014 Affordable Care Act provisions to student 
health insurance coverage as defined in this proposed regulation. 
Comments are also requested on the interaction of student health 
insurance coverage with the health insurance Exchanges that will be 
created in States beginning in 2014.
6. Medical Loss Ratio (MLR)
    Some issuers have raised concerns regarding the application of the 
medical loss ratio (MLR) provisions of section 2718 of the Affordable 
Care Act to student health insurance plans. This provision requires 
that, in general, at least 80% (in the small group and individual 
markets) or 85% (in the large group market) of the premiums that 
issuers receive for insurance policies be spent on reimbursement for 
clinical services to enrollees (such as hospital and physician 
payments) and activities that improve health care quality. The issuers 
assert that the administrative cost structure of student health 
insurance plans is higher than the more typical individual policies, in 
part due to the customized nature of each college or university's plan, 
making compliance with the 80% MLR standard potentially prohibitive. 
For example, issuers stated that, compared to other health insurance 
coverage, student health insurance coverage may hold open enrollment 
periods more frequently (for example, each academic term rather than 
annually), require unique product designs (for example, for foreign 
students), and require more manual claims processing than average due 
to the billing and accounting practices of college health clinics. 
There is no public data regarding the actual expense structure of 
student health plans or regarding their MLRs.
    HHS issued an interim final rule (IFR) (75 FR 74864, December 1, 
2010, as modified by the Correction of IFR (75 FR 82277, December 30, 
2010)), implementing section 2718, based on the recommendations in the 
MLR model regulation of the National Association of Insurance 
Commissioners (NAIC). In that regulation, issuers of policies that have 
a total annual limit of $250,000 or less (so-called ``mini-med'' plans) 
and issuers of expatriate plans are required to report their mini-med 
and expatriate plan experience separately from their other policies for 
one year, and, for that one-year period, are provided an accommodation 
in the formula for determining the MLR for those lines of business. 
This was done because mini-med plans and expatriate plans were believed 
to have unique characteristics or expense structures and, as here, 
there is limited data regarding the administrative cost structures of 
these policies. This accommodation was made in order to allow the 
collection and analysis of data to determine if they have special 
circumstances that warrant special methodologies. The MLR IFR does not 
provide a special methodology for student health insurance plans.
    To the extent that the application of the MLR requirements set 
forth in 45 CFR part 158 to student health plans would ``prohibit an 
institution of higher education * * * from offering a student health 
insurance plan,'' as section 1560(c) of the Affordable Care Act 
provides, then student health insurance plans may have unique 
administrative expenses that warrant developing methodologies that take 
such expenses into account in calculating the measure of activities to 
be reported as part of the MLR requirements. HHS is requesting comments 
on PHS Act section 2718 as it relates to student health insurance 
coverage.

E. Notice

1. Requirement
    This proposed regulation would require a health insurance issuer to 
disclose to the student and any dependents in the insurance policy or 
certificate and any other written materials (for example, enrollment 
materials) that the policy being issued does not meet all of the 
requirements under the Affordable Care Act. HHS believes that the 
communication of this information is necessary in order for students 
and any dependents to understand the value and quality of the coverage 
that is being offered to them, and not have expectations that all of 
the requirements under the Affordable Care Act will apply. The notice 
would be required to provide a brief description of the requirements of 
the Affordable Care Act that do not apply to student health insurance 
coverage, and it would be required to be prominently displayed in 
clear, conspicuous 14-point bold type.
    HHS is requesting comments on the notice requirement for student 
health insurance coverage.
2. Model Language
    This proposed regulation would provide model language that can be 
used by health insurance issuers to satisfy the notice requirement. 
This proposed regulation would provide that substantially similar 
language can also be used to satisfy the requirement. HHS is requesting 
comments on the model language.

F. Interaction With State Laws

    As indicated earlier, many States do not regulate student health 
insurance as individual health insurance coverage but as a type of 
association blanket coverage or as non-employer group coverage. 
However, States have been aware, ever since the enactment of HIPAA in 
1996, that health insurance coverage that is not sold in connection 
with employment is individual market coverage for purposes of the 
Federal statute (unless there is a specific exception such as for 
short-term limited duration insurance). The preemption provisions of 
section 2762 of the PHS Act (added by HIPAA and implemented in 45 CFR 
148.210(b)) apply so that the

[[Page 7774]]

PHS Act requirements are not to be ``construed to prevent a State from 
establishing, implementing, or continuing in effect standards and 
requirements unless such standards and requirements prevent the 
application or requirement'' of the PHS Act. The HIPAA conference 
report indicates that this is intended to be the ``narrowest'' 
preemption of State laws. (See House Conf. Rep. No. 104-736, at 205, 
reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
    In applying this preemption standard, a State is free to continue 
to regulate student health insurance coverage as association coverage 
or as a form of group health insurance provided that doing so does not 
prevent the application of any of the applicable requirements and 
protections of the individual market provisions of the PHS Act and 
Affordable Care Act. If any State law or requirement prevents the 
application of a Federal standard, then that particular State law or 
requirement would be preempted. HHS invites comments on the interaction 
of specific State laws or requirements with the Federal standards 
regarding student health insurance coverage.

G. Conforming Amendments

    Conforming amendments were made to the definitions in 45 CFR 
144.103. First, this proposed regulation would clarify that the 
definitions apply to part 147 unless otherwise noted. Second, a 
definition of student health insurance coverage is added, which cross 
references the definition of student health insurance coverage in 45 
CFR 147.145(a).

H. Applicability Date

    The applicability date of the proposed regulation would be for 
policy years beginning on or after January 1, 2012. This is because the 
Department recognizes that health insurance issuers will need time to 
incorporate the requirements of individual health insurance coverage 
under the PHS Act that would apply to student health insurance 
coverage. HHS believes it would be appropriate to provide time for 
transitioning student health insurance coverage to comply with the PHS 
Act and Affordable Care Act to the extent necessary in order to 
maintain the offering of student health insurance coverage to students. 
To require that issuers of student health insurance coverage comply 
with the applicable provisions of the PHS Act and Affordable Care Act 
upon the effective date of the regulation would be disruptive to the 
student health insurance market.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. This 
proposed rule contains information collection requirements (ICRs) that 
are subject to review by OMB. A description of these provisions is 
given in the following paragraphs with an estimate of the annual 
burden, summarized in Table 1. In order to fairly evaluate whether an 
information collection should be approved by OMB, section 3506(c)(2)(A) 
of the Paperwork Reduction Act of 1995 requires that we solicit comment 
on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this proposed rule that contain information 
collection requirements (ICRs).
    Proposed 45 CFR 147.145(d)(1) would require issuers of student 
health insurance coverage to provide notice to enrollees that the 
policy does not meet all of the requirements of the Affordable Care 
Act. In addition, the proposed regulation would require that the 
disclosure must be prominently displayed in clear, conspicuous 14-point 
bold type. Additionally, the proposed regulation provides model 
language that issuers of student health insurance coverage can use in 
order to be in compliance with the notice requirement. The model 
language is provided in proposed 45 CFR 147.145(d)(2).
    In order to provide the notices, the issuers of student health 
insurance coverage will need to review the model language or draft its 
own language, incorporate the plan or issuer's name into the model 
notice (or a notice that is similar to the model), and print the notice 
in any plan or policy documents that are regularly sent to student 
enrollees.
    This burden estimate encompasses the entire notice process which 
includes assembly of the notice. It is estimated that approximately 75 
student health insurance coverage issuers will have to provide such 
notice.\12\ We estimate that it will take approximately 2 minutes per 
student enrollee or approximately 1,000 hours per student health 
insurance issuer to prepare and mail the notices to students. Including 
hourly wage and printing and mailing costs, we estimate the annual cost 
burden will be $40,840 per affected issuer for a total cost of 
$3,063,000. In some cases, actual burden per notice (for example, 
postage) may be lower because we expect that many issuers will insert 
the model language into the existing plan materials that they were 
already intending to send to enrollees each year.
---------------------------------------------------------------------------

    \12\ This estimate is based on data from the 2009 National 
Association of Insurance Commissioners (NAIC) Annual Accident and 
Health Policy Experience Exhibit and the American Council on 
Education (ACE). The 2009 NAIC filings show that there are 58 health 
insurance issuers offering student health coverage; however this 
data does not include managed care plans in California, and may 
include some issuers offering K-12 student accidental health 
coverage. In addition, data from the American Council on Education 
suggests that there are several smaller plans offering student 
health plans.

                                                                 Table 1--Annual Reporting, Recordkeeping and Disclosure Burden
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Burden per                     Hourly labor     Total labor    Total capital/
          Regulation section(s)                 OMB Control No.         Respondents     Responses      response      Total annual       cost of         cost of       maintenance     Total cost
                                                                                                        (hours)     burden (hours)  reporting  ($)   reporting ($)     costs  ($)        ($)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   147.145..........................  0938-New..................               75    2,250,000           .0333          75,000           26.14       3,063,000                0    3,063,000
                                         -------------------------------------------------------------------------------------------------------------------------------------------------------
    Total...............................  ..........................               75    2,250,000  ..............          75,000  ..............  ..............  ...............    3,063,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 7775]]

    If you comment on this information collection requirement, please 
do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Office, 
9998-IFC. Fax: (202) 395-6974; or E-mail: OIRA_submission@omb.eop.gov.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

A. Summary

    As stated earlier in this preamble, this proposed regulation is 
designed to address several issues that have arisen regarding the 
applicability of the Affordable Care Act to student health insurance 
coverage, including how this coverage is categorized under the PHS Act. 
Specifically, the provisions in this proposed regulation clarify which 
protections of the PHS Act and the Affordable Care Act would apply to 
student health insurance coverage, and to what extent students and 
their dependents enrolled in these plans would have the benefit of 
these consumer protection provisions. This proposed rule would define 
student health insurance coverage as a type of individual health 
insurance coverage and specify certain PHS Act and Affordable Care Act 
requirements as inapplicable to this type of individual health 
insurance coverage. These provisions are generally effective for 
student health insurance policy years beginning on or after January 1, 
2012.
    The Department has proposed this regulation to implement the 
protections intended by Congress in the most economically efficient 
manner possible. We have examined the effects of this rule as required 
by Executive Order 12866 (58 FR 51735, September 1993, Regulatory 
Planning and Review), the Regulatory Flexibility Act (RFA) (September 
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive 
Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 
804(2)). In accordance with OMB Circular A-4, the Department has 
quantified the benefits, costs and transfers where possible, and has 
also provided a qualitative discussion of some of the benefits, costs 
and transfers that may stem from this proposed regulation.

B. Executive Orders 13563 and 12866

    Executive Order 12866 (58 FR 51735) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). Executive 
Order 13563 (76 FR 3821, issued on January 21, 2011) is supplemental to 
and reaffirms the principles, structures, and definitions governing 
regulatory review as established in Executive Order 12866.
    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a proposed 
rule: (1) Having an annual effect on the economy of $100 million or 
more in any one year, or adversely and materially affecting a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or Tribal governments or communities 
(also referred to as ``economically significant''); (2) creating a 
serious inconsistency or otherwise interfering with an action taken or 
planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year), and a ``significant'' regulatory action is subject to review by 
the Office of Management and Budget (OMB).
    As discussed below, we have concluded that this proposed rule would 
likely not have economic impacts of $100 million or more in any one 
year or otherwise meet the definition of an ``economically significant 
rule'' under Executive Order 12866. Nevertheless, the Department has 
opted to provide an assessment of the potential costs, benefits, and 
transfers associated with this proposed regulation. This assessment is 
based primarily on the estimated administrative costs to issuers 
associated with providing the required notifications to student health 
plan enrollees. As discussed below, we believe that this proposed rule 
will have a minimal effect on premiums. The Department invites comments 
on this issue.
1. Need for Regulatory Action
    In order to address several issues that have arisen regarding the 
applicability of the Affordable Care Act to student health insurance 
coverage, including how this coverage is categorized under the PHS Act, 
this proposed rule proposes that student health insurance coverage will 
be defined as a type of individual health insurance coverage and, with 
the exception of certain specific provisions, be subject to the 
individual market requirements of the PHS Act and the Affordable Care 
Act. As discussed elsewhere in the preamble, in clarifying the general 
applicability of the PHS Act and the Affordable Care Act to student 
health insurance coverage, this proposed regulation would also specify 
that a limited number of requirements of the PHS Act and the Affordable 
Care Act are inapplicable to student health insurance coverage. Section 
1560(c) of the Affordable Care Act provides that ``[N]othing in this 
title (or an amendment made by this title) shall be construed to 
prohibit an institution of higher education (as such term is defined 
for purposes of the Higher Education Act of 1965) from offering a 
student health insurance plan, to the extent that such requirement is 
otherwise permitted under applicable Federal, State, or local law.'' 
The Department interprets this provision of the Affordable Care Act to 
mean that if particular requirements added by the Affordable Care Act 
would, as a practical matter, have the effect of prohibiting an 
institution of higher education from offering a student health plan 
otherwise permitted under Federal, State or local law, such 
requirements would be inapplicable pursuant to the rule of construction 
in section 1560(c). As discussed elsewhere in the preamble, based on 
factual information provided by stakeholders representing colleges and 
universities and students, the Department has determined that if 
insurance meeting the definition of student health insurance coverage 
were required to comply with all of the market reform provisions of the

[[Page 7776]]

Affordable Care Act, this would be the functional equivalent of 
``prohibiting'' the educational institutions from making such coverage 
available to students. This proposed rule specifies that the 
requirements of the PHS Act relating to guaranteed availability and 
guaranteed renewability would be inapplicable to student health 
insurance coverage; would clarify that student administrative health 
fees are not cost-sharing requirements under section 2713 of the PHS 
Act; and would provide for a transition period for issuers of student 
health insurance coverage to comply with the restricted annual dollar 
limits requirements under the Affordable Care Act. The Department 
believes that the clarifications that are included in this proposed 
rule are necessary to facilitate the offering of student heal