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ACA & The Rise of Mandatory Student Accident Policies

Due to the changes in the Affordable Care Act’s minimum standards of care more colleges and universities are searching for solutions due to escalating costs. Part of the major legislation of the ACA was that all health insurance plans needed to conform to minimum levels of coverage. The challenge became that many colleges & universities were no longer able to design their student programs as “catastrophic only” and had to provide a baseline of coverage that is more in line with traditional health insurance programs. As a result, premiums for student health plans have increased from premiums as low as $300 per year, per student to in some cases $2,000 per year, per student.

Furthermore, the risks of accidents & injuries resulting from interscholastic/intramural sports, study abroad programs, campus outreach events, and the general accident prone nature of college age students puts administration in a difficult situation – does the institution wish to provide no fault coverage to provide a minimum standard of care or do they want for the injured party to have to demonstrate negligence on behalf of the college to recoup medical expenses? What is the institution’s financial responsibility to the student? Is there a way to encourage goodwill towards the student but not negatively impact the casualty insurance program?

The purpose of this article is to discuss why it might be prudent for your college or university to purchase these policies, how they function, ease administrative burdens, encourage goodwill between the institution and students, protect your casualty insurance program, and discuss the different types of student accident programs.


What is student accident coverage?
Very simply, the coverage is medical expense benefits for accidental injuries. Coverage limits are typically between $1,000 & $25,000 per incident, per student. Coverage can be written for school time only, 24 hour, and can include pre-existing benefits, HMO/PPO benefits, and heart & circulatory benefits. Premiums are calculated on a per student, per semester basis.


Easing administrative burdens
One of the most significant challenges of dealing with your student population's health and welfare is the knowing what level of coverage they have while they are at your school. Even the most well-intentioned administrative staff cannot keep track of each student's health insurance status. A student accident policy allows for knowledge of the minimum coverage offered to a student attending your school.

As we will discuss later, there are pitfalls to allowing your commercial general liability to be the primary source for handling student accidents. Claims made through the commercial general liability policy require constant contact and involvement of school staff and administration. An accident policy allows for claims handling to be done directly between the company paying the claim and the claimant. Once the claim has been processed by the company your staff is free of the process.

Most institutions also ease the administrative burden of paying the premium just by including it within the normal fee structure of the student’s costs. Some programs cost as little as $15 per student per semester and therefore the cost is nominal to the students.


Goodwill with students
As with any school your reputation with current students and their parents is important, but so is your reputation with future student and parents. How a school handles accidents and injuries on campus can have a direct impact on the view the community at large has towards your institution. In this regard, a student accident policy is a 1st party policy that can have a positive effect on public relations.

Student accident policies provide 1st party benefits that handle claims without regard to liability. A 1st Party Policy is also a way of saying “no-fault” and that the coverage trigger does not require a 3rd party to have negligence that caused the accident. In other words, the claimant doesn't need to prove XYZ College as negligent in how it maintained its sidewalk, if the student just fell due to clumsiness – the policy will pay out up to its limit of liability. This can be extremely helpful at the time of an injury as it provides students a quick turnaround and claim payout.

If there is no Student Accident Policy in place it can place the college or university in a difficult position relationally with the student. In order for the Commercial General Liability policy to respond it must be triggered with an allegation of negligence. For monies to be awarded, the burden is on the student to show the school's negligence. Adjusters & attorneys typically need to be involved to determine negligence and payment. Though in the case of very significant injuries this may be the best course of action, the typical accident/injury claim can simply be resolved through handling basic medical bills. By allowing for a quick and simple process a school can help generate goodwill from the parents and future parents.

Accident policies also work well in conjunction with health insurance plans. A growing trend in the health insurance marketplace is high deductible health insurance plans. For example, a student might be under their parent or guardian’s plan but be subject to a $3,000 annual deductible. Student accident policies are typically written on an excess basis in which they supplement the out-of-pocket expenses. In the scenario of a student needing a trip to the ER and subsequent treatment they may very well approach the annual deductible in one visit. A Student Accident Policy could pay for the entire amount of the out-of-pocket expense.

Creating a process that helps quicken and simplify the claim process for students and adding to it the ability to help supplement the health insurance they may already have, we lessen the likelihood of costly litigation against the institution. This is not to say that it will eliminate litigation, but when students feel well cared for one would assume they may be less likely to engage attorneys to help remedy their situation.


Protecting loss ratios for liability policies
Proper risk management strategy identifies and assesses the risk and then either avoids, reduces, shares, or retains that risk. The risk of student injuries/accidents to an institution can be both reputational and financial. A Student Accident Policy can share some of that risk with a specific insurance carrier without affecting the primary casualty program. This both helps improves the school’s risk profile and protects the loss ratio of the casualty program. These factors in sum can lead to lower priced casualty programs.

As a side note, be sure to check your Commercial General Liability & Umbrella/Excess policies to clarify if the policies cover claims associated with athletics – many carriers are attempting to put exclusionary endorsements on all athletic activities. The industry expects to see a rise in athletic related injuries that find colleges and universities negligent for failing to properly care for student athletes. If professional leagues who have billions of dollars to protect their brands, assets, and provide the best medical care have problems handling concussions and other head injuries, it stands to reason that colleges and universities are even more susceptible to these types of lawsuits. We expect more carriers to begin trying to limit coverage for this liability.


Different Types of Programs
Mandatory vs. Voluntary - The types of programs that you can offer will sometimes vary in their coverage limits, but one of the most significant decisions that needs to be made is if the institution will offer Mandatory or Voluntary programs for students. Voluntary programs can provide the limits that you would want, but it does not allow you to have certainty of coverage for each of your students, therefore no known minimum limits of insurance coverage. Secondly, these programs are typically more expensive as the insurance company does not know the total amount of purchased programs it will provide and therefore will have a higher premium on a per student basis. Mandatory programs provide the institution with the peace of mind that each student has a minimum coverage limit, but it also provides the insurance company with a known premium quantity and this drives down the overall cost per student.

School Time Only vs. 24-Hour Coverage – All coverage options provide coverage for students while on campus and participating in university sponsored events/outings (School Time Only). Some colleges and universities carry the coverage one step further and provide 24-Hour Coverage. This can help eliminate any discrepancy if the student was engaging in a sponsored event, traveling, etc. The typical cost of 24 Hour coverage is 25-35% higher than School Time Only, but again that needs to be weighed against the potential goodwill it would provide to parents and students to know that even if they are off campus or not participating in a school sponsored event that they have minimum coverage limits for accidents and injuries and that it will still respond as a supplement to their health insurance at those times also.


Conclusion
Each institution needs to evaluate their exposure versus the potential benefits and parental goodwill that a student accident policy can provide. In an ever increasingly litigious society the need for proper risk management, risk transfer and positive PR need to be evaluated. A review of the options available for your college or university can be provided and assessments made to help better educate and prepare you for potential student accidents and injuries. If you have any questions or would like a review of how these types of programs would work for your institution please contact our office for further assistance.