A primer on school health insurance
That school health insurance plan your child brought home when classes started? It's cheap, yes. But read carefully before you buy. it doesn't cover much. If anything at all.
At the beginning of every school year, kids come home with a backpack stuffed with papers. Among the handbook, rules, newsletters and lunch menus is often a K-12 student insurance brochure.
These insurance plans vary from state to state. Some are simple accident plans, which provide accident coverage for students at school, traveling to and from school or while at any school sponsored activity. Others may provide illness coverage that covers the child both in and away from school for illness and injuries, like a typical health insurance policy. Bells and whistles such as additional dental and football coverage are often optional add-ons. And the plans generally come in two or three tiers such as basic, silver and gold coverage.
For example, K-12 Special Markets offers a Gold plan for a $31 annual premium. Dental coverage is an added $7, and optional football coverage is $163 annually. There are lots of exclusions, including fighting or brawling, except in self defense. While 80% of physician services are covered to a $3,000 maximum, a maximum per tooth reimbursement is $600 although an emergency root canal or crown would likely be more than $1,000.
Schools typically contract with an insurance provider and K-12 coverage is a one-size fits all, simple, low cost bare bones policy that could provide some stop gap coverage for parents of kids with no health insurance or as secondary insurance if their primary is very limited. "These are like mini med policies," says Katherine Woodfield, author of Don’t Buy that Health Insurance: Become an Educated Health Care Consumer. "They were never designed to replace full health insurance coverage and they cost a finite amount and pay out a finite amount."
Another such company K&K has been in the K-12 school insurance business for 60 years according to its website. A spokesperson did not return the call for information but its brochures lists a national accident plan with an annual premium of either $83 for a basic plan or $122 for a plan with more coverage. Optional add-ons for summer coverage or football coverage is also available for additional fees.
K&K's plans have no deductibles, which is a plus, and a $25,000 maximum payment per injury. Most covered benefits, however, are extremely low. Surgery coverage is limited to $1,000 and $1,200 for the low and high cost options, respectively, which likely wouldn't cover a fourth of a typical surgery charge. Ditto for laboratory charges, which max out at $50 and $300 for the respective plans, though lab charges often can total $1,000 or more.
"The coverage is limited, particularly the surgery limitation," says Thomas J. Simeone, Esq., a personal injury attorney, law professor and part of Simeone & Miller, LLP in Washington, D.C. who has a lot of experience with school injuries and school lawsuits and has never seen anyone covered under one of these plans. "Note also that it only covers charges that are 'reasonable' and 'U&C' -- meaning what the company determines to be usual and customary." Like any health insurance company, they will fight charges they feel are not usual and customary. "Given how low their premium is, they have a tight profit margin, and will likely deny and fight many claims or individual charges," says Simeone.
Who is best served by school health insurance plans?
In 2011, 9.4% of children under age 18 (7 million children) were without health insurance. For children at the poverty level, uninsured numbers climb to 13.8% according to the Income, Poverty, and Health Insurance Coverage in the U.S. Census report.
These policies may be a way for poor parents to provide some type of health coverage for their kids. Or if you have very limited health insurance coverage, these types of policies could provide a little more comfort. There are usually no deductibles, which is a benefit. But they won't be practical for most parents whose children are already covered by health insurance.
"Insurance is like any other business -- you get what you pay for," says Simeone. A company willing to write a policy for such low premiums per year after actuarial evaluation of the risk, most likely says that the company is not paying many claims, Simeone speculates. Either there aren't a lot of injuries or they aggressively deny claims.
What's more, come January 2014 when the Patient Protection and Affordable Care Act takes effect, these policies may all but wither and die. Not only will half the states expand Medicaid coverage, which may enable many more children to receive subsidized benefits, but these policies also are not considered minimum essential coverage under health reform, explains Warren Kingsley, Esq. partner and employee benefits expert at Arnall, Golden & Gregory in Atlanta. That means parents would still need to purchase another health plan for their children if they have no other coverage.
"This insurance historically has been add-on insurance. People buy it without thinking," says Kingsley. Parents who already have coverage buy it anyway because they think it will provide them some more. Others who don’t realize their children qualify for a state assisted health program may also buy in. And those who won’t qualify for Medicaid, yet still may find insurance too expensive on the state run online health exchange may still gravitate toward these policies.
What should parents know before signing up for a school health insurance plan?
- You don't have much to lose if your child isn't covered by any other plan until January 2014.
- If your primary plan doesn't provide much coverage, these plans may provide additional cushion for very little money.
- Some plans have language making them secondary to other plans. Parents should check their health insurance policy to make sure it does not make itself secondary to these plans. If it does, then they should not get one of these plans because they would simply be paying for what they already have.
- Many incidents disqualify coverage including fighting, rioting, alcohol or drug involvement and others. Be sure to check the list of exclusions.
- Be sure to check if your state offers a state assisted child health program or if your child qualifies for Medicaid or will in 2014.
- You may only want to use these plans until January 2014 when you‘ll be able to shop for a low cost plan on your state's health exchange.
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