NEW YORK, N.Y. (April 8, 2010) - Attorney General Andrew M. Cuomo today revealed troubling practices uncovered in his investigation of the school-sponsored student health insurance industry. Cuomo’s office has subpoenaed ten of the largest insurers of students and five insurance brokers, agents, and consultants as part of the investigation.

In a letter sent to more than 300 colleges, universities, professional schools, and trade schools, Cuomo cautioned schools to review their sponsored student health insurance plans and alter potential problems that add gratuitous expenses and put students at risk. The Attorney General’s letter was sent to schools across New York and to certain out-of-state institutions attended by New York residents.

Many colleges and universities require students to purchase a school-endorsed, private health insurance plan unless students prove that they have comparable insurance coverage. The Attorney General’s investigation revealed that many of the school-endorsed plans have extremely low coverage limits, excessive costs for the coverage provided, and inconsistencies with federal protections recently signed into law.

“Many of the sponsored health care plans looked at during our investigation leave students at risk while providing massive profits for insurance companies,” said Attorney General Cuomo. “It is important for students to have adequate health care coverage to protect themselves during times of illness or injury, but a bad health insurance plan can have catastrophic and long-lasting effects on a young person’s life. By being informed of the problematic practices that currently exist in the industry, schools can negotiate for better health plans, and students and their families can be better equipped to select the coverage that is best for them.”

The school-sponsored student health insurance industry generates over $1 billion of revenue per year. Approximately 1,000,000 college students obtain their health insurance through school-sponsored plans nationwide. With these plans, students pay annual premiums for individual coverage that can be as low as under $100 or as high as over $2,500. Over two-thirds of private colleges and universities and almost one-quarter of public colleges and universities require that their students either purchase the school-sponsored plan or have their own “comparable” health insurance.


The Attorney General’s investigation revealed that many school-sponsored student health plans have limitations and exclusions that put college students and their families at risk of facing catastrophic costs for medical care. Some plans have exclusions for pre-existing conditions, leaving many students with such conditions completely uncovered for any related treatments. Some plans require students with pre-existing conditions that are uncovered to purchase the plan at its full price. Many plans also have extremely low coverage limits. For example, some plans cap all coverage at less than $25,000, while others have per-illness caps of as low as $700. Additionally, many plans either fail to include prescription drug coverage or limit such coverage to an inadequate level.

The investigation revealed that in addition to providing limited coverage, many school-sponsored plans are unnecessarily costly. In many cases the amount of claims paid out by the insurance company is only a fraction of the premiums students pay, resulting in excessive profits for the insurance companies.

The investigation also exposed troubling conflicted relationships between agents and health insurers involving undisclosed contracts that created incentives for the agents to work against the best interests of students and to persuade schools to take and maintain overly costly plans.


The Attorney General’s letter advised colleges and universities to review their policies related to student health insurance coverage and to modify them, if warranted, to ensure that they sponsor fair plans. The letter included the following suggestions for schools:

* Provide adequate coverage. Schools that require or offer sponsored health insurance should sponsor a plan that provides adequate medical and prescription drug coverage with no annual, lifetime, per-illness, or per-injury caps.
* Maintain Appropriate Loss Ratios. Schools with plans that have consistently low loss ratios - the losses paid out by the insurer expressed as a percentage of the premiums paid by the insured - should look for better coverage for their students. Schools should look for coverage with a target loss ratio of at least 85%, which is now mandated by federal law.
* Control Relationships with Insurance Brokers, Agents, and Consultants. Schools that retain insurance brokers, agents, or consultants to help them select and negotiate with student health insurers should preferably pay these intermediaries on a fee basis - rather than through commissions based on premiums - to reduce the possibility that conflicts of interest may arise. The intermediaries should agree to disclose to the school any quotes they receive from student health insurers and any fees or commissions that they would receive. The intermediaries should base their insurance recommendations solely on what would be in the best interest of the school’s students.
* Prohibit Remuneration to Employees and to the School. Schools should prohibit school employees who are involved in the selection of health insurers or brokers, agents, or consultants from accepting anything of value - personally or on behalf of the school - from student health insurers or intermediaries. Schools should not accept anything of value from student health insurers or intermediaries in exchange for any advantage or consideration provided by the student health insurer or the intermediary.
* Adequately Disclose Cost of Mandatory Coverage. Schools that require students to purchase their sponsored insurance plan should clearly and conspicuously disclose this fact in admissions and acceptance materials, as well as the annual cost of the insurance plan. These schools should also reevaluate whether mandating enrollment in the school-sponsored plan is in their students’ best interests.
* Reject Exclusions. Schools should not require or offer school-sponsored student health insurance that excludes coverage for pre-existing conditions or preventative care, or that includes unlawful or improper coverage exclusions.

Cuomo’s letter also notes that since college students who purchase insurance are a generally healthy population, schools have strong bargaining power to ensure that the school-sponsored plan provides sufficient, fairly-priced coverage.

As part of the investigation, the Attorney General issued subpoenas to the following insurers, which are among the largest insurers of students in the nation: Aetna Inc.; United Healthcare Insurance Company; Gerber Life Insurance Company; Markel Insurance Company; Beech Street Corporation (PPO); United States Fire Insurance Company; Combined Life Insurance Company of New York; National Union Fire Insurance Company of Pittsburgh, PA; Security Mutual Life Insurance Company of NY; and Commercial Travelers Mutual Insurance Company.

The Attorney General also issued subpoenas to the following insurance brokers, agents, and consultants: University Health Plans, Inc. (broker); Niagara National Inc. (agent); Haylor, Freyer & Coon, Inc. (agent); The Bailey Agencies (agent); and Mercer Health & Benefits LLC (consultant).


Since 2007, Attorney General Cuomo has led a nationwide investigation into the student lending industry, resulting in massive reforms that prohibited bad practices at institutions of higher education throughout the United States. Cuomo’s investigation has resulted in settlements with the largest student lenders in the country and 28 schools. The settlements have resulted in the return of over $3.5 million dollars to students and their families. Cuomo also established a multimillion dollar national education fund that is dedicated to educating the country’s high school students and their families about the financial aid process. Furthermore, Cuomo’s Code of Conduct for the industry was codified into New York State law as the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007 and became national law as the federal Higher Education Opportunity Act of 2008.

After finding troubling practices in the student loan industry, the Attorney General’s office began examining other areas where students may be required or strongly persuaded to purchase particular products or services because schools limit their choices.

Cuomo’s investigation of school-sponsored student health plans is ongoing.

Attorney General Cuomo has launched a Web site to inform students, parents, and schools about his investigation into school-sponsored health insurance plans: The text of the letter sent to schools is also available at the website.

The Attorney General encourages students who have encountered problems with school-sponsored health plans to contact his office. Schools that wish to share concerns regarding particular insurers, brokers, or consultants may also contact his office. Information pertaining to this investigation can be relayed via telephone at 800-771-7755 or via e-mail at

The student health insurance investigation is being handled by Special Counsel Carolyn Fast, Assistant Attorneys General Melvin Goldberg, Brian Montgomery, Laura Levine, Benjamin Lee, Stephanie Sheehan, Harkiranjit Chahal, and Ellen Fried, under the supervision of Chief of the Bureau of Consumer Frauds & Protection Joy Feigenbaum.