Ryan Nelson: Lifetime, pharmacy care caps on UC SHIP should be removed

In Oakland, the University of California Office of the President has been engaged in deliberations over a cap on health.

Through the university’s attempts to restructure the Student Health Insurance Plan, or UC SHIP, a spotlight has been placed on the plan’s two primary caps: the pharmacy and lifetime care cap. Insurance caps, or maximums on the amount an insurance plan or company will pay out for a certain type of coverage, have generally been used as a way to reduce insurer liability.

Under President Barack Obama’s new Affordable Care Act, all private insurance companies must remove caps in their future plans. However, self-insured student health care plans, including UC SHIP, were exempt from removing lifetime and pharmacy caps.

In order to bring UC SHIP to par with new national health care standards, the University of California should remove the caps on lifetime and pharmacy care, while also removing, or at least significantly raising, the cap on other benefits.

For example, UC SHIP places a cap on pharmaceutical charges to the tune of $10,000. Since the cap is in place, that means a student’s insurance will help cover his prescription drug costs up to $10,000. After that, the patient must pay for his own prescriptions.

For the average student who receives the occasional antibiotic, the deal is more than enough to subsidize costs.

For students with illnesses that cause them to exceed the cap, the costs can add up quickly, adding undue strain to their finances. Lifetime caps are the total paid benefits that UC SHIP will cover over a student’s tenure at UC. The cap varies per campus, but most cover up to $400,000 in benefits.

The UC SHIP advisory board, a body made up of students and health care representatives, voted recently to recommend the removal of the caps. Some in California’s state legislature have also recognized the need to do away with the caps and have proposed Assembly Bill 314, which would require UC SHIP to conform to all cap eliminations under the Affordable Care Act.

Voluntarily removing the caps on pharmaceuticals and lifetime coverage before they are legislatively forced to would create a feeling of goodwill between the students and the university. In addition, preemptively eliminating or significantly raising the caps on certain benefits such as newborn care would mark a huge step in the process of providing comprehensive health care necessary for the population UC SHIP serves.

Of course, everything boils down to cost. When considering the cap removals, the university could point to the fact that based on data from previous years, relatively few students exceeded the caps.

Based on a UC SHIP report using data from August 2011 through July 2012, a total of 150 students exceeded the pharmacy cap, while only 12 overdrew the lifetime benefit cap. Is it fair to raise premiums on everybody to support an initiative that would benefit fewer than 200 students?

If you ask one chancellor, yes. Chancellor Robert Birgeneau of UC Berkeley, in a March 2013 letter to UCOP, estimated that the cost for raising both caps would be about an annual $39 premium hike for undergraduate students, or about a 2 percent raise for Berkeley students. UCOP estimated an increase of about 3.2 percent in the overall premium cost if the caps were removed. Still, for UCLA undergraduate students, that would translate to about a $50 increase in premiums. The premiums would kick in the year the caps are removed.

Even though $50 may seem steep, it would effectively safeguard students against a potential loss of thousands because of sudden sickness.

To put this in an even broader context, that additional $50 would come on top of likely premium increases that will be necessary to cover UC SHIP’s documented operational deficit of $57 million. But even if it adds to the increase, students should not accept a health care plan that does not provide them with the same coverage other Americans must receive by law.

By continuing to place financial limits on assistance, the university is actively sending the message that a ceiling exists for a person who needs help. It’s wise to be cost conscious, but the UC should not engage itself in the insurance business if it finds that it has the inability to match the quality of care demanded by law. Removing the caps on pharmacies and lifetime coverage would be a huge step toward showing the students the UC is serious about their health.

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