Obamacare loophole threatens UC students

by Nanette Asimov and Victoria Colliver, San Francisco Chronicle

Life was great for Kenya Wheeler in the spring of 2011. He’d just enrolled in a UC Berkeley master’s program in city planning and had won a research position that would pay his fees. Healthy as a horse, he biked to campus every day.

A year later, a cancer diagnosis had changed everything. Wheeler, 38, had so many medical bills that he reached the $400,000 limit allowed by his UC student health plan. He scheduled a hasty wedding with his girlfriend in March so he could continue receiving life-saving chemotherapy through her insurance.

"I didn’t know when I was diagnosed that I would be in for a battle to fight my cancer – and for my medical care," Wheeler told the UC regents at this month’s meeting in San Francisco.

Health care limits like the one imposed by UC are already illegal under the sweeping federal health-care law – dubbed Obamacare – that takes full effect next Jan. 1. But the health care act does not apply to "self-funded" college plans like UC’s, in which the university takes on the financial risk of medical claims.

Now, thousands of UC students are demanding through a petition drive that the university voluntarily lift its insurance caps.

"There’s a loophole in Obamacare that exempts (self-funded) student health plans," doctoral student Charlie Eaton of the UC Student Employees Union told the regents. "We ask you to voluntarily drop the caps this year. We don’t want anyone to have to go through what Kenya has gone through."

UC officials say they’re weighing their options but are hesitant to voluntarily lift the caps until they know what it would cost – and how much they’d have to raise the price of student health care to pay for it.

"It’s a front-burner issue," said Peter Taylor, UC’s chief financial officer, who became aware of the problem last summer. "We’re not making a profit on (student health care) – but I can’t afford to lose money, either."

Self-funding benefits

Universities have long offered student health coverage to make sure their students have access to health care. Most college health plans purchase a group policy from a health insurance company and must adhere to the new federal requirements.

But some large universities – an estimated 30 universities and systems covering some 300,000 students nationwide – prefer self-funded health plans because they provide more control over policy terms, offer lower taxes and let schools keep funds until it’s time to pay a claim. Similar self-funded plans are offered by corporations and other large businesses, but they are subject to the new federal regulations.

It’s not clear why self-funded student policies were left out of the law, but federal health officials indicated last year they did not believe they had the legal authority to regulate this type of plan.

Nonetheless, starting Jan. 1, the federal law will require Americans – including students – to have health insurance that meets certain minimum requirements or face penalties.

Meanwhile, UC and other universities, including Harvard, have asked federal health officials to add self-funded student health plans to the new law, in which case UC would be required to lift the caps, said Grace Crickette, UC’s chief risk officer. Asked why, Crickette said it was to benefit students, who might otherwise suffer tax penalties.

"We don’t know if we’ll get in," she said. "We might be rejected."

UC switched to a self-funded system in 2011, not long after the federal prohibition on coverage limits took effect in September 2010.

Most of UC’s 10 campuses limit coverage to $400,000. Students at UCLA pay more for a $600,000 limit, while graduate students at UC San Diego pay even more for a $750,000 cap. Far lower caps exist for subsets of coverage, including prescriptions. Wheeler’s drug cap – reached in three months – was $10,000.

He worked for the law

Wheeler, who grew up in Berkeley, became interested in urban planning in the 1990s after graduating from UC Santa Cruz with a degree in environmental studies. While saving money for grad school a few years ago, he became a field director with a group pushing for passage of the Affordable Care Act – Obamacare – and celebrated its U.S. Supreme Court victory in June. He never imagined that two months later he would begin tumbling through a gaping hole in that very law.

Seizures landed him in the hospital, where doctors diagnosed a brain cancer called primary T-cell lymphoma of the central nervous system. Chemotherapy would be so intense that Wheeler would have to be hospitalized for five days every two weeks throughout the treatment period.

"It was all covered by the UC Student Health Insurance," said Wheeler, who was seen at UCSF Medical Center, the flagship hospital of the university system.

Or so he thought. As his medical and pharmaceutical bills soared beyond $200,000 in just five months, Wheeler became alarmed. His pharmacy stopped providing the daily pill he was supposed to take. He had had one pill left when the drug manufacturer’s hardship program finally accepted him.

"That was a very close call," Wheeler said. He was less lucky with Medi-Cal, the state-federal health program for the poor, which rejected him in February.

Girlfriend to the rescue

He and his girlfriend, Ruby Reid, had been dating since 2009 and dreamed of a wedding in the Santa Cruz Mountains that would combine romance with fun. Wheeler had his eye on a package where the wedding party would travel by steam train through a meadow – and suddenly be held up by train robbers. He, the groom, would rescue his bride and save the day.

His bride, it turned out, rescued him.

They married at 4 p.m. March 30 in the meditation room at UCSF. "Three hours later I was in a bed on the 11th floor getting prepped for chemo," Wheeler said. And by April 1, he was fully covered under the insurance of his new wife, the data director for a political action committee.

Today, his cancer is in remission.

"I’m saddened to see that students’ well-being has to be held in a cost-benefit analysis," Wheeler reflected. "UC should be giving them the best care, especially since UC hospitals are some of the best in the nation."

A fix is needed

UC’s Jack Stobo, a physician who serves as senior vice president of health services, agrees.

"If we have students, particularly of UC and in UC programs, who can’t get the medical care they need and deserve, then shame on us," he said. "We need to fix that."

At the same time, Stobo said he knew of only about five cases in which UC students had hit the lifetime cap. Those who need more insurance might qualify for Medi-Cal under Obamacare’s expanded eligibility requirements, which go into effect next January, or they could buy coverage through virtual marketplaces known as "exchanges" that will also be part of the new law, Stobo said.

Another doctor takes a different view.

No matter how few students reach the coverage limit, "it shouldn’t be that UC exposes them to bankruptcy, incomplete treatment or death. It’s just wrong," said Dr. Flavio Casoy, chief resident for psychiatry at San Francisco General Hospital, part of UC. Although his psychiatric patients are unlikely to reach coverage limits, Casoy thought the issue important enough to take up with the regents.

"Who can predict when a normal bike accident results in a bad back injury, which has complications, and the person develops an infection, and so on," Casoy told the regents. "It’s astounding to me how unexpectedly these bad things happen and how wildly health care costs can spiral up."