Sallie Mae has recently added a tuition insurance plan to students and parents. The plan is offered in partnership with Next Generation Insurance Group. According to the NY Times, however, the plan reimburses at different rates for physical and mental health withdrawals from school.
While physical causes for withdrawal result in 100% tuition reimbursement, mental health withdrawals from school are only reimbursed at 75%, and often require a multiple day hospital stay. The irony is that mental health issues are most likely to be the reason a student will have to withdraw from school.
There are some underwriters who offer equal coverage for physical and mental illness withdrawal but Sallie Mae chose to partner with a provider who insists on disparate treatment.
Federal law now mandates equal coverage for mental and physical illness where employers offer insurance for mental health, however tuition insurance is only based on health, but is not actually health insurance and therefore doesn't fall within these rules against disparate treatment. According to Ken Libertoff, a Vermont consumer advocate, parents need to be aware that there is a fatal flaw in these plans.
Premiums for Sallie Mae's tuition plan can go as high as $599 for $50,000 of coverage. But students can get free insurance for $5,000 of coverage, and following the article in the NY Times, Sallie Mae started offering 100% mental health coverage to students who take the free coverage. One forgiving provision in Sallie Mae's coverage allows students to purchase the coverage even after the school year has begun, allowing a backdoor out for students whose mental health issues may be in check at the beginning of the year, and want to give school a try, only to realize that they're in over their heads, emotionally, and need to drop out for mental health reasons.
The coverage is generally not available for an illness that was "active" when the student enrolled in the school, however conditions such as anxiety or depression may be exempt from this disqualification even if being treated prior to enrollment. About 1,200 private schools offer some sort of tuition insurance, and many of those schools make it mandatory for new students. At most colleges, however, less than 10 percent of parents sign up for tuition insurance.
Whether Sallie Mae will equalize its coverage for both physical and mental health issues on all its tuition insurance policies remains to be seen.
Marcy Einhorn is a New York attorney and The Money Coach.
Marcy is available as a speaker for community organizations and business events, and also offers confidential, personal money coaching. Contact Marcy@nylifeordebt.com for more information.
http://www.nylifeordebt.com/
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