During my wife’s recent birthday, she surprised me with a question that made me reflect on the past year. She asked, “What did we talk about the most during my last birthday?”
Last year at that time, I was the newest student-elected trustee, and was especially concerned about the rising cost of health insurance for students’ dependents. My wife is a teaching assistant protected by the Cornell Student Health Insurance Plan, and thus not my dependent. But she still cares passionately about this problem, which became the topic of our conversation that day.
My wife was the one to tell me that many dependents at Cornell have absolutely no health insurance. We investigated this problem and the results surprised us. There are more than 1,000 students’ dependents at Cornell; among them only 224 spouses and 161 children were protected by Cornell’s health insurance plan for the 2005 academic year.
These low numbers are mainly due to the program’s cost. Many teaching and research assistants at Cornell earn the minimum salary for a nine-month appointment, about $20,000. Many started their young families here. However, the annual cost of spouse and child health insurance was recently increased to $5,092, bringing dependent health insurance costs to 25 percent of the stipend of those T.A.s and R.A.s.
For international students, this problem becomes even more severe. They need to demonstrate that they have sufficient funds to bring their dependents here. According to data provided by the International Student and Scholar Office, the average Cornell graduate financial aid package is $2,500 to $3,000 short of estimated living expenses for a couple (more money is needed if they have a child). So, the U.S. government requires a typical international T.A. or R.A. to show a $7,500 to $9,000 dollar bank certificate to fill this gap for three years, in order to bring their spouses here. This is largely because the health insurance price for a spouse is $3,139, about $1,700 more expensive than the student plan. The cost of health insurance not only causes hardship for student families, but also makes the current plan unsustainable. Because the cost is high for students with families, only people who are at high risk will buy the Cornell health insurance and people who are at lower risk will opt out. Economic theory suggests that the negative cycle will be self-enforced and may lead to very high prices and little to no enrollment. This ultimately raises the cost of the health insurance.
After we found this problem, my wife encouraged me to sit on the Student Health Insurance Advisory committee. As a Ph.D. student in applied economics, she would be able to help me design several possible solutions to the health insurance problem. Our first solution was a two-tier plan: keeping the current plan but adding a lower cost option, so students have the flexibility to choose. After calculating it, however, the plan proved to be impractical. Even with a 90 percent decrease in the plan’s maximum benefit, the cost only decreased by 8 percent.
Although I became very frustrated when I saw this result, my wife nevertheless encouraged me to think creatively and positively about it. Its failure actually helped me to realize what the problem was: our enrollment in the dependent insurance is too low, and this drives prices up. After we thought more about the data, we drew two conclusions.
Firstly, because of low enrollment, a two-tier plan, which works for a large sample, will only further divide the dependents’ group and make the price worse. Therefore, instead of separating students’ dependents into two plans, we propose pooling them with dependents of employees and faculty. In this case, the risk will be diversified and we can achieve lower premiums.
Secondly, a subsidy does not have to be costly, particularly if the low price attracts low risk people back to the plan. As they return, average risk would decrease, as would the insurance premium. I talked to the president of Chickering Group, our current health insurance operator, and he told me that we could get a great rate if we had 100 percent participation. We are very far away from that number today.
While addressing this problem, I want to hear from you, my constituents. What are your experiences with providing health care to your spouses or to your children? Do you use the university’s health insurance or another company’s, and why? Or perhaps you are on your parent’s plan as a dependent: what is your coverage and premium as a dependent on another plan? And do you have any ideas on how this problem should be solved? I want to hear your comments on my proposal, as well as your own thoughts, so that I can better represent you and your interests to the Board of Trustees.
I also want to use this opportunity to encourage students with dependents to consider buying health insurance for your families. It will not only help others to diversify the risk, but it will also lower your insurance cost.
Finally, I want to dedicate this column to my wife, Xi. It has been a year since your last birthday, when we first started to discuss this problem, and you have been integral to helping me discover innovative solutions. One year after that day, I have come to realize that I could not have done this work without you. Providing low-cost health insurance is very difficult, but I have learned the value of working together on these difficult problems.
I hope you, my readers, will also be part of this work. Designing a campus-wide solution, a feasible plan for health care for students’ dependents, requires community participation to keep this dream alive and make it come true.
Mao Ye is a student-elected trustee. He can be contacted at my87@cornell.edu [1]. Trustee Viewpoint appears alternate Wednesdays.
Links:
[1] mailto:my87@cornell.edu