When the University of Missouri temporarily canceled graduate student health insurance subsidies earlier this month, it highlighted a troublesome unintended consequence of the Affordable Care Act that may affect universities around the country.
University administrators made the unexpected announcement that they were reneging on promised $3000-per-year subsidies to graduate student employees on August 14. Then, they retracted this decision a week later in response to student outrage, promising to keep paying the subsidies for at least a year. But, the complicated issues behind the University of Missouri's original decision remain unresolved.
Some universities around the country may be at risk of steep fines from the IRS--$100 per student per day—because of the way they are subsidizing graduate students’ healthcare.
The issue comes down to difficulties in interpreting the Affordable Care Act, explains Steven Bloom, the director of Federal Relations for the American Council on Education. Specifically it comes from a 2013 IRS interpretation of one provision in the ACA.
“[The IRS] were worried employers were going to avoid the employer mandate by giving money to employees [to] go out on the individual market and buy individual insurance,” Bloom says.
The employee mandate is a requirement that large companies must provide affordable healthcare for employees. It’s intended to benefit employees. But it may apply to graduate students because many of them are employed as graduate assistants.
According to Bloom, an IRS official gave "informal guidance" this past spring that implied universities that offered these types of policies to graduate students might be subject to the same penalties as other businesses that violate these regulations.
It’s common for research universities to give graduate students subsidies to pay for healthcare, Bloom says. So this guidance could potentially affect thousands of students across the country.
I think it's just a matter of unintended consequences
To make things more complicated, at the University of Missouri graduate students don’t have a group plan, but instead buy insurance through its student health insurance plan. Student plans like these are defined by the federal government as “individual health insurance.”
Universities are grappling with this issue, though it’s still uncertain whether the IRS will ultimately apply fines or not. Bloom said his organization is trying to get more direct, clear guidance from the federal government.
He doesn’t think the IRS intended for this to happen.
“They're not targeting the universities specifically,” Bloom says. “I think it’s just a matter of unintended consequences and I think we are all trying to figure out how schools could continue to do what they've always done in a way that's consistent with the law.”
Some graduate schools in the U.S. such as Louisiana State University have already made changes to their policies by canceling subsidies. Others are sitting back and waiting for clearer guidance from the federal government before they take action.
Bloom said the American Council on Education is working alongside the Council of Graduate Schools and the National Association for Graduate-Professional Students to get further guidance from the IRS, the Department of Health and Senior Services or the Department of the Treasury.
Meanwhile at the University of Missouri, grad students staged a walk-out on August 26 to demand the university find a long-term solution to this problem and commit to funding its grad students’ basic needs including assistance with childcare and housing.
