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Caps, Gowns, Diplomas and ... Insurance!

Published by: David Andrews | Post a Comment

In the classic 1967 movie, The Graduate, a smug businessman collared recent college grad Benjamin Braddock (Dustin Hoffman) to proffer this pearl of wisdom: "Plastics." This summer, another one-word piece of advice could be of real value to millions of young adults and their parents: "Insurance."

As soon as they doff their caps and gowns, many college graduates are no longer protected against medical catastrophes. What's worse, they (and their parents) often are unaware of this fact and don't even know that affordable, short-term medical insurance is readily available.

This disturbing news comes from two surveys conducted by Assurant Health, the latter completed this spring in partnership with the College Parents of America (CPA). Consider these findings:

Approximately 40 percent of parents mistakenly believed that adult children (ages 21 -24) living at home were covered under their health insurance plans.
20 percent of college parents have no idea when their health insurance will no longer cover their college-age children.
Most believe that short-term health insurance for a healthy young adult costs more than $100/month; in fact, such policies generally cost around $50/month.
68 percent of the parents were not even aware of the availability of short-term health insurance. (Learn more about short-term health insurance.)

These results, moreover, are consistent with previous studies such as a report from the Commonwealth Fund that found nearly 40 percent of college graduates (and 50 percent of high school grads not attending college) are uninsured at some time during their first year after graduation.

Let's examine some of the implications of this research.

A High-Stakes Gamble

The most telling--and surprising--conclusion drawn from this data is that a lack of knowledge is putting so many young adults needlessly at risk. As James A. Boyle, founder and president of College Parents of America, commented, "We hope this research sends a wake-up call to the tens of thousands of parents who do not realize they may be at great financial risk right after their children graduate."

And make no mistake: Not having medical coverage is a high-stakes gamble that can have disastrous consequences. Since our healthcare payment system shields most policyholders from the true costs of medical care, most graduates and parents would be shocked by what they might have to pay out-of-pocket for an accident or illness. Based on claims estimates from HealthcareFees.com, here are some representative costs for treating these medical problems:

$623,000 for a spinal cord injury
$466,000 for a climbing accident
$129,000 for an aortic aneurysm
$75,000 for a case of pneumonia
$45,000 for a head injury from a car accident

What's even more devastating is that these unforeseen expenses would come at the worst possible time. Many college graduates must begin paying off their student loans, while their parents could share in this burden while also trying to build their nest egg for retirement.

A Solution

Parents and new college graduates should look into short-term medical insurance. Short-term medical insurance is temporary health insurance that protects policyholders, typically for 30 to 185-day gaps in coverage. Its primary purpose is to protect policyholders from the expenses--including hospital stays and surgery--of a medical catastrophe. For example, one Assurant Health policyholder who paid only $266.40 for a six-month policy received benefits covering a spinal cord injury worth more than $623,000.

In regards to costs, short-term medical insurance can be less expensive than permanent insurance plans because policyholders don't pay for routine coverage. Though short-term policies vary by age, gender and state, they're typically about one-third the cost of coverage through government-regulated extension programs such as COBRA. Policyholders can save even more by choosing a high-deductible plan or a 50/50 co-insurance option with a cap. (Learn more about short-term health insurance.)

These policies give graduates the flexibility needed during this transitory stage of their lives. For example, certain plans allow them to pay one month at a time; if they do find a job that provides permanent coverage, they can stop paying the monthly premium with no penalty. In addition, graduates can carry these plans with them if they move out of state, because there are no network requirements.

Lastly, it's extremely easy for graduates to enroll. A typical application has only 3-5 yes/no questions and often can be completed online. Some companies make coverage available in less than 24 hours.

A college diploma is a ticket to a brighter future. Short-term medical insurance is an affordable way to make sure that future doesn't get waylaid by financial catastrophe.

David Andrews is Vice President, Product Management -- Short Term Medical for Assurant Health. His experience prior to joining Assurant includes 15 years in consumer packaged goods marketing, business-to-business marketing, and healthcare marketing and management, including positions with Sara Lee, McCain, Amoco and Nestle. Andrews earned his Bachelor's degree from Creighton University and his Master of Business Administration degree from Northwestern University's Kellogg School of Management. He holds the FLMI designation and is a member of the Society of Insurance Research.

About Assurant Health
Assurant Health has been in business since 1892 and is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company. Together, these three underwriting companies provide health insurance coverage for more than one million people nationwide. Each underwriting company is financially responsible for its own insurance products. Primary products include individual medical, small group, short-term and student health insurance products, consumer-choice products such as Health Savings Accounts and Health Reimbursement Arrangements, as well as non-insurance products. With almost 3,000 employees, Assurant Health is headquartered in Milwaukee, Wis., and has operations offices in Minnesota, Idaho and Florida, as well as sales offices across the country.