The University of Missouri, citing changes in federal policy, says it’s no longer allowed to provide subsidies to its graduate students to pay for health insurance.
The notice, sent to the university’s graduate students on Aug. 14, comes less than two weeks before the start of the academic school year, potentially leaving some students in the lurch.
“The Affordable Care Act prevents employers from giving employees money specifically so they can buy health insurance on the individual market,” the university stated in a letter posted online. “Graduate teaching and research assistants are classified as employees by the IRS, so they fall under this ruling.”
Graduate students have to buy insurance in individual markets because they aren’t eligible for the insurance plan offered to University of Missouri staff and faculty.
Earlier this year, the Internal Revenue Service released a bulletin offering guidance on this issue and outlined “severe” penalties for noncompliance, according to Steven Bloom, director of federal relations for American Council on Education.
The IRS was concerned that some employers were going to use an HRA (health reimbursement account) or flexible spending account to give money to an employee, who would then go out and purchase insurance independently, Bloom said. It was a way the IRS predicted some employers would try to avoid their obligations to offer employer-sponsored health insurance under the ACA, Bloom said.
“In a nutshell, the IRS notice says you can’t do that,” Bloom said.
In this case, the university can pay the students more but can only encourage the students to use the extra funds on health insurance. They can’t force the students to earmark the additional compensation for health insurance, according to Sidney Watson, health law professor at St. Louis University School of Law.
To make up for the last minute change, the university says it will offer a one-time fellowship to certain graduate students who can then choose to use the extra fellowship money to purchase coverage. But now there will be less money for each student, according to the university.
“In the past, we provided subsidies only for the students who enrolled in the student insurance plan,” the letter reads. “However, we now need to distribute the same amount of money over the entire population of eligible students, thus reducing the amount we can provide to each student.”
In 2014, about 3,100 graduate students at the University of Missouri received a stipend to pay for health insurance at a cost of about $4 million, the university reports. About 70 percent of eligible students enrolled in the insurance and received the subsidy.
It’s unclear if the new fellowship funds will be offered for next school year.
Bloom says the current situation universities face regarding this issue is an “unanticipated consequence” of the regulation. His organization is working with the IRS to provide guidance to universities to resolve the issue.
Washington University said it provides graduate students with “subsidized assistance” for payment of their insurance premiums and student health fees. The subsidy varies by school and program, said spokeswoman Susan Killenberg McGinn.
“There have been no changes by any schools to graduate students’ subsidy,” McGinn said. She did not clarify whether there would be future changes to the program.
St. Louis University said it offers coverage for graduate students and is looking into the issue, but no decisions have been made.
Samantha Liss • 314-340-8017
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