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Business and Policy Areas
Business and Policy Areas
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Subsidized Student Health Insurance Plans Permitted Indefinitely

October 27, 2016

In an effort to fill gaps in the Affordable Care Act (ACA) that did not address the unique relationship between colleges and universities and their graduate student employees, last spring the Internal Revenue Service (IRS) began evaluating whether or not subsidies for student health insurance plans (SHIPs) fall under the category of "scholarships" or "employer payment plans." An IRS determination of "employer payment plans" would cause SHIP subsidies to run afoul of the ACA's provision against employer-subsidized purchases of individual health plans, while a determination that SHIPs function more similarly to scholarships would allow schools to continue offering them.

The Service's initial attempts to resolve the question led to guidance in early February indicating that some SHIP arrangements may violate ACA but that also permitted institutions to continue offering the subsidies for plan or policy years prior to January 1, 2017. However, more recent guidance offered jointly by the Departments of Health and Human Services, Labor, and the Treasury on October 21 has extended the permissibility of SHIP subsidies indefinitely until more substantive guidance can be issued.

This guidance is in line with advocacy by NACUBO, the College and University Professional Association for Human Resources (CUPA-HR), the American Council on Education (ACE), and other higher education associations that have all encouraged the agencies to take note of the mutually beneficial role of SHIP subsidies to both students and colleges and universities.

Contact

Megan Schneider
Assistant Director, Federal Affairs
202.861.2547
E-mail

Mary Bachinger
Director, Tax Policy
202.861.2581
E-mail