Sen. Charles Schumer (D-NY) and a group of 16 Democratic senators sent a letter
(718 KB PDF) last week to the Obama administration on the need to develop a
permanent solution to allow graduate students to receive subsidized
student health insurance coverage under the Affordable Care Act (ACA).
Since the enactment of the ACA in 2010, regulations and guidance
issued by the Department of the Treasury and Internal Revenue Service
(IRS) have raised potential concerns for higher education institutions
that provide subsidized student health insurance to graduate students.
These concerns are based on the continuing confusion over whether
graduate students are defined as employees or students under the ACA.
In February, the IRS, along with the departments of Treasury, Labor, and Health and Human Services, issued a notice
(46 KB PDF) asserting once again that in the long run, institutions might be
violating the ACA by subsidizing student health insurance coverage for
their graduate students. However, the notice also provided temporary
transition relief, effectively permitting institutions to offer
subsidies through the 2016-17 academic year.
The senators’ letter urges swift action to resolve this issue,
pointing out that colleges and universities soon will be negotiating the
terms of their student health insurance coverage for the upcoming
academic year and that “thousands of graduate students at campuses
across the country could potentially be affected, costing students and
schools millions of dollars.”
“This treatment of graduate students as ‘students’ for health care
purposes is consistent with IRS regulations implementing the Student
FICA Exception,” they wrote. “Under the Student FICA Exception, the IRS
wisely recognized that it makes no sense for a student who is engaged in
paid services that are "incident to and for the purposes of pursuing a
course of study" to pay FICA (Social Security and Medicare) taxes.
Similarly, it makes no sense to penalize universities for offering
students access to lower-cost, high-quality health coverage when it is
provided while they are pursuing a course of study.”