University of Missouri announced that it is no longer allowed to provide subsidies to its graduate students to pay for their health insurance.
"The Affordable Care Act prevents employers from giving employees money specifically so they can buy health insurance on the individual market. Graduate teaching and research assistants are classified as employees by the IRS, so they fall under this ruling," stated the University.
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.
According to Steven Bloom, director of federal relations for American Council on Education, the Internal Revenue Service released a bulletin offering guidance on this issue and outlined "severe" penalties for noncompliance.
"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. It was a way the IRS predicted some employers would try to avoid their obligations to offer employer-sponsored health insurance under the ACA," said Bloom.
"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," said Dr. 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.
"In the past, we provided subsidies only for the students who enrolled in the student insurance plan. 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," stated the university.
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. 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 the next school year.
Bloom said 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 provides graduate students with subsidized assistance for payment of their insurance premiums and student health fees. The subsidy varies by school and program. There have been no changes by any schools to graduate students," said Susan Killenberg McGinn, spokeswoman.