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Senators Ask Administration to Clarify Graduate Student Health Coverage Rules

June 27, 2016


​Sen. Charles Schumer (D-NY) and a group of 16 Democratic senators sent a letter 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 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.”

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