Schools' Use of Parents' Insurance For Spec.-Ed. Services Stirs Concern
By Debra Viadero
When Don and Wendy Shook placed their severely handicapped daughter in a residential school, they used the only resource they had to pay for the special schooling: Mr. Shook's employer-paid group health-insurance plan.
But the $64,000 spent to cover the tuition for Karen Shook's two years of private schooling proved to be more costly than the North Carolina family ever thought possible. The expenditure, coming after the payment of $36,000 in other medical bills, exhausted the $100,000 "lifetime cap" on the family's health-insurance plan.
The result was that, at age 21, Karen was left with no health insurance to pay the medical bills that she would incur over the rest of her life.
Some experts contend that Karen's experience and a handful of similar situations detailed in recent court cases around the country are telegraphing an important message to school administrators nationwide. They say the cases point out a potential risk in the increasingly popular practice of billing private insurers for some special-education costs.
"A lot of districts are looking for innovative ways to finance special-education costs," said Joy Rogers, a professor of counseling and educational psychology at Loyola University Chicago. "If you don't have enough money to go around, and the law says you have to provide services, what else can you do?''
"What I am saying," Ms. Rogers added, "is that there are risks involved, and parents and school administrators may have no idea what they're getting into until it is too late."
Still, both proponents and critics of the practice note, the issue of who pays for what special-education services will only become more pressing as districts confront rising special-education costs in the years to come.
As advances in medical technology facilitate the survival of increasing numbers of premature babies, they said, schools will be confronted with children who are more severely handicapped and who are in need of more medically related services than ever.
"Schools are facing some very serious crunches and, unless they can access Medicaid or private insurance, there's no way they can pay for them," said Marvin Roelofs. Mr. Roelofs is director and founder of Trans-Allied-Medical-Educational Services, or TAMES, a company that offers to set up or manage third-party billing systems.
Idea Gaining Favor
In a sense, Ms. Rogers and others note, the Shooks' experience does not offer the clearest illustration of the kinds of problems that can occur when private insurers are billed for special-education costs.
Unlike other cases in which the impetus for asking parents' insurance companies to pick up special-education costs comes mainly from school administrators, the decision to use such an arrangement for Karen was made by her parents.
The Shooks made their decision to place Karen in a residential facility, according to court records, at a time when they and Gaston County school officials were embroiled in a dispute over the kinds of special-education services the young woman needed.
In a suit filed against the district several years later, Karen contended that it should have paid her tuition, and she asked the Gaston County district to compensate her for the loss of her health insurance.
The U.S. Supreme Court is currently reviewing the case to determine whether to accept it and offer a decision on a procedural issue.
Much more troublesome, said Ms. Rogers and other parents and school-board members concerned about the issue, are situations in which school administrators ask parents' insurance companies to pay for special-education costs.
Inspired by recent changes in federal law and the entrepreneurship of companies promoting third-party billing arrangements, more and more school districts have looked to private health insurers to pay for such services as physical therapy, occupational therapy, and counseling.
"If it's provided by a health-care agency in the community or region, in all likelihood, it will be billable through private insurers," said Mr. Roelofs of TAMES. Such systems also tap public resources, such as Medicaid, for special-education bills.
According to Mr. Roelofs, nine states--Connecticut, Maryland, Pennsylvania, Illinois, Wisconsin, Oregon, Washington, California, and Florida--are currently either gearing up to put in place a third-party billing mechanism to pay for special-education costs or are exploring the idea.
Typically, in such arrangements, parents give school districts permission to bill their insurance companies for certain special-education costs.
In return, districts pay the parents' deductibles and make any coinsurance payments.
If a private company such as Mr. Roelofs' handles the billing arrangements, the charge to the school system is generally about 25 percent of the payments received.
According to Mr. Roelofs and other proponents of the concept, schools can usually expect to bill private insurers no more than $2,500 a year in services to a single student. For example, he said, the average transaction for speech-therapy sessions is $1,500 a year.
"That does not, in itself, constitute a real depletion of lifetime benefits," he said.
But, Ms. Rogers said, problems arise when, as happened with Karen Shook, "you hit a relatively low cap and a relatively high claim." Then, she said, the prospect of financial disaster can become very real for a family.
According to the Health Insurance Association of America, few Americans covered by employer-paid group health plans have lifetime caps as low as the Shook family.
A 1988 survey by the trade association found that 21 percent of such plans provide unlimited coverage. Another 45 percent have lifetime caps of $1 million or more. Only 34 percent offer less than $1 million in lifetime health coverage.
Apart from the caps often placed on overall health-insurance coverage, however, most plans also place even-tighter limits on the amount of mental-health services they will pay for. For young people with serious emotional and behavioral disorders, according to David Puryear Jr., the lawyer for Karen Shook, it is this area where the need is most crucial.
"When these kids 'age out' of special education," he said, "they are still likely to need some sort of treatment that will fit under the umbrella of psychological or psychiatric services." The problem, he added, is that "they may have used up their benefits."
"Karen Shook is a classic example," he said. "She still needs residential services."
Doing It 'Right'
To supporters of the concept, however, the kinds of risks described by Ms. Rogers and Mr. Puryear "are more theoretical than practical."
First of all, they pointed out, the kinds of claims filed by the vast majority of districts rarely come close to depleting a family's lifetime cap.
And, they added, parents always have the option of withdrawing or refusing their consent for billing their health-insurance plan.
"It's a good idea if it's done right," said Karl White, a professor of psychology and special education at the Utah State University and a supporter of the idea. "If districts don't approach it carefully, they can end up taking a lot of time and having it not really benefit the children."
One problem, according to Ms. Rogers, is that such arrangements are sometimes not "done right" by school districts.
Some do not warn parents of the potential consequences of using their health insurance, she said, and others provide consent forms that do not make it clear that the parents' participation is voluntary. School districts cannot refuse to provide services if a parent declines to participate.
"Parents of handicapped children, in order to get the services they think their children need, are perhaps less cautious and less inquiring then they might be," said Muriel Dawson, a member of the Matteson District 162 Board of Education in Illinois.
A longtime opponent of the idea, Ms. Dawson last year helped persuade her school board to withdraw from a three-year-old billing arrangement with TAMES.
She said her concerns about the contract centered on a different matter: She feared that, through interactions with private insurers, some students might acquire stigmatizing labels that could follow them for the rest of their lives and keep them from obtaining health insurance.
Ms. Dawson's doubts were drawn from personal experience. An acquaintance, who asked to be unnamed, recently found that he could not buy health insurance for his learning-disabled son. The company refused to provide coverage on the grounds that the boy's learning disability constituted a "mental or nervous disorder."
According to the father, the company only learned of his son's disability through hospital recordsafter the boy was treated for a head injury incurred in a swimming-pool accident. Doctors at the hospital had administered diagnostic tests on the boy to assess the extent of the damage caused by the injury.
"This is what everybody runs the risk of doing if they take their son or daughter in for an evaluation and submit that bill to an insurance company," he said. He asked to remain anonymous because, as an insurance broker, he deals with the company that refused his son coverage.
'Sources of Support'
The concept of billing third-party payers for special-education services dates back to the landmark 1975 law that established the right of all handicapped children to a "free, appropriate" education, according to proponents of the idea.
They said the Senate report on The Education For All Handicapped Children, or p.l. 94-142, urges states to "utilize all sources of support for comprehensive services for handicapped students."
But, according to Mr. White, few districts made use of such resources until 1986, when the Congress passed another law expanding special-education services for disabled infants and toddlers. The Education of the Handicapped Amendments Act of 1986, or p.l. 99-457, states unequivocally: "Funds ... may not be used to satisfy a financial commitment for services which would have been paid for from another public or private source."
"We've given insurance carriers a number of years in which they haven't had to pay," Mr. Roelofs of TAMES noted.
At least one insurance company, however, has challenged such legal claims.
Pennsylvania Blue Shield, entangled in a lawsuit filed by some Pennsylvania parents, contends that it is not obligated to pay for physical-therapy services for disabled children--particularly when the district has paid the deductible.
A federal judge last June agreed with the insurer. The case is now on appeal to the U.S. Court of Appeals for the Third Circuit.