Health Care Sharing – a growing alternative to traditional insurance.
I wish I could say I felt surprised when I got to the final page of my “Healthcare.gov” application and saw rates of $1400/mo for my family’s healthcare coverage. That was $1400/mo for the cheapest "Bronze" policy and, unfortunately, we've been on a trajectory for that high rate for quite some time now. Our (family's, nation's) health insurance premiums have been on a vigorous climb for years, at a rate far outpacing the general rate of inflation, college inflation, energy inflation, iPhone inflation - basically anything else you can imagine.
For some reason I'm not able to articulate, this was the year I snapped. It's hard to explain, but it was something like the sound of a twig breaking inside me. Maybe my limit on what I’m willing to pay to avoid pain is $1400/mo...I digress… Anyways - I cried uncle and decided we were finally going to do something different.
Healthcare sharing organizations – also known as sharing “ministries” – have been around for a long time. They’ve experienced a recent lift in popularity, however, since the advent of the Affordable Care Act (ACA or “Obamacare”).
As families have seen their insurance costs skyrocket, more and more have fled the scene and found their retreat in this growing alternative. Crucially, and perhaps a good explanation for part of this exodus, the ACA legislation permitted members of these ministries an exemption from the health insurance mandate penalties. We now know that this penalty will be repealed beginning in 2019. It remains to be seen whether this will stem the flow of new subscribers into sharing organizations. For many, the pure cost of an individual health insurance policy is/was enough to drive them out the market, penalty or not.
So, how does this work and for whom might this be a real alternative? Let’s cover some ground:
State of the Health Care Industry
It’s a vast oversimplification to describe the current state of our health care industry as being “in transition”. With Obamacare teetering on the edge repeal, many insurers and providers have totally pulled out of the individual exchange markets.
As premiums have increased, many healthy individuals have also pulled out which is leaving the “risk pool” full of those who can’t afford to pull out (e.g. the sick). As the risk pool becomes composed of sicker and sicker people, the rates climb faster and it becomes a vicious cycle. Now that we know the mandate (or penalty to be more correct) will disappear in 2019, many more insureds are likely to leave the market, likely taking additional insurers with them.
For employees, business owners and the self-employed, healthcare costs have risen dramatically both in the form of substantially higher premiums and substantially higher deductibles and out-of-pocket limits. Many are reaching their breaking point just as I did.
What is Sharing
Healthcare sharing is just what it sounds like – you join a group of people and you contribute a monthly “share” amount into a pooled account. When you have a claim or need, benefits are paid out of these pooled assets. Effectively, you are “sharing” the healthcare costs of other members.
Most of these organizations are Christian ministries, built on the foundation that Christians should share their brother’s burdens (Galatians 6:2). It is important to note that healthcare sharing is not insurance; the organization is not obligated to pay benefits. In practice the overwhelming majority of claims are paid, but its important to remember that the organizations have the discretion to not pay.
The cost to join a sharing organization is often substantially lower than the cost of traditional health insurance. For our family, our monthly share amount is approximately $350/mo and we have a $5,000 “deductible” before our claims are covered. Contrast this with our offer for 2018 ACA coverage of $1400/mo premiums with a $13,000 deductible.
There are some significant differences between a sharing organization and a health insurance policy. It's important to realize that sharing organizations can:
Exclude your preexisting conditions
Deny your application to join
Deny claims which are result from activities which are contrary to a Christian lifestyle (drug abuse, adultery, DUI’s, tobacco, etc).
Who is a good candidate for Sharing?
Because of the latitude that a sharing organization has in determining who to let in and what claims to cover (including their ability to deny or limit preexisting condition claims), many people may be better off remaining in the traditional health insurance market. However, for certain individuals and families, sharing can make a lot of sense:
Those who make too much money and don’t qualify for ACA premium subsidies, but for whom health insurance premiums still substantially impact their finances.
The business owner & self-employed person who bear the full cost of their health insurance.
Christians - since you must adhere to a Christian lifestyle.
Brass tax here: the benefits are mainly financial. If you're a person/family who otherwise fits into the sharing model, the monthly “share” cost (e.g. premium) will likely be substantially lower than a premium for traditional health insurance. Moreover, the deductible amounts are potentially much lower as well.
Also, since we still do have a healthcare mandate penalty for 2018, its important to note that you are granted an exemption the mandate for purchasing healthcare coverage – filed on IRS form 8965 here. This means you won’t have to pay the IRS penalty for not purchasing individual health insurance coverage.
Because the sharing organization has the capacity to accept or deny new members based on their health, the sharing risk pool should theoretically be “healthier” than that of the general population. This, again theoretically, should lead to more stable and lower rates in the future. In contrast to the traditional insurance market, healthcare sharing organizations have seen relatively stable costs even through the explosive growth in subscribers they’ve experienced these past few years.
For our family - we are a young & reasonably healthy. The prospect of yet another year of paying an insurance company $16,800 in premiums just so that I’d have the privilege of paying them another $13,000 if we actually had a need felt unnerving, wasteful, and many other things I won’t describe here.
As I’ve already mentioned, sharing is not insurance. While the major sharing organizations have a strong track record of paying claims consistently, the sharing organization can deny your claim and they can exclude or limit coverage for your pre-existing conditions. Each organization has its own policy on preexisting conditions; some more liberal than others. It would behoove you to carefully read through each groups’ policies before signing up.
For us- I have GERD and that's about it for our family's health conditions. With the organization we chose (Medi-share) my GERD will be gradually phased into being covered over a five year period. Even after the five years, my benefit for care resulting from that pre-existing condition would be capped at $500k per year. So, this is a disadvantage and a bit of a dice roll on my end. You should weigh your individual situation carefully.
Also, members must abide by the tenants laid forth in each organizations’ standards of conduct. This may be a disadvantage if you or someone in your family currently struggles with an addiction. Claims arising from events which go against the standards will likely not be covered (drug abuse, addiction, driving while intoxicated, abortion, etc).
It’s also important to note that if you’ve funded an HSA in the past you will not be able to continue contributions as a member of a sharing ministry. You can keep existing HSA funds and continue to use the funds for qualified eligible expenses, but no new contributions can be made.
I would strongly suggest if you’re considering sharing to click through and thoroughly research the different organizations before moving forward.
If you’d like to reach out to me, I’d be happy to discuss my experience and help answer more questions.
As always, a decision like this is best made within the parameters of your total financial picture. If you’re not currently working with an advisor in that capacity, give me the opportunity to show you why it matters.
Please note - I am not affiliated with any of the organizations below and am simply posting their sites in an informational capacity:
Christian Healthcare Ministries