U.S. health insurance premiums and deductibles continue to rise at an unprecedented rate. For those of you fortunate enough to have employer-provided coverage, celebrate! Even a subpar employer-sponsored plan typically offers lower premiums and better coverage than plans on the individual exchange.
For those of you who don’t have health insurance through work, read on for a look at an interesting — and often less costly — alternative to buying coverage on the open market: health care sharing programs.
Repeal of the Individual Mandate
The Tax Cuts and Jobs Act of 2017 repealed the Individual Mandate, so you will no longer pay a tax penalty for not carrying health insurance in the U.S. (starting in 2019). Nevertheless, avoiding health insurance coverage altogether is risky. You will be on the hook for all medical bills, possibly ruining your credit history if you do not have cash to pay them. Medical organizations typically offer payment plans, but they are just like any form of debt: You should carefully analyze interest rates and the impact those payments will have on your budget.
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With the Individual Mandate repeal, premiums will be even higher. People who think they are healthy enough to go without insurance may opt out, and those who are willing to pay higher premiums stay on plans due to pre-existing medical conditions.
The gig economy and entrepreneurship is prevalent as technology accelerates and people increasingly opt for work-life balance. It is uncommon to spend over 30 years of your life working for the same company in a desk job. Faced with competing pressures of skyrocketing health insurance costs and your desire to have flexibility in your work life, how do you move forward?
An Alternative to Traditional Insurance
Health care sharing programs offer an alternative to individual health insurance plans on the exchange and are often more cost effective. They are faith-based programs that facilitate voluntary sharing of eligible medical expenses among members. Please keep in mind that health care sharing programs are NOT insurance. The ministry program is not legally required to pay for a member’s medical expenses. However, larger ones typically have a strong track record of paying eligible medical expenses once the family has met their equivalent to an annual deductible.
In full disclosure, my family moved to a health care sharing program earlier this year, but this is not an endorsement for them. I heard about these programs through an XY Planning Network member forum and personally conducted extensive research on one program in particular, Medi-Share. You should diligently investigate and make your own assessment prior to selecting any health care sharing plan.
Considerations of Health Care Sharing Plans
There are four critical questions to ask yourself prior to enrollment:
1. Does anyone in the family have pre-existing medical conditions?
In our family, the answer is no and that is beneficial.
2. Do you NEED coverage for preventive care visits, or are you simply looking for catastrophic assistance?
Most health care sharing programs do NOT cover preventive care but will theoretically assist if an unforeseen medical emergency occurs. In that instance, other health care sharing program members’ monthly share amounts are used for your eligible medical bills after your annual household portion is met.
If you are planning a pregnancy, remember that your out-of-pocket costs will be greater due to the sheer amount of prenatal visits recommended by physicians. Medi-Share recently made their standards more stringent, requiring families to be members for a longer time period if maternity fees are to be covered. This prevents a family from joining Medi-Share for a few months, getting pregnant, having the baby, and quickly leaving the plan.
3. What is the track record for the health care sharing program?
Medi-Share began in 1993, and members have shared and discounted more than $2 billion in medical bills since inception. It is one of the largest health sharing programs and has a history of paying 100% of eligible medical expenses beyond the Annual Household Portion. A strong track record and increasing membership count may provide additional assurance during the selection process.
4. Does the program align with your values or needs?
Several faith-based health care sharing programs do not cover expenses they consider “unbiblical,” such as abortion, birth control, and injuries related to drugs and alcohol. In fact, many ask you to sign an oath during the application process to confirm that all family members agree with these principles. So, this type of program will not be a good fit for everyone.
The Downsides of Health Care Sharing Programs
I am painting an optimistic picture of health care sharing programs, but there are two significant downsides:
- You don’t know what you don’t know. Akin to traditional health insurance plans with high deductibles, you likely have no idea what your out-of-pocket cost will be for a procedure or prescription medication. Your level of financial responsibility is uncertain until the service is rendered, an Explanation of Benefits is provided, and the bill arrives or you are at the pharmacy counter picking up the prescription.
- Employer-sponsored plans typically offer better value, especially at large employers. Faith-based sharing programs are usually costlier than insurance offered by your employer, but they may be less expensive than plans you can find on the individual exchange. Our family will be switching to a traditional health insurance plan soon when my husband is eligible for benefits at his new employer.
Personal History
Here’s the story behind my family’s health care insurance decisions. In 2017, my husband was employed by a large corporation that offered solid medical plans. Since I am self-employed, it made sense for our entire family to use health insurance coverage offered by my husband’s employer. The premiums for our family of five ran $450 monthly for both medical and dental care. We had relatively low deductibles and out-of-pocket costs.
When my husband quit his job so we could pursue our dream of living abroad in Spain in early 2018, we needed to find alternate coverage. COBRA premiums would have exceeded $2,000 monthly for our family. On the individual exchange, medical insurance premiums for silver- or bronze-level policies with much higher deductibles still averaged $1,500 monthly. The government’s premium assistance only happens at certain income levels, and we did not have a clear idea of our family’s 2018 income. We would have tripled our medical insurance cost by pursuing one of the individual exchange plans!
Health care sharing programs are a saving grace for our family. Although the terminology is slightly different, our monthly premium (known as “monthly share amount” by Medi-Share) is $788, and our annual household deductible (“annual household portion”) is $3,000. The doctors we regularly use are within the program’s preferred provider network. The health care sharing program negotiates a discount directly with the medical provider and sends me an Explanation of Sharing statement after the service is rendered. Then the medical provider bills me directly.
Do Your Homework
Health care sharing programs are not for everyone. Traditional health insurance is often the best option for many families, particularly for people with pre-existing medical conditions or whose personal beliefs oppose biblical principles. But if you are frustrated with traditional insurance and had no familiarity with these faith-based programs prior to reading the article, I encourage you to explore them further and conduct additional research. Reading this Nerd’s Eye View article will help you understand the nuances between the most popular health care sharing programs, namely:
- Christian Healthcare Ministries (CHM)
- Liberty HealthShare
- Medi-Share
- Samaritan Ministries
If you are still torn between a health care sharing program and traditional insurance, consider visiting Take Command Health. They act as an online health insurance broker for families, helping you compare traditional policies with sharing programs like Medi-Share.
As a fee-only fiduciary adviser, my only source of compensation comes directly from clients through a stated, transparent fee. There is absolutely no financial incentive for me to recommend faith-based programs, Medi-Share, Take Command Health or any other resource listed in this article.
Medical insurance costs continue to be a hot-button item in the conversations I’m having with clients, prospective clients and friends. Perhaps one of the health care sharing programs will ease that burden for your family.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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