September 17, 2018
Medical Insurance and Healthcare Sharing
In this post I will look at how traditional health insurance stacks up against healthcare sharing programs, and share my own experience using a healthcare sharing plan. We will look at recent trends in the insurance world (notably, rising premiums), recent legislature changes, how sharing programs work, who should and shouldn’t consider them and what I expect to see in coming years. Full disclosure: I use Samaritan Ministries.
Health insurance premiums have been steadily rising over the past decade, sometimes skyrocketing at rates in the double-digits. Prior to the implementation of the Affordable Care Act (https://www.healthcare.gov/glossary/affordable-care-act/) in 2010, individuals were more likely to forgo traditional insurance completely. While some families still chose to risk a tax penalty and opt out of healthcare, more people began to explore healthcare alternatives, giving rise to so-called healthcare co-ops or healthcare sharing ministries. Now that the Tax Cuts and Jobs Act of 2017 has eliminated the individual health insurance mandate, more people will feel comfortable exploring alternatives.
These alternatives often refer to themselves as ministries because of their religious affiliations, usually Christian. They exist outside of the laws governing traditional insurance companies, which impacts membership requirements, how you pay them, and how they pay your medical bills. In most cases, it even impacts what medical expenses they are willing to cover. Of course, those restricted coverages usually translate to monthly savings in your premiums.
Healthcare Sharing Ministries
These programs all share several common aspects, with minor variances between them. At its core, a healthcare sharing program operates by sharing eligible medical costs of its members across the group. Membership is voluntary but typically restricted to people that live by the organization’s religion-based belief system. Each person, once admitted to the group, submits monthly payments to either a central office or to each other for the express purpose of covering eligible medical expenses for other members. Similar to the way insurance companies pool risk by grouping customers with similar risk profiles, these groups operate under the belief that they can accurately predict the costs of a comparable group of individuals.
One of the most attractive aspects of a sharing program is cost. Typically, monthly premiums are much less expensive than traditional insurance. It should be mentioned that these companies go to great lengths to make sure customers understand they are not insurance companies. As such, they do not refer to the monthly cost as a premium; it is typically called a “share.” The average share cost ranges from $300 to $500 per month while the average price of insurance coverage is more than 3 times that! For persons with access to generous employer coverage or government assistance, traditional insurance may still be more affordable. Personally, I pay $495 per month to cover six people in my Samaritan Ministries plan (astute readers will note that I have a family of seven – more on that later!), which is the highest share cost in the program.
Additionally, sharing programs usually have lower out-of-pocket annual and per visit expenses as well, while also limiting the total amount they will cover per each health event. Obviously, one begets the other. To wit, under the Affordable Care Act, insurance companies were legally required to cover “essential health benefits.” Healthcare sharing ministries are not bound by the same guidelines and therefore can limit their coverage to help keep costs in line. In addition, these organizations limit coverage based on their religious principles. For example, programs may not cover birth control, injuries resulting from illegal activities or drug use, or maternity care for a single woman. Most programs require an affirmation of Christian beliefs, sometimes including regular church attendance, in order to be a member.
Despite these exclusions, participating members are not required to have traditional insurance per the individual mandate from the Affordable Care Act. Of course, today this is irrelevant as the individual mandate has been repealed.
Healthcare Sharing Ministries vs. Insurance
There are many similarities between healthcare sharing programs and traditional insurance. Members of both programs make a monthly payment in order to share their medical risk with a larger group. This group in turn helps to pay for each member’s medical costs as they arise. The primary difference is that sharing programs are voluntary. Health insurance companies and their customers enter into a legally binding contract; no such contract exists between sharing organizations and their members. Indeed, there is no contract between the members themselves. Unlike traditional insurance, healthcare sharing programs do not guarantee to pay for members’ medical needs. For instance, should the members of a healthcare sharing group all incur high medical costs in a single month, the combined payments of the members would not likely be enough to pay for everyone’s care. There are contingency processes to aid in a situation like that; medical costs can be spread out over several months (in that case, members might not be reimbursed in a timely manner) or monthly payments could be increased. In the case of Samaritan Ministries, a majority of members would need to agree to increase monthly payments.
This ambiguity can be very scary for potential customers. Speaking from personal experience, I was hospitalized for two weeks last year and came away with over $80,000 in medical bills, all of which were covered through Samaritan. The entire reimbursement process took several months and I was still receiving checks in January of this year. In a case like that it’s important to understand that members may need to pay bills before they receive reimbursement from the ministry.
Additionally, with traditional insurance most plans cover routine treatments and physicals. I don’t know about other groups, but Samaritan members are completely responsible for these visits. Traditional insurance also comes with a deductible – the amount of money each person is personally responsible for annually. Many healthcare sharing programs have a similar feature. They aren’t called deductibles, they have names like personal responsibility or annual unshared amount, depending on the program. Unlike traditional insurance, these amounts reset for each medical event and do not accumulate throughout the year. For Samaritan, that amount is either $1,500 or $300 depending on the plan you choose. Personally, I am required to pay the first $300 out of pocket for medical expenses my family incurs. This amount can be reduced by any discounts I negotiate with my medical provider directly. Also, regular dental expenses are not covered, but major medical expenses associated with dental surgery are eligible to be shared with the group.
Of special note, these programs are not ideal or recommended for people with pre-existing conditions or mental health issues. Most healthcare sharing programs are very limiting regarding what they will cover in both situations. In both instances, traditional insurance is a better choice for most people. Also, people that want to take advantage of an HAS should not use sharing ministries as they are not considered high-deductible medical plans.
For obvious reasons, healthcare sharing programs have risen in popularity over the past several years, and their systems and processes have grown more sophisticated. Now, it is easier than ever to learn how they work and if they are right for you. Ultimately, it’s up to each individual to weigh the options against insurance. Most importantly, if one is considering using healthcare sharing it is paramount that you carefully read the terms of each provider. They vary from group to group and some are more restrictive than others.
Finally, while these programs have grown in popularity (over 1 million participants), legislature has been slow to respond, particularly when it comes to taxes. In 2018 you can deduct any legitimate medical expenses incurred from the diagnoses or treatment of a disease, including your premiums, in any amount above 7.5% of your adjusted gross income. Since there is no formal guidance on how to report medical expenses and reimbursements when working with a healthcare sharing ministry, it’s best to work directly with a tax professional.
As stated, I personally use Samaritan Ministries. While Samaritan is one of the more restrictive groups in terms of membership, I found it to be superior to other programs I researched. We looked at several different programs and opted for Samaritan Ministries because they would allow us to use any provider of our choice, had higher rates of total coverage ($250,000), and allowed for sharing of medical needs immediately (some programs have probationary periods initially). We were also pleased to find as we used the program that Samaritan would use contractors to negotiate additional discounts on our bills above any discounts we could obtain on our own. In order to be a member of Samaritan Ministries you must go through a verification process each year, which must be attested to by a church leader. Verification includes confirming regular church attendance at least 3 out of 4 weeks, health and weather permitting.
Every month I receive a name, address, and health concern (referred to as prayer requests by the ministry), as well as the amount I need to send to the individual in need. Typically, the request is for the same amount ($495) but I have been asked to send smaller checks to separate people (totaling $495) in the past. Additionally, one month I was asked to send less money in lieu of receiving a check for a small medical need I submitted. Many members send cards and notes with their check and I admit, reading people’s notes and prayer intentions was something I looked forward to while I was recovering last year. When my kids have a medical need, I always share the cards we receive with them but they enjoy getting mail of any kind.
As you can imagine, sending a check every month can be a cumbersome affair, as well as receiving several checks (in the case of a large expense) and taking them to the bank. Recently, Samaritan has adopted a connection to PayPal and funds can be sent and received electronically.
When I have a shareable (qualified) medical expense, I simply upload an electronic image of the bill to the website and someone at the central office reviews it for approval. Once approved, the applicable “shared amount” is assigned to various members. For example, a $1,200 bill would be approved for $900 in shareable expenses (I am responsible for the first $300 of costs). If I am able to negotiate a discount with the provider, say $100, that goes towards my costs. I would still receive $900 from other members. $495 is the highest monthly share obligation and an expense of $1,200 would necessitate three or four members to send funds to me. With most banks accepting electronic check deposit, it’s fairly easy to deposit the funds and pay bills. Within 30-60 days we receive checks from other members to the extent the medical need was covered. In my experience, this has always been 100%, short of the $300 that falls under my personal responsibility.
If Samaritan thinks that additional discounts can be obtained, they contact me and ask permission to work through the Karis Group to negotiate additional discounts with the provider. Whether or not Samaritan is happy with the price of the service does not impact if the bill will be shared with the group; it only impacts the time before I will be reimbursed, as additional negotiations take time. I have read reviews of Samaritan where members recount that they were asked to use a different provider in the future when costs have been higher than Samaritan deemed appropriate. I have never had that experience. The only real complaint I have is related to the time it takes to receive a reimbursement, usually 30-60 days. In most cases, I pay my bills out of pocket prior to receiving funds.
Samaritan has two pricing options, Basic and Classic. Prices vary based on family size. With Samaritan Basic, monthly costs are determined by an age-based formula and are lower than Samaritan Classic. Samaritan Basic members are subject to higher personal responsibility amounts and lower total expense coverage.
We opted for Samaritan Classic because of the higher limits and lower personal responsibility limits. Of particular interest to us was maternity coverage. For Samaritan Basic, maternity coverage is limited to $5,000 versus $250,000. Additionally, medical needs are shared at 90% instead of 100% and the out of pocket responsibility is $1,500, not $300.
On top of the regular sharing mechanisms, Samaritan also offers a “Save to Share” program to allow members to help each other with medical costs above the $250,000, or which fall outside of the regular shared expenses (like dental work). “Save to Share” enrollment costs $150-$415 per year and members’ funds are pooled to cover each other’s larger medical expenses. According to the Samaritan guidelines, bills that exceed 50% of the money pool may not be shared in full. Additionally, the largest single bill ever submitted was for $3.5 million. The bill was discounted down to $2 million and fully shared at that point. There is currently $20 million of “Save to Share” funds available. However, the “Save to Share” program is based on pledges, not contributions. Meaning, those funds are accounted for on paper but dollars are physically in participating members’ bank accounts.
Of special note regarding healthcare sharing programs, their pre-existing condition requirements can present additional obstacles for adoptive parents or parents considering adoption. Adopted children are subject to the same eligibility requirements and limitations as other members. In addition to limited coverage for mental health, my adopted daughter’s health issues would be considered “pre-existing” and therefore not eligible for coverage under a sharing program. That being said, using Samaritan for the rest of my family and traditional insurance for her has resulted in dramatically lower medical costs for us.
Finally, while there are many benefits to a healthcare sharing program, this article is not an endorsement. So far, it has been a tremendous benefit to my family and everyone’s medical situation is unique. There are many reasons why a healthcare sharing program would be the wrong choice to replace traditional insurance. That being said, clients ask about healthcare sharing from time to time and I wanted to share my story.
Any decisions related to insurance: life, disability, and even medical should be discussed with a knowledgeable professional before you take action.
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