If you’re looking to leave the traditional workforce to be an entrepreneur, freelance worker, or early retiree, one of the biggest financial challenges you will face is medical insurance. Health Care Sharing Ministries (HCSM) are an alternative to traditional health insurance policies and could be a viable solution for some people.
Why an alternative is needed
Medical costs have been cited as the most common cause of bankruptcy in America. Medical expenses are a cause of stress and hardship for many more families, even for those with health insurance. As such, managing health care costs is an important component of a risk management strategy.
The Affordable Care Act (ACA) aimed to provide medical insurance to more people for less cost. As I wrote about recently, the ACA is very favorable to early retirees due to generous subsidies available for those with low incomes. However, the ACA’s plan for success hasn’t worked out as well as hoped. It has attracted too many people who are older, unhealthy and receiving subsidies. At the same time, it’s been unable to attract enough of the young, healthy, and unsubsidized enrollees who are required to make it work financially. Thus, costs continue to increase while numerous insurance companies have dropped out completely. The future of the law is in serious doubt.
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An alternative solution to traditional health insurance has come to the forefront, in the form of Health Care Sharing Ministries (HCSM).
You may be surprised to learn that HCSMs have existed for over 20 years. However, participation has more than doubled since the inception of the ACA. This is likely due to political and moral opposition to the law, as well as generally lower costs for those that qualify. Still, the number of people who participate in HCSMs pales compared to those with traditional medical insurance. Many people know very little about Health Care Sharing Ministries if anything at all.
So, let’s explore 3 key things you need to know about HCSMs. This will help you decide if an HCSM is a viable alternative to traditional medical insurance for your needs.
Health Care Sharing Ministries Are Exclusive
Health Care Sharing Ministries are based on the Christian tradition of voluntarily helping others in need, and sharing one another’s burdens. Participation in an HCSM involves signing a statement of shared beliefs.
On the more exclusive side are companies such as Medi-Share and Samaritan Ministries, which essentially limit themselves to evangelical Christians with very theologically specific statements of affirmation. Other companies, such as Liberty HealthShare, have more inclusive statements of affirmation. These involve a shared belief in a fundamental religious right to worship the God of the Bible in his or her own way.
In any case, this requirement to affirm your beliefs and agree to certain moral and behavioral standards is a key differentiator between any HCSM and health insurance. It will determine who is eligible to participate in these groups, what behaviors are deemed acceptable of those who participate, and what services are covered. This distinction is the first thing that you need to know before considering an HCSM as an alternative to traditional health insurance.
Health Care Sharing Ministries Are Not Medical Insurance
Health insurance is a legally binding contract between an insurance provider and a subscriber. Under the terms of the ACA, insurers are required to cover specific mandated conditions and services, and they are unable to discriminate based on preexisting medical conditions.
At first glance, Health Care Sharing Ministries can look and seem to function like medical insurance. Members of HCSM pay a monthly share, similar to a standard insurance premium. HCSMs require participants to share in an initial percentage of their own costs, similar to insurance deductibles. Participation in an HCSM exempts an individual or family from the ACA requirements to have medical insurance.
However, they are also very different from traditional insurance. HCSMs are completely voluntary organizations of like-minded people who make a commitment to share the burdens of others as needs arise. HCSMs provide no legally binding guarantees of coverage. While insurance companies are highly regulated organizations, required to have specific financial reserves, HCSMs are essentially large escrow accounts that take in and pay out money as needed.
The traditional purpose of insurance is to control catastrophic costs. The ACA required this for all ACA-approved plans by eliminating annual and lifetime coverage limits. This is not true of HCSMs, though, which are not governed by the ACA. HCSMs do not offer any guarantees, can have annual and lifetime limits, and have limited legal liability. While members have traditionally reported high levels of satisfaction with HCSMs, these are very important distinctions to understand before choosing an HCSM over traditional medical insurance.
Health Care Sharing Ministries Have Unique Risks
As Christian-based organizations, HCSMs explicitly prohibit behaviors that are not consistent with these beliefs. While health insurance cannot discriminate based on behaviors or preexisting conditions, HCSMs can... and do. This is one of the fundamental principles on which they operate. It allows the group to control costs by eliminating certain high-risk, high-cost behaviors that are mutually agreed upon by the group.
Under the ACA, medical insurance companies are not allowed to discriminate based on medical history or behaviors, aside from age and tobacco usage. Sure, this is good for those who already have a medical condition or who have an unhealthy lifestyle. But it also exposes insurance companies to massive risks and costs that they have no way to control.
This situation is unique to medical insurance, only becoming an issue with the inception of the ACA. For example, if you get a speeding ticket or are involved in an accident, your car insurance goes up. If you participate in high-risk activities such as scuba diving or rock climbing -- or have a history of medical issues, like cancer -- your life insurance premiums go up. However, health insurance companies now have no way to enforce consequences for undesirable behaviors. Their ability to incentivize healthier alternatives is also diminished.
While an inability to discriminate sounds great on the surface -- and is thus popular, politically -- it puts insurance companies at a substantial disadvantage. They are left unable to control risk, which increases costs for everyone.
This is a significant cost advantage to an HCSM and for those that participate in one. HCSMs limit or eliminate behaviors such as the use of alcohol, tobacco, illegal drugs, and sex outside of marriage as terms of participation. Thus, they can greatly control costs associated with these actions by covering only a lower risk and healthier population.
However, this moral and behavioral component opens up HCSM members to risks not faced by those with traditional medical insurance. Consider a few examples:
- Imagine a person who has an occasional drink or two with dinner. After going out to dinner one night, he is assaulted while leaving a restaurant. He gets injured in said altercation one he did not instigate or desire. However, these injuries may not be covered by his HCSM simply due to the involvement of alcohol.
- Imagine someone who has routine knee surgery and is legally prescribed narcotic pain medication. What if this legitimate pain medicine usage develops into addiction (including excessive and illegal use of these drugs or use of other illegal drugs), as is all too commonly seen with the opioid epidemic in our country? Treatment of this addiction would not be covered, as it is outside of agreed upon acceptable behaviors.
- Imagine marital infidelity, where a spouse contracts an STD and then passes it onto the other spouse, who is innocent and unknowing but still needs treatment. Or, imagine having a teen daughter who becomes pregnant. In either of these cases, the disease or pregnancy would have occurred due to sexual relations outside of a marriage and may not be covered.
When accepting the terms of an HCSM, you are agreeing to moral and behavioral standards that you must abide by in order to obtain desired medical coverage. If enrolling a family, you are accepting consequences for not only your own behavior but for that of other individuals, including spouses and children, over whom you ultimately have no control.
Actions that can already strain families -- such as the above circumstances -- can also be accompanied by legal, social, or professional consequences. Add to that financial hardships not faced by those with traditional medical insurance, and you can wind up with a very difficult situation. This is a serious risk management issue that you shouldn’t take lightly when making your decision.
The risks and advantages of traditional health insurance are very different and unique compared with those of HCSMs. Each has clear upsides and downsides. Before enrolling in either, it is important to understand these distinctions.
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Is an HCSM Right for You?
Health Care Sharing Ministries can be a viable alternative for those of a Christian faith who are agreeable to the terms and conditions of their participation. They can help to lower medical care expenses and manage financial risks for their enrollees. There are clear benefits and advantages for some people. However, HCSMs could be completely inappropriate for others, based on their religious and moral beliefs, medical conditions and needs, or financial situation.
We each have to make our own informed decision. Sit down and take a long hard look at your lifestyle before deciding to switch from traditional insurance to a sharing ministry. The savings may be well worth the jump for your family -- just first be sure that you aren’t setting yourself up for additional risk!