When you get used to a thing, particularly vital access to decent healthcare coverage, it’s like a smack in the face when it’s suddenly gone. What happens when your employer-sponsored health insurance is no longer available to you?
For Americans lucky enough to have had an employer-sponsored health plan, this question rears its head at the end of employment – typically after receiving a letter outlining the significant costs to continue on a former employer’s health plan through COBRA. We’re talking 102% of the full premium rate; goodbye employer contribution. And that price tag is no easy pill to swallow.
The alternatives? Since the Affordable Care Act (ACA) was enacted, many who earn median incomes have been able to turn to this health insurance marketplace, available at a reduced cost through the help of government subsidies (if this might be you, I recommend visiting www.healthcare.gov to determine if you qualify for a premium subsidy). But there’s still a large segment of the population that earns too much to qualify for a subsidy, yet not enough to comfortably pay the high price of COBRA premiums or individual health insurance policies.
For these individuals stuck in the middle, help may be on the way in the form of relaxed rules governing short-term health insurance policies and possibly Association Health Plans (AHPs), although these options will present the consumer with a decision about trading premium for coverage and provider access.
One limited option that’s often overlooked is the Healthcare Sharing Ministry (HCSM). This concept was created by faith-based groups, primarily Christian, and has grown to over 1 million participants since the introduction of the ACA’s now-zeroed-out individual mandate penalty in 2014 (also note: HCSM members are protected from the mandate). The idea is that all participants bear the burden for other members’ healthcare expenses by making voluntary monthly payments to the HCSM.
This sounds an awful lot like an insurance policy but is technically not considered insurance. There is no contract or guarantee to pay benefits, there are no fixed premiums and there is no assumption of risk. Instead, medical expenses incurred by individuals are presented to the ministry, which draws on the money paid by its members each month. It comes with its risks – if the ministry decides to reject a claim, the participant would be 100% responsible for the charges. Also, since HCSMs are not regulated by a state’s department of insurance there may be a higher risk the organization mismanages the funds, which would result in an inability to cover claims. Remember, HCSMs are not insurance.
HCSMs come with their rules as well; participants are required to adhere to certain health habits (e.g., avoiding tobacco, heavy drinking and illegal drugs). And HCSMs reserve the right to exclude coverage for pre-existing medical conditions, as well as deny claims that are outside of the group religious beliefs (think: abortions, contraception or claims related to illegal drug use).
In spite of the fact that monthly payments are not deductible from federal income tax or a charitable deduction, it is no surprise that Healthcare Sharing Ministries have grown in popularity given their low monthly cost compared to ACA individual health insurance policies. For participants with a good medical history and infrequent medical needs, HCSMs provide a lower-cost way to hedge against minor and major healthcare costs in these turbulent times.