Today we start with a disclaimer: This post is intended to educate readers about an alternative option to traditional health insurance, and it is not a recommendation. CONSULT YOUR FINANCIAL ADVISOR, OR OTHER FINANCIAL PROFESSIONAL, TO DETERMINE IF THESE ALTERNATIVES ARE A GOOD FIT FOR YOU.
It’s November, which means it’s open enrollment for health insurance coverage in 2017. And just like every year, Americans are seeing premiums rise, but 2017 is bringing some of the highest premium increases the Affordable Healthcare Act has seen.
In response to rising premiums, more individuals are discovering alternatives to traditional health insurance. Before I discuss one alternative, let’s take a quick look at some statistics regarding insurance premiums, particularly AHA exchange policies.
- Some plans on the Affordable Health Care exchanges are expected to rise up to 25%**.
- In comparison, the average employer health insurance premiums is expected to rise by just 5%*.
- In Indiana (I highlight Indiana because it’s my home, but other states will have similar figures) a family of 4:
- with an income less than $33,534 will receive free health care through the Medicaid program.
- a family of 4 with an income between $33,534 and $60,750 will receive a lower premium plus extra savings for the exchange policy.
- a family of 4 with an income between $60,751 and $97,200 will receive a subsidy to lower their monthly premiums.
- a family of 4 with an income above $97,200 will receive no subsidy.
- In addition to the rising premiums, many states are seeing major insurance providers dropping out of the exchange program for 2017.
- Talk about a double whammy–fewer choices and higher premiums–economics at it’s finest.
While the initial response for households with an income above $97,200 not receiving any subsidy is probably not sympathetic, after all $97,200+ is well above the average household income, these households bear the brunt of the premium increases. Almost 20% of household income for a family just above the threshold will go to health insurance premiums, and this doesn’t take into consideration the deductible that must be met before the insurance policy kicks in. Many policies start with a $6,000 deductible, which takes the household expense on health insurance to 25%. Talk about a damper on discretionary spending. My family is a dual-small business family, and the above situation describes our current situation. Before I committed to spending 20-25% of our annual income on health insurance, that knock on wood, we hardly use, I decided to look for alternative options.
When the AHA was first introduced, I knew a few people who went with medical share plans, but I never looked into them. But, now it was time to learn a little more about them. Unbeknownst to me, for more than 20 years medical share plans have been helping individuals share the burden of medical expenses with each other. In my research, and through talking with others, I’ve come to the conclusion that these plans are relatively unknown, and I want to introduce readers to the concept.
So, without further ado:
There are numerous non-profit organizations, often affiliated with a religious organization, that act as an intermediary helping individuals share in their medical expenses. Members of these organizations, also referred to as ministries, do not carry traditional health insurance, but agree to share in the responsibility of each others medical expenses. Although the ministries do not offer traditional health insurance, they meet the guidelines of the Affordable Health Care Act, which keeps members will from being subject to penalties under the AHA.
For many, the most attractive feature of medical share plans is the significantly lower monthly expense (for my family $495 vs. $1500 a month). As we all know there is no such thing as a free lunch, and the lower monthly expense comes at a cost–members pay for routine doctor visits and smaller medical expenses on their own. In theory, since members pay significantly less month to month, they should be able to cover smaller medical expenses–a emergency fund should cover these as well. When a member has a qualifying medical expense, she negotiates a lower rate and payment plan as a cash-pay patient. Side note: Most medical offices have lower rates for cash paying patients because they don’t have to deal with insurance companies. The medical expense, or “need”, is then submitted to the ministry for other members to share in the expense.
Although the fundamental concept amongst the different ministries is the same, there are differences between them–no two are the same. If you are considering a medical share ministry, it is extremely important to research and compare multiple ministries to determine which best suits your personal situation. For example, one plan I researched will allow expenses for pregnancy to be submitted to the group if the pregnancy occurred while an active member, while another plan would not cover pregnancy for the first year. If an expanding family is a part of your immediate plans, this difference in the plans is important.
When conducting your due diligence here are some things to consider and/or compare:
- What is the per occasion cap? What is the lifetime cap?
- Are there medical needs you may have that are not covered?
- Since many of these are religious organizations, there are some medical procedures and expenses that will not be covered due to religious beliefs.
- When are you able submit medical claims to the group?
- There is typically an amount that must be met, similar to a deductible, before the group sharing kicks in.
- What is the monthly share (the equivalent of a traditional insurance premium)?
- How does the ministry handle pre-existing conditions?
- Since these plans are not insurance plans, they are able to exclude pre-existing conditions from coverage, or require a waiting period before coverage kicks in.
- Has the plan not been able to pay claims?
- How much does the ministry have in reserve to pay claims?
- What is the history of member share (monthly expense) increases?
- Is there a preferred network of doctors?
- How are prescriptions covered?
Obviously, health insurance is an extremely important component of a financial plan. However, given the rising cost of traditional coverage, it may be appropriate to consider an alternative method for medical expenses. Make sure to conduct thorough research to make sure you are not subjecting your family to an even larger financial burden than than the rising premiums under the AHA.
As the disclaimer above noted, consult your financial advisor to determine if a medical share plan is a good fit for your family.
Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.