Medical Cost Sharing: All About Health Care Sharing Ministries
Have you heard any news recently about prices falling in numerous industries across the United States? No? That’s most likely because costs are increasing in almost every sector, including health care.
Health spending in this country is projected to grow by five percent between 2023 and 2024 to a total of $4.9 trillion. Trillion, not billion.
The price of employer-sponsored insurance also is rising, with plans expected to spike over six percent in 2024. If those prognostications are correct, the cost of plans for singles and families will climb this year by about $550 and $1,500, respectively.
Some individuals and employers who want to cut health care costs while working with an entity that reflects their personal moral viewpoints are switching from traditional health care plans to health care sharing ministries (HCSMs). It is part of the growing trend of medical cost sharing.
What is Health Care Cost Sharing?
Although an alternative to traditional health plans, HCSMs do not provide health insurance. They are a type of health care funding cooperative, most of which require payments resembling deductibles, monthly premiums and copayments and define a benefits package. The costs of medical expenses are shared among eligible members.
Although not always the case, most HCSMs are open to individuals who share their religious or ethical beliefs. For example, they might require members to avoid using tobacco or alcohol and adhere to similar moral clauses.
Members who are part of these not-for-profit health care sharing ministries are part of a preferred provider organization (PPO) and procure pre-negotiated rates when using providers in their network. Individuals can use medical cost sharing to supplement an existing health insurance plan to possibly decrease the amount they spend on out-of-pocket costs, such as co-pays.
Just how prevalent are HCSMs in the U.S.? According to a report from the Colorado Division of Insurance, more than 1.7 million Americans use these plans. The following numbers are courtesy of the Alliance of Health Care Sharing Ministries:
- Approximately $1.3 billion of medical expenses were shared by HCSMs in 2022.
- The Department of Health and Human Services (HHS) has certified 107 health care sharing plans as meeting the federal definition.
- Members of HCSMs live in all 50 states.
How Do Health Care Sharing Ministries Operate?
Again, not every HCSM operates the same way, but most such organizations require members to make monthly payments or contributions to cover the qualifying medical expenses of other members. Many HCSMs either match paying members with those who need funds for health care costs, while others combine all monthly shares and administer payments directly to members. Members of health care sharing ministries sometimes contribute to their own savings accounts but are able to request funds to pay for certain medical costs.
As with actual health insurance plans, HCSMs typically mandate that members pay a certain portion of out-of-pocket costs — ranging from $500 to $10,000 — before the medical cost sharing provider begins to cover expenses. The maximum shareable amount is different for each health care sharing plan, and members are given plan guidelines that must be followed along with a list of eligible expenses.
Often, health care sharing ministries instruct members to request financial assistance (charity care) before their medical expenses are submitted to the non-profit organization. Or, their members ask for their provider’s cash pay rate and request that the HCSM pay the remaining balance.
How Is Medical Cost Sharing Different Than Traditional Health Insurance?
Unlike self-insured, level-funded and fully-insured plans, health care sharing ministry plans are not classified as insurance. Most don’t include network requirements, so members have more choice in the providers they choose to see for their medical care. Whereas health insurance plans guarantee coverage of specific services and treatments, HCSMs can decide on a case-by-case basis what and how much is indemnified.
Another difference is that traditional health plans guarantee coverage of expenses once a deductible and out-of-pocket maximum are met. They are not required to comply with the Affordable Care Act (ACA), meaning they do not have to cover minimum health benefits mandated by that law. Some health care sharing plans cover members’ medical expenses only up to a certain dollar amount.
As mentioned earlier in this blog, the majority of health care sharing ministries require members to adhere to specific standards of behavior. That includes anything from abstaining from drugs and alcohol to promising to commit to certain health habits. Individuals who do not agree with those guidelines are not allowed to become members of the HCSM.
| Medical Cost Sharing | Traditional Health Insurance |
|---|---|
| Not classified as insurance | Classified as insurance |
| Choice of providers | Network requirements |
| Coverage decided on a case-by-case basis | Guaranteed coverage of services |
| Not required to comply with the ACA | Must meet ACA guidelines |
| Not regulated by state/federal insurance laws | Must meet state/federal insurance laws |
Advantages of Health Care Sharing Ministries
Joining a community of individuals with the same belief system attracts a lot of members to HCSMs, but so does the prospect of lower out-of-pocket medical expenses. Members’ monthly payments or contributions typically are markedly lower than premiums for traditional health insurance premiums. Here is an example:
Without an Affordable Care Act subsidy, the annual cost of health insurance for a family is more than $22,000. For self-employed families in the 25 percent tax bracket, that is an out-of-pocket premium of $16,500. However, if a family in that same tax bracket becomes members of an HCSM and contributes monthly for an annual total of $11,000, they save $11,000 before tax and $3,500 after tax each year.
Another benefit enjoyed by individuals and families in a health care sharing plan is that they are able to foster a sense of community with other members by helping them with their health care expenses. The health care sharing ministries provide them with an outlet for encouraging members who share the same morals, ethics and beliefs.
Although there are some limitations with health care sharing ministry plans, having some sort of coverage is better than an individual being without insurance. Some HCSMs offer membership bonuses, including vision and dental discounts and disability sharing plus coverage of qualified adoption and funeral expenses.
Members’ geographic location and employment status do not affect their status in the HCSM, nor do specific medical conditions end their membership. There is no wait for an open enrollment period or a qualifying life event necessary for enrollment in a health care sharing ministry.
Disadvantages of Health Care Sharing Plans
Those guidelines some health care sharing ministries require their members to follow are too restrictive for some individuals, making traditional health insurance plans a better choice. Another issue with which individuals deciding on a health insurance plan take exception is that HCSMs do not guarantee coverage of their medical expenses or payment of health care claims. They are not required by law to cover or pay for any expenses.
Health care sharing ministries do not always cover pre-existing conditions or preventive services — especially for medical services or treatment that contradict their beliefs or ethics — or do so on a limited basis, making their plans more advantageous for healthier individuals. Health care sharing plans are not regulated by the federal government, and most (30) states have enacted “safe-harbor” rules that exempt them from state insurance regulation. The result is that members are left with fewer consumer protections without the state insurance commissioner to handle complaints.
HCSM plans can be confusing and mislead individuals into believing they are enrolling in government-defined health insurance. The option often appears very similar to traditional plans, even though what and how much they cover typically are much more limited.
Because health care sharing ministries do not meet ACA standards for minimum essential health benefits, they cannot be offered by employers with 50 or more full-time equivalent employees. They also must not be offered as an alternative to group health insurance or an individual coverage health reimbursement arrangement (ICHRA), and contributions to medical cost sharing are not deductible on federal income taxes.
Tips for Selecting a Health Care Sharing Ministry
The requirements and coverage of HCSMs vary widely, so it is crucial to choose one that:
- Aligns with your values, beliefs and preferences
- Covers the type of medical expenses you’ll most likely need
- Clearly communicates covered expenses, out-of-pocket minimums and maximums and coverage caps
- Supplements your existing health care insurance
- Employs a reputable administrator to oversee the plan
If you still aren’t sure whether medical cost sharing is a good fit for you and/or your employees, reach out to one of our team members who will guide you through finding the best health insurance options available. At StenTam Employer Services, we serve businesses of all sizes and a multitude of industries. By collaborating with us, you’ll have access to best-in-class, enterprise-level health insurance products, ongoing compliance reviews and consulting and cloud-based technology and experience-built solutions.
Glossary
Affordable Care Act:
A health care reform law was enacted in March 2010 to make affordable health insurance available to more people, expand Medicaid to cover all adults with income below 138 percent of the FPL and support innovative medical care delivery methods designed to lower the costs of health care.
Essential health benefits:
A set of 10 categories of services health insurance plans must cover under the Affordable Care Act. These include doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. Some plans cover more services.
Fully-insured health plan:
Employers pay a fixed monthly premium to a third-party commercial insurance carrier that covers the medical claims.
Health care sharing ministry:
Organizations in which the members pay in and share the costs of health care.
Insurance company:
A company that creates insurance products to take on risks in return for the payment of premiums.
Level-funded health plan:
Reduce risks and streamlines administration by offering a fixed monthly price that covers the cost of administration and stop-loss and fully funds the claims risk for the year.
Out of pocket costs:
Expenses for medical care that aren’t reimbursed by insurance, including deductibles, coinsurance and copayments for covered services plus all costs for services that aren’t covered.
Preferred provider organization:
A type of medical plan in which coverage is provided to participants through a network of selected health care providers, such as hospitals and physicians.
Self-insured health plan:
Type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims.
