Open enrollment is typically not most people’s favorite time of year. It means evaluating their health insurance options which, in many cases, their monthly premiums have increased, along with their deductibles, co-insurance percentage, and co-pay amount for office visits and other procedures.
In addition to those who suffer through open enrollment with employer-sponsored healthcare, some people face rising annual Affordable Care Act premiums, and there is a host of new post-pandemic solopreneurs experiencing for the first time the pain of learning what their individual health insurance options are.
One alternative to traditional health insurance many people are taking a hard look at is the medical cost-sharing plan, also called the health care sharing plan. Let’s look at what it’s all about and see if it may make sense for you.
What is cost-sharing?
Medical cost-sharing plans are provided by organizations whose members share medical costs. As a member, you are responsible for paying a certain dollar amount (similar to a health insurance premium) that is your monthly share amount, as well as an annual unshared amount (like a deductible) to pay for your own expenses before the plan shares any of your medical expenses.
How does cost-sharing work?
If this sounds a lot like health insurance, that’s because it bears a close resemblance to it. You pay a monthly fee for an organization to help pay your medical expenses if you need medical treatment for an illness or injury, much like you do for traditional insurance.
While there are a few similarities between medical cost-sharing plans and health insurance, there are some significant dissimilarities.
This is, of course, what drives most people to join medical cost-sharing plans. The monthly cost for a single person can be under $100, compared to a bronze-level plan from the health insurance marketplace, which averages about $330 per month, before any applicable government subsidies.
Some members feel good about being part of a like-minded group of people who share their faith or believe in, and want to follow, certain lifestyle and spiritual guidelines. Some groups, for example, will pray for members who are ill.
Unlike they do with insurance companies, state governments have no legal control over medical cost-sharing plans. In fact, thirty states have laws on their books saying these plans aren’t bound by the same rules as insurance companies. And at least fifteen states have warned the public to exercise caution with these plans.
For example, the Nebraska Insurance Department considers these organizations to be an unregulated “ministry.” The department said, “The Insurance Department cannot assist you with any complaints about the ministry. Your medical provider is not obligated to accept any discount from the ministry if there is no contract between the ministry and the provider.”
[ Related: How many Americans are uninsured? ]
Pros & cons of medical cost-sharing
In addition to the lower monthly costs associated with medical cost-sharing plans, they also have other advantages:
- The unshared amount is typically much lower than the deductible on a high deductible health plan (HDHP) or a traditional health insurance plan with lower premiums because of a higher deductible (also known as “catastrophic health insurance”).
- Members have more provider choices than HMO and PPO plans provided by insurance companies. There are no network requirements; members simply provide their cost-sharing card as proof of coverage. If you must pay out of pocket, your particular plan may reimburse some or all of your expenses.
As previously mentioned, a drawback to medical cost-sharing plans is the absence of any assistance from state insurance departments if you have a problem with the plan. In addition:
- Unlike the Affordable Care Act, there is no requirement that plans cover pre-existing conditions, such as cancer, diabetes, or any lifestyle-related conditions, such as heart disease related to smoking. If you have pre-existing conditions, they may not be fully covered for a year or more, or your application for membership may be declined.
- Essential health benefits like wellness exams, vaccinations, or mental health counseling are typically not covered by these plans.
- Plans are mostly faith-based and ask you to live what they define as a “moral and healthy lifestyle,” such as not using tobacco or abusing alcohol or drugs. The plan may cancel your membership at any time if they decide you have not met any requirements, such as attending a Christian church weekly, having reached age 65, or having used illegal drugs.
Who benefits from medical cost-sharing?
Medical cost-sharing plans aren’t suitable for everyone, but they can work well for you if you:
- Are generally in good health
- Aren’t eligible for a tax credit based on income
- Lack access to insurance through your job or a government program
- Can’t get coverage because you missed open enrollment
- Only need or want catastrophic coverage
- Can’t afford health insurance premiums
The biggest differences between the various plans are their guidelines for accepting members, whether they cover alternative medical treatments, and if they process bills electronically.
Combining a medical cost-sharing plan with concierge medicine, also known as direct primary care (DPC), may also work well for you. Through DPC, 90-95% of your primary healthcare needs, including office visits and lab work, are provided by your doctor for a monthly retainer fee. Your medical cost-sharing plan can then be used to cover other out-of-pocket expenses that may be too expensive, like hospital stays. And, some plans offer discounts to members with a DPC membership.
Questions to ask before joining a cost-sharing plan
If you’re considering joining a medical cost-sharing plan, ask yourself the following questions before signing up:
- What are the plan’s lifestyle or religious rules, and am I comfortable with them?
- How much will I have to pay out of pocket?
- What, if anything, does the plan guarantee it will cover?
- Will my doctor accept the plan?
- Is there a network of providers?
- If I have a pre-existing condition, what are the rules for cost-sharing?
- When I have doctor bills, does the plan pay them directly, or do I pay them and get reimbursed by the plan?
- How do I appeal a sharing decision?
- How often does a plan suspend a member’s coverage?
The bottom line
Medical cost-sharing plans may offer attractive pricing, but some risks must be taken into account, such as a lack of guaranteed coverage and little or no recourse on your part if your medical bills aren’t paid. Before you apply, check out high deductible health insurance plans combined with a health savings account (HSA) or Affordable Care Act plan with a subsidy.
The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.