Know all the facts before choosing this lower-cost alternative to health insurance.
For many households, the costs associated with medical care and health insurance will constitute one of the largest expenditures made on an annual basis. Despite the many reforms that have been undertaken over the last decade, health insurance costs and premiums have continued to rise. This has led many consumers to search for more affordable alternatives to traditional insurance. One of the most popular of these alternatives is medical cost sharing plans (MSCP).
Below, we will detail what MCSPs are, what the benefits of utilizing one may be, and some of the potential drawbacks that they contain.
What are MCSPs?
Medical cost sharing plans are plans that are set up to act as an alternative to health insurance, and which are co-operative in nature. As opposed to normal health insurance, where a premium is paid each month and policyholders file a claim when they are in need of assistance for medical costs, MCSPs operate a single shareable account to which participants contribute funds to assist with the medical costs of each of the members on an as-needed basis.
MCSPs are often discussed as having no deductibles; however, this is not exactly the case. Nearly all MCSPs include a non-shareable cost amount each year, which functions identically to a deductible for traditional insurance.
While MCSPs may sound a lot like health insurance, they are legally distinct from traditional health insurance plans in several ways. Most notably, MCSPs are exempt from federal and many state laws that regulate and govern health insurance companies.
Benefits of Using Medical Cost Sharing
There are a number of benefits that can be derived from using an MCSP as opposed to a traditional plan. Chief among these would likely be cost; MCSPs can often cost a fraction of what a traditional plan can cost in terms of monthly premiums. Additionally, MCSPs may allow the payment for services to be in cash, which can lead to discounts when paying for care.
Another key advantage MCSPs have is in regard to the healthcare providers that can be seen by their members. Traditional health insurance typically restricts a policyholder to only using a provider that is within their own network of providers; a policyholder may be entirely precluded from using an out of network provider or may be financially penalized for doing so. With MCSPs, there is no network, so participants can choose any provider they wish. If they desire, they could even choose to go out of state or out of the country to seek care.
Finally, MCSPs can typically take on new participants at any point throughout the year. This can stand in contrast with traditional healthcare plans, which typically take on new participants during a designated “open enrollment period” at a fixed time during the year.
Downsides of Medical Cost Sharing Plans
While there are indeed some benefits to making usage of a MCSP for healthcare, there can also be quite a few downsides and risks that many individuals will not want to assume.
Lack of Governmental Regulation
As was detailed above, MCSPs are typically exempt from federal and most state regulations concerning health insurance. Many of these regulations are put in place to protect the rights of policyholders when they are in need of making a claim or in case of the financial insolvency of the insurance company.
Health insurance companies are the subject of oversight regarding their financial health, as well as laws that protect consumers in the event that the company is not able to meet its financial obligations. MCSPs are generally not covered by these laws. Therefore, if a situation should arise where the MCSP becomes insolvent or is unable to provide benefits, participants may have very little recourse to pursue in order to receive what they are owed.
Lack of Coverage for Pre-Existing Conditions
Many traditional healthcare plans available today are required by the Patient Protection and Affordable Care Act to cover pre-existing conditions, such as diabetes. Once again, MCSPs are generally exempt from having to cover these conditions.
Many MCSPs, if they do cover pre-existing conditions at all, will require a participant to pay into the plan for at least one, and in some cases several, year(s) before any benefit can be claimed for costs associated with the condition. For many participants, costs associated with a pre-existing condition can represent the lions’ share of health care costs for them. Not being able to receive any benefit from the plan for these costs could defeat the entire purpose of saving on premium payments by participating.
Restrictions on Covered Conditions
Related to pre-existing conditions, MCSPs are the ultimate arbiter of what is and isn’t covered in the plan. This can change from year to year, often without any input from the plan participant. A contribution made to an MCSP is considered a gift, and the MCSP gets to decide whether or not the participant will be reimbursed for claim expenses or not.
Other Factors to Consider
Aside from the factors delineated above, other items to consider when deciding whether or not to make use of a MCSP include:
- MCSPs often do not cover the costs of wellness visits to a primary care physician or preventative medicine.
- MCSPs are not able to be used with funds from a Health Savings Account (HSA) or other employer-sponsored reimbursement plan.
- Traditional healthcare plans will often include coverage for vision care and dental care. MCSPs frequently do not do so.
- MCSPs are frequently founded by faith-based organizations. These organizations may require potential participants in the plans to adhere to the religious doctrines or principles that are espoused by these organizations. Many potential participants may not wish to do this.
Some of the most popular MCSPs offered today include:
- Medi-Share: a subsidiary of Christian Care Ministry, Inc. Payments are based on age, size of household, and program option that you choose (there are a total of seven that are offered, in increasing dollar amounts). The shareable amount offered is for the entire household for the entire year, not per person or per event. Participants must be active church-goers and are forbidden from vaping to be eligible.
- Christian Healthcare Ministries: Offers three different service levels (Gold, Silver, and Bronze); Gold is the most expensive and also offers the most coverage. Bronze is the least expensive and comes with the highest shareable amount. Plans come with a maximum shareable amount of $125,000 per illness; a supplemental coverage, called “Brother’s Keeper”, can be purchased to increase this to $1 million for Silver and Bronze plans and unlimited for Gold plans. CHM does not discriminate based on age, weight, location or health history, but does require abstinence from tobacco and illegal drugs, following biblical teachings regarding alcohol, and regular attendance at worship services.
- Liberty Healthshare: Two different membership plans, for those under 30 and those 30 or older. Prices also vary based on whether the plan is purchased for a single person, a couple, or a family. Two different service tiers also apply, Liberty Plus and Liberty Share. Liberty Plus allows for reimbursement of expenses up to $125,000 per incident; Liberty Share allows for reimbursement of up to 70% of qualifying expenses per incident, not to exceed $125,000. Liberty Healthshare requires participants to eat nutritiously and to exercise regularly.
- Samaritan Ministries: Offers two different plans, the Samaritan Basic and Samaritan Classic. Samaritan Classic offers 100% reimbursement up to $250,000 per need; Samaritan Basic has a limit of $236,000 for 90% reimbursement. Samaritan Classic also offers up to $250,000 in maternity coverage, compared to $5,000 for Basic (more or less necessitating the Classic plan for anyone who is pregnant or plans to be so in the near future). It also offers a “Save to Share” plan for an additional fee, covering needs in excess of the limits mentioned. Payments are sent directly to fellow participants after the first two months, rather than to a central office. Notably, Samaritan Ministries does not negotiate with medical providers; that is the responsibility of plan participants.
Medical cost sharing plans may indeed offer the ability for at least some consumers to lower their health care costs without causing disruption to their lives. However, the factors that we have discussed herein should be heavily considered when deciding whether or not to make use of a plan. Participating in a MCSP may be trading a fixed amount of payment each month in premium or deductible for an increased risk that the consumer will face a much larger liability for medical costs just when they are in need of care. For many consumers, this risk may be too great to take on.