You'll learn the main advantages and disadvantages so you can evaluate if joining a health sharing option is right for you.
Tired of paying sky-high health insurance premiums? Learn more about the pros and cons of healthcare sharing, a low-cost alternative gaining popularity.
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Hi friends, and welcome back to Money Girl! My name is Laura Adams. If you're new here, I'm an award-winning personal finance author who's been writing and hosting this show since 2008.
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If you get health insurance through a group plan at work, you're probably getting an excellent policy at an affordable price. But if you leave because you get laid off or want to be your own full-time boss, you'll need to evaluate other insurance options carefully. And one alternative to health insurance that's getting more popular is joining a healthcare sharing plan.
This episode will explain health sharing and seven critical things to know about it. You'll learn the main advantages and disadvantages so you can evaluate if joining a health-sharing option is right for you.
Here's what you should know before enrolling in a healthcare sharing plan.
Healthcare sharing plans are nonprofit cooperatives with members who agree to cover a portion of each other's medical expenses. They aren't insurance plans and, therefore, aren't subject to regulatory oversight or laws governing policyholder consumer rights. Also, since they aren't insurance, you never qualify for a health savings account or HSA, even when you have to pay a lot out-of-pocket.
Instead of paying premiums to a health insurance company, sharing plans charge members a monthly fee. They set their own rules on who can join and what expenses they'll cover.
In addition to medical costs, some health sharing plans include dental, vision, and even disability coverage. However, there's always an annual unshared amount, similar to an insurance deductible. But unlike regular insurance, which has a deductible based on the calendar year, unshared amounts apply per medical event.
For instance, if you choose a $1,000 unshared amount and go to the hospital in March for a covered respiratory illness, that's all you'd have to pay for that medical issue until the following March. But let's say you fall and break your arm in June; you'd have to pay another $1,000 for those expenses. And if you get into a car accident in December, you'd have another $1,000 to pay out-of-pocket.
Typically, there's a cap on the number of unshared amounts, such as three within a 12-month period. So, if you had a fourth visit to the hospital before March, you might not have to pay anything because you've paid the maximum for three unshared medical events.
In other words, what you're responsible for with a health-sharing plan is significantly different from regular health insurance. So be sure you understand the details of unshared amounts and how much your maximum out-of-pocket expenses could be.
Since healthcare sharing plans are not insurance, you can enroll anytime. With employer-sponsored health insurance, you typically must wait until an annual open enrollment to make changes unless you're a new employee.
There's also an annual enrollment period for a state or federal marketplace health plan, which typically runs from November 1 to January 15. However, if you have certain life events—such as losing your job, relocating, getting married, or having a child—you qualify for a marketplace plan's special enrollment period and can get coverage.
Health share plans typically don't comply with ACA regulations because they don't offer minimum essential coverage or guarantee your insurability for pre-existing health conditions.
However, some sharing plans provide preventative services, such as annual physicals, vaccinations, and wellness visits, which is the minimum for ACA eligibility. That allows members to avoid potential penalties for violating the requirement to have ACA coverage.
While many states don't enforce ACA penalty fees, some do. So be sure you understand the maximum penalty if you choose a health sharing plan that isn't ACA-qualified.
If you need individual health insurance and have a low to moderate income, you typically come out ahead by purchasing an ACA plan from a state or federal marketplace. That's because they provide tax credits, which are subsidies based on your income and family size.
However, for 2023, if you earn more than $54,360 as a single taxpayer or $111,000 as a family of four, you typically don't qualify for a health subsidy. That means coverage can be expensive, especially if you're over 50. Premiums are age-adjusted in most states, meaning older policyholders can pay up to three times that of younger people for the same coverage.
So, if you earn too much to qualify for an ACA marketplace subsidy, enrolling in a health sharing plan can be a much more affordable option.
As I mentioned, when you purchase an ACA-eligible health plan, federal and state laws require insurers to cover your pre-existing conditions for unlimited care. But healthcare sharing plans can deny your membership based on your health history.
Some may accept members with pre-existing conditions but not pay for services related to them. Or sharing plans may charge extra or even impose a waiting period, such as one year, to cover 25% or 50% of costs related to your pre-existing conditions. In some cases, they may be 100% covered after you've paid into the sharing plan for several years.
But you'll typically be covered if you develop a medical condition after joining a sharing plan. So understanding how a sharing plan does or doesn't pay for services related to any previous medical treatment or disease you've had is critical before signing up.
When you have traditional health insurance, it pays a portion of your claim and bills you the rest. You typically pay nothing or a small copay to the service provider. But healthcare sharing plans reimburse you after you pay a medical bill–at least up to your chosen unshared amount.
Since you're technically uninsured when you're a member of a health-sharing plan, you must present yourself as a cash customer. That can be a good thing because it may qualify you for discounts. Then you submit your receipts to the sharing plan for approval and help negotiating the cost.
Most healthcare-sharing plans are religious nonprofit organizations. They may require members to sign statements of faith for approval. Plus, you may have to agree to a particular lifestyle, such as regularly exercising, eating healthy food, attending worship services, and avoiding drugs and alcohol.
For instance, if you drink alcohol and get into an accident, many healthcare sharing plans would deny you coverage. As I mentioned, sharing plans aren't insurance and create their own rules for who can join and what will be covered.
While sharing plans can be attractive because they cost less than insurance, be sure you fully understand the fine print before signing up and not having a substantial medical bill covered. While some sharing plans are more comprehensive than others, most are designed to give catastrophic care to healthy members.
LISTEN ALSO: 5 Steps to Create Your Own Self-Employed Benefits Package
As always, you can leave a comment or money question by calling 302-364-0308 to leave a voice message. Or send an email using my contact page at LauraDAdams.com.
That's all for now. I'll talk to you next week. Until then, here's to living a richer life.