For many of us struggling with the continuing growth of health-care costs, the fear of an unforeseen medical expense occurring is ever-present.
This past fall, my oldest son fell while on the dreaded monkey bars and broke his arm. Aside from the pain of seeing my first-born injured, the pain of shelling out over $6,000 in unpaid medical costs also hurt.
Combine that with the annual premium costs of approximately $8,000 we paid, and my wife and I were looking at a sizable portion of our annual income going toward health-care last year. I know we are not alone in the impact rising medical costs are having on personal finances.
If it feels like you’re paying more for less, you’re not wrong. According to the Federal Medical Expenditure Panel Survey, which surveyed more than 40,000 business establishments, premiums for employer health plans rose by 4.4% for single plans and 5.5% for family plans in 2017. However, for these increases in premiums, the coverage actually went down. The average deductible for single-person policies over that time period rose by 6.6 percent.
These increases in premiums, combined with decreasing coverage, are causing many to demand changes. In Washington, those on the right are once again attempting to use the courts to strike down the Affordable Care Act, aka Obamacare, which they say will help return health costs to the levels they were at prior to the law being signed in 2010. Those on the left believe a single-payer governmental system of health care, which they often refer to as “Medicare for all,” is the answer.
Individuals are also looking for solutions. As a result, medical sharing plans are gaining in popularity. If you listen to the radio you have probably heard advertisements for some of these organizations such as Medishare or Liberty Healthshare.
Because my exposure to large out-of-pocket health expenses is high, their claims that they can reduce overall health-care expenses by as much as 50% intrigued me. I recently had the opportunity to meet with a representative of one of these plans to better understand how they work.
First, let me make very clear, these plans are not health insurance. They are simply an organized group of people who band together to help each other pay for medical expenses. With insurance, the liability and risk are transferred to the insurance company. With a medical sharing plan you are ultimately responsible for all medical expenses if the plan were unable or unwilling to pay.
The principle these sharing plans use of pooling high impact, low probability risks to protect the individual is the same as what is used by insurance companies. The individual pays a monthly premium to the pool, which is then used to pay the costs of those who need it that month. As long as the amount people pay into the pool is greater than the money being taken out, the system works as planned.
Aside from reducing overhead costs and eliminating the need for profits, the biggest way these medical sharing plans keep premium costs down is to reduce the amount they pay out of the pool. This is why they are strict in the types of claims they will pay out on. In general, they do not allow high-risk individuals into their pools. People who smoke, have a history of substance abuse or pre-existing conditions are typically barred from participating. Because many of these organizations are faith based, other moral and ethical requirements may also exist for enrollees.
If you can qualify for coverage and can accept some of the risks, you can possibly save a lot of money on your health coverage. I personally found that my monthly premiums would drop by nearly 50% under one of these plans.
If you are struggling with your health-care costs I would encourage you to dig deeper into these and other options. While you are not able to purchase one of these plans through Stewardship Capital, that fact makes us no less willing to sit down with you and share more information about their pros and cons so that you can figure out if they might be a good fit for you. Just reach out to us at email@example.com to schedule a time to talk.
(Advice is general in nature and not intended for specific situations.)
Luke Davis is the director of operations and compliance at Stewardship Capital in Independence.