This article was first published by Forbes on January 30, 2019 (HERE).
According to Gallup, the number of people who are uninsured has risen over the last two years. Although this conclusion is disputed by government estimates, it’s very possible that no one is measuring the phenomenon correctly.
The reason? Large numbers of Americans are turning to alternatives to Obamacare – including alternatives that are not called “insurance” by government regulators or even by the plans themselves.
The four top “sharing” organizations, for example, are now insuring more than one million people – up fivefold since the passage of the Affordable Care Act. To put that in perspective, only about 10 million people are currently enrolled in the Obamacare exchanges and the vast majority of those are receiving subsidies.
Among people who don’t get subsidies, there may now be more who have an alternative (non-ACA-compliant) plan than the number with an unsubsidized Obamacare plan.
In what follows I will briefly review three popular alternatives to Obamacare: health sharing plans, indemnity insurance and short-term plans.
Health Sharing Plans. These plans originally had a religious motive for their existence and some still do. To become a member of Medi-Share, for example, applicants must agree to a detailed statement of faith and “attest to a personal relationship with the Lord Jesus Christ.” Samaritan Ministries even requires verification of regular church attendance.
Although there are non-religious plans (discussed below) almost all sharing plans tend to avoid paying for health expenses related to “non-Biblical lifestyles and choices.” For example,
The two most attractive features of these plans are the price and the lack of a restrictive provider network. According to Jake Thorkildsen – a financial advisor whose post I am relying on for most of the material in this section, premiums are well below what others are paying in the private sector for comparable coverage. Christian Healthcare Ministries (CHM), for example, offers a family of three unlimited coverage per health care incident for a monthly premium of $478. That’s less than one-third the cost of a typical employer plan and less than half the cost of insurance on the Obamacare exchanges.
Although some plans have networks with negotiated fees, members can see almost any doctor or enter almost any hospital. The only requirement is that patients must aggressively bargain for the “cash price” of care, typically about 60% or less of usual and customary fees. Liberty HealthShare considers hospital bills fair and reasonable if they are from 150% to 170% of Medicare rates. If the patient needs help negotiating a rate, the plan supplies it.
A typical plan has a deductible associated with a health incident, rather than an annual deductible. If a member has a heart attack, for example, the deductible applies to all the expenses related to the episode, regardless of the time period. Also the typical plan has a monetary limit on benefits, which may be $125,000 or even $1 million. This not an annual limit, however; it is a limit applied to each health incident.
Under a conventional arrangement, members send their monthly premium to a central hub, which then pays medical claims. However, some plans have members send money directly to other members who have medical bills instead. Say a member of Samaritan Ministries has a monthly premium of $400. She might send $250 to Jeff in Montana and $150 to Mary in Virginia. These checks are often accompanied with get-well cards or notes with kind words and well wishes.
Health sharing organizations were grandfathered under the Affordable Care Act. As a result, they can exclude people with pre-existing conditions, although in most plans coverage for pre-existing conditions is phased in over a period of three years. Also these plans are not regulated as insurance companies in any state. In fact, the plans typically go out of their way to avoid insurance terminology. Premium payments are often called a monthly “share” and the deductible is called the “unshared amount.”
Even so, members of these plans were specifically excluded from the Obamacare mandate penalty assessed against those who lack health insurance.
Because they are unregulated, the plans are not required to have reserves. Also, their agreements are not insurance contracts. In fact, they are not contracts at all. Members, therefore, must trust the organization to keep its word and pay medical bills. But trust is a two-way street. The plans must trust the members to pay the doctor after they are reimbursed for a medical expense.
If you Google “Christian health sharing ministries,” you will find some complaints. Nonetheless, according to Thorkildsen the arrangement seems to be working well. CHM, for example, has paid out over $3.5 billion in claims, has never failed to pay a claim for lack of funds in 37 years and has had no increase in premiums for its basic product in a decade.
One downside of health sharing plans is that they typically don’t pay for health maintenance. If a diabetic goes to the emergency room, for example, the plans pay for the treatment. But they don’t pay for insulin or other maintenance drugs beyond, say, 120 days.
However, a non-religious plan offered by M Powering Benefits Association assists patients with drug costs by connecting them with foreign pharmacies who sell drugs at prices paid by patients in other countries. This practice is perfectly legal so long as the patient is buying for personal use and not to resell in the U.S. market.
Unlike other plans described here, M Powering Benefits typically sells to employer groups. It helps employers meet their Obamacare mandate to provide minimum essential benefits by providing enrollees with 63 preventive services at no charge, the ability to consult with physicians 24/7 by phone and access to a “concierge desk” that helps patients connect with specialists and obtain lower prices for medical tests. This package also has a Health Savings Account component that can be used in conjunction with a health sharing plan – to pay for deductibles, maintenance drugs and other out-of-pocket costs.
Limited Benefit Indemnity Insurance. This is another type of insurance product that is becoming increasingly popular. These plans pay a fixed amount of money for each medical incident, regardless of the actual cost of care. There is generally no annual deductible.
Although limited benefit plans are offered by Blue Cross, UnitedHealthcare, Cigna and other insurers, they are not considered major medical insurance. They are regulated as insurance, but they are not subject to Obamacare regulations.
An especially popular form of limited benefit insurance pays for primary care but provides much less coverage for inpatient care.
Since my name is often associated with high-deductible insurance, this is probably a good place to stop and explain why non-catastrophic plans appeal to so many buyers.
Suppose you have a choice between a plan with a $10,000 deductible and $1 million of coverage and a plan with no deductible but only $25,000 of coverage. Suppose the premium for the two plans was the same. Which would you prefer?
For people with high incomes and high net worth, this is a no brainer. They would choose the former option in a heartbeat. By the way, these are the types of people who designed Obamacare.
But young, healthy, low-income families living paycheck-to-paycheck invariably prefer the latter option. How do we know that? Because that’s the kind of insurance they and their employers chose to buy before there was Obamacare.
The biggest fear these people have is that someone in the family will have an accident (the source of 66% of all ER visits under the age of 45) and they won’t be able to afford the urgent care visit. In today’s marketplace, these families are rejecting Obamacare and choosing limited benefit insurance instead.
Hooray Health is a Dallas-area firm catering to that very market. For $99 a month ($229 for a family) the company offers individuals and employees access to more than 3,000 retail clinics and urgent care clinics in 46 states. All that is required is a $25 copay for each visit.
The basic plan does not cover preventive care. However, for $139 a month ($329 for a family) an employer can add minimum essential coverage (MEC) for the full panoply of preventive services required by Obamacare (immunizations, flu shots, coloscopies, mammograms, etc.) and there is zero copay for these.
Basically, anything that can be done under the roof of a primary care doctor’s office or urgent care facility is covered by the plan. That may come as a surprise to people who think these types of plans are “skimpy.”
[Note, however: since the number of visits is limited to 5 per year, per person, this plan is not likely to appeal to patients with a continuing chronic condition.]
Hooray Health includes other benefits that are also not skimpy. Enrollees have 24/7 free access to doctor consultations by phone, through MyTelemedicine. The wait for a response is typically 2 or 3 minutes and the doctors responding have immediate access to the patient’s medical records. They also have 24/7 access to a medical concierge – where they can get advice on finding doctors, scheduling medical tests and purchasing drugs.
Short-Term Insurance. This type of insurance has existed for a long time. It is usually purchased by people who need to fill a gap in coverage – say, on the way from school to a job or on the way from one job to another. It appears these plans are now becoming an alternative to Obamacare.
The reason? They are exempt from Obamacare regulations, including mandated benefits and a prohibition against pricing based on expected health expenses. Also, unlike Obamacare’s narrow enrollment window, these plans can be purchased at any time of the year.
Although they typically last up to 12 months, the Obama administration restricted them to 3 months and outlawed renewal guarantees, which protect people who develop a costly health condition from facing a big premium hike on their next purchase.
The Trump administration has now reversed those decisions, allowing short-term plans to last up to 12 months and allowing guaranteed renewals up to three years. The ruling also allows the sale of a separate plan, which I call “health status insurance,” which protects people from premium increases due to a change in health condition should they want to buy short-term insurance for another three years.
By stringing together short-term and health status insurance, people potentially could be able to remain insured indefinitely, with the kind of coverage that was readily available before Obamacare.
Like indemnity insurance these plans are often referred to as skimpy. Yet Beverly Gossage, president of the Kansas Association of Health Underwriters, says short-term insurance may be as good or better than Obamacare plans for some people. And if you are healthy, they cost a lot less money. She gives the following example from Overland Park, the second largest city in her state.
A 25-year-old could pay $397 a month for an unsubsidized (Obamacare) silver plan with a $6,000 deductible and maximum out-of-pocket payment of $7,900. Yet a comparable short-term plan that has all the benefits a young person would likely want has a $2,500 deductible, no additional out-of-pocket costs and runs only $98 a month.
So for one-fourth the premium, the buyer can have a much lower out-of-pocket cost should an emergency strike.
To take full advantage of the new Trump regulations for these plans, states must act, however. They must allow three years of guaranteed renewability and allow health status insurance to fill the gap between three-year periods. In some cases that may require legislation. In other states, the insurance commissioner alone may have the power to pave the way.
But even without further state action, short-term insurance appears to be a popular alternative to Obamacare.