“Change is the only constant in life.” There can be many different applications of the Greek philosopher Heraclitus’ words of wisdom, but one that is especially relevant to this blog post is planning for retirement. For soon-to-be retirees, understanding how to adjust to life after work can be stressful and overwhelming. And as the Baby Boomer generation continues their mass transit from the corner office to the golf course, more and more people are having to deal with one particularly stressful variable – Health Care. How much does it cost? Which plan should I choose? Should I fund my HSA?
With health care costs continuing to rise faster than other costs (food, utilities, shelter, etc.), understanding the landscape of available options is as important as ever. And when you consider that in 2019 individuals will no longer to be required to have basic health care coverage, insurance costs could continue to rise as healthy people are removed from the risk pools.
For some, a potential solution could be Healthcare Sharing Programs (HSP’s). While not new, the aforementioned rise in health care costs have made this alternative more popular. Because HSP’s are incredibly nuanced and no one is the same, this blog will provide a very high level introductory into HSP’s.
What is a Healthcare Sharing Program?
An alternative to traditional health insurance, these programs are faith-based organizations that provide support to eligible individuals and their families with health care needs. Similar to insurance, they pool the resources of the members to help pay for those in need. Though the terminology is different, you pay the equivalent of premiums, deductibles, out of pocket expenses, etc.
Despite being around since the 1980’s, the popularity of HSP’s has gained momentum since 2010 as membership has increased 5-fold to 1,000,000 members today. The majority of the members belong to the four most popular organizations:
Who can join?
There are no set rules or guidelines for joining an HSP but the common theme is that they are all faith-based organizations. Some require a formal interview and further proof of the individual’s commitment to the organization, while others merely require that you respect many different denominations. Depending on where each organization falls on that spectrum, the coverage provided will vary. For example, health care needs related to alcohol and drug use may not be covered.
Why consider a them?
The main appeal to HSP’s is that they’ve been much cheaper than the more traditional coverages. According to financial planner Jake Thorkilsden (who wrote a much more detailed analysis here), families can join these programs from $300 to $500 month. For context, private health care coverage (outside of employer or government) costs on average about $1,564 per month for families. Further, HSP’s have lower out-of-pocket limits than the standard high-deductible health insurance plans.
What’s the catch?
Like anything, HSP’s come with tradeoffs. It’s important to understand one key difference between HSP’s and traditional health insurance – HSP’s are a voluntary agreement between members to help pay for each other’s health care needs. In contrast, standard health care arrangements are legally binding contracts that hold insurers liable for unpaid needs. So in theory, if an HSP didn’t do what it said it was going to do (i.e. provide reimbursements for health care), a member would have no legal basis to seek action.
Further, because each program is unique, there are no standard answers to questions like “Does It cover pre-existing conditions? Are you restricted to which health providers you work with? How do I get reimbursed?” For all these questions listed, the answer is the hated “it depends.”
Details, Details, Details
Do you think an HSP might be right for you? Be sure to your do due diligence and really dive into the details. Our clients rely on us to understand these details, eliminating unnecessary stress in their lives so they can focus on things more important to them. If you’re going about this alone, be sure to read the fine print and make sure you understand the tradeoffs.