PART 3: RELIABILITY (How can I know if my HCSO will be reliable?)
Considering the recent bankruptcy of a HCSO – the first in 40 years - and accusations of financial malfeasance at others, consumers may be better protected by trusting those HCSOs that have engineered certain protections and protocols into their sharing practices.
In Part 1 of our Blog Series: Choosing a Healthcare Sharing Program: An Insider’s Perspective we discussed the concept of Affordability to help you understand why an HCS is so much more affordable than health insurance. It’s important for you to understand HCS in terms of its Affordability to help you better assess if HCS is right for you and your family. In Part 2 , we discussed the Credibility of a HCSO and its Programs in terms of its design, governance and management. In Part 2, we wanted to steer you away from those HCSOs that were 1) too willing to confuse the concept of HCS with insurance; 2) not committed to best in class governance, potentially riddled with conflicts, and imbalanced in its use of funds; or 3) managed and operated in a way to side-step the issue of inurement.
As Industry Insiders we believe that HCS is a great alternative to health insurance for many American families. However, over the last 24 months, news within our Industry has provided evidence to the reality that all HCSOs are NOT created equal. Since one HCSO recently filed bankruptcy, a first in HCS’ 40-year history, and there are accusations of fraud and financial malfeasance at others, we wanted to provide Consumers with a framework for assessing the credibility, reliability and visibility that is necessary before a HCSO and its Programs should be trusted.
Today, in Part 3, we will discuss the concept of Reliability in terms of the protocols and practices that can be engineered into a HCS Program to protect Members. As we will explain, a properly engineered Sharing Program will not only reduce the likelihood of fraud and financial malfeasance, but will enable the HCSO to match, allocate, publish and share medical bills within 30 days on average. This level of performance is similar to that of insurance companies and is a significant factor in gaining greater Healthcare Sharing acceptance and adoption among the Medical Provider Community. As implied in Part 2: Credibility , a HCSO’s governance and management is dependent on the integrity of its policies as enforced by the individual directors. History has shown that “Christian” and “non-profit” labels are not enough to protect the interest of Consumers. Provided below are the most pertinent sharing protocols and practices that a Consumer should consider when evaluating an HCSO’s Program offering
NOTE: For the sake of disclosure, many of the practices discussed below are embedded in Sharable’s Platform: Sharing as a Service TM. Afterall, why would we build a platform that did not include the items we considered most vital? Thus, we have a commercial interest in advocating these protocols and practices. However, a HCSO does NOT have to use the Sharable Platform to implement these practices and to protect their Members’ interests.
Before we provide our insights as to what makes a HCS Program reliable, know that you can find some related questions to consider in our DECISION GUIDE: Choosing a Healthcare Sharing Program. An Insider’s Perspective.
Does it use Member-owned Accounts?
The first thing you should be concerned about when evaluating the reliability of a HCSO and its Programs is the “receipt of funds.” Does it take receipt of funds into a centralized account, or does it utilize Member-owned Accounts, thus having visibility of the funds but not full control? Taking receipt of funds vs. not taking receipt of funds is critical to a HCSO’s ability to delineate itself from the practice of insurance and is evidence of a HCSO’s willingness to engineer consumer protections into its sharing process.
Consumers should consider prioritizing those HCSOs who direct funds into Member-owned Accounts. By design, these HCSOs have better protected their Members from the potential future governance and management issues by limiting their access to, and control of, funds. By utilizing Member-owned Accounts, the HCSO not only engineers a certain level of consumer protection in the sharing process but also enables a greater level of visibility into the “use of funds.” The use of Member-owned Accounts requires collaboration with a Financial Institution, e.g., America's Christian Credit Union , that serves as a fiduciary of sharing funds. These funds are deposited by HCS Members through the Monthly Share Notice process into the Member’s Share Account (held at the Financial Institution). As discussed later, the Financial Institution will move money P2P (peer-to-peer) as medical bills are matched, allocated and published for sharing. Through this process the HCSO never takes receipt of funds and never fully controls the funds.
NOTE: to ensure the integrity of a P2P Sharing process and its use of Member-owned Accounts, the Financial Institution and its agent, should not have a conflict of interest with the HCSO, or any other HCSO, in any way.
The use of Member-owned Accounts protects both the Member and the HCSO in the following ways:
- GAURDS AGAINST POOLING – if funds are received in Member-owned Accounts, and NOT into a centralized escrow account, then the HCSO is not “pooling” funds. The concept of “pooling” funds and then paying claims from that pool is the primary business practice of insurance. Any HCSO that takes receipt of funds is “pooling” and must rely on other arguments to delineate itself from insurance. However, if an individual member’s funds are received in an individual account that is titled, owned and controlled by that member then there is NO pooling. Furthermore, if those funds are engineered to move from one member’s account to another member’s account when and only when an eligible medical bill has been matched, allocated and published for sharing, then the HCSO has demonstrated a sharing process that is clearly different from the practice of insurance.
- ELIMINATES COMMINGLING – HCSOs that use Member-owned Accounts cannot commingle sharing funds with funds that are to be used by the HCSO. This is a key consumer protection required in many state statutes but isn’t practiced or demonstrated by those HCSOs that use a centralized account to receive funds. In contrast, dollars held in Member-owned Accounts can only be used for sharing and payment of medical bills. Thus, when a member deposits their Monthly Share, i.e., Monthly Contribution, into their Share Account the HCSO must initiate a monthly transfer (debit) from the Share Account for any Admin Fees, Program Fees and/or other fees needed to run the HCSO’s operations. This request is published and executed through the Monthly Share Notice. Thus, the sharing dollars and dollars needed for the HCSOs operations are never commingled. So, the Member is always fully aware of the “use of funds” in terms of what amount is being used for sharing and what is being used to run the HCSO’s operations. In the case of Member-owned Accounts, a HCSO can never arbitrarily reach into the Member’s account to access additional funds for their operations or for purposes of self-enrichment without the Member being aware of the transaction per the Share Notice.
The main reason for an HCSO to NOT use Member-owned Accounts is that they desire greater access and control of member funds. History demonstrates that this makes HCS Members more vulnerable to the fraud and financial malfeasance of bad actors. Consumers should be cautious of any HCSO that takes receipt into a centralized and/or escrow account. Consumers cannot rely solely on the integrity of the individuals who govern and manage their HCSOs. Over time those responsible for governing and managing will change. For the greatest amount of consumer protection, control and vissibility into the “use of funds,” Consumers should prioritize those HCSOs who have engineered protections through Member-owned Accounts.
Does it move funds P2P?
Peer-to-Peer (P2P) Sharing is the second protocol that protects Consumers and makes Healthcare Sharing a more fiscally sound and reliable model. HCSOs that practice P2P Sharing will process and share eligible medical bills by moving funds directly from member-to-member. P2P Sharing deploys advanced algorithms (managed by the Third-Party Financial Institution or its Agent) to electronically match, allocate, and publish every eligible medical bill, and then to share that bill by transferring funds from the available balance of Contributor Account(s) to the account of the Bill Owner. Funds are then transferred electronically from the Bill Owner’s Account to a Provider Account(s) as payment to the Provider. P2P Sharing is a fast and seamless electronic process that is enabled by permissions set by the Member and requires no additional effort by the Members. P2P Sharing assures that Members are in control of their dollars that are used for sharing. In contrast, HCSOs that use centralized and/or escrow accounts take receipt and control of ALL funds, even those used for sharing; they cannot distinguish which members own each dollar in the escrow account.
HCSOs that deploy a P2P Sharing process advantage their Members, and the HCSO itself, in the following ways:
- ASSURES VOLUNTARY SHARING (NEEDS PUBLISHING) – Prior to the transfer of funds, all Contributors are electronically notified of 1) the name of the Bill Owner (last name only) who will be receiving their funds; 2) the amount of the medical bill that is being shared; and 3) the amount that has been allocated to be debited from the Contributor’s Account and transferred to the Bill Owner’s Account. This notification process is called “publishing” and satisfies state regulations that requires sharing to be voluntary, requires members to be notified of the use of their dollars and requires funds to move from member-to-member. The “publishing” process satisfies the voluntary statute by delaying the transfer of funds for 72 hours after the electronic notification has been delivered. Should the Contributing Member wish to no longer participate in the Sharing Program he is allowed to terminate and can usually withdraw the available balance in his account. Contributing Members can NOT pick and choose with whom they will share. However, if they do not wish to continue sharing, they may terminate from the program.
Some HCSOs take this voluntary element a step further by requiring Contributors to initiate an action that electronically pushes the funds to the Need Owner’s Account.
- RESTRICTS USE OF “SHARED” FUNDS (VIRTUAL BILL ACCOUNTS) – HCSOs who employ P2P Sharing protect their Members by restricting the use of “shared” funds to the payment of an eligible medical bill. To restrict the use of shared funds, P2P Sharing will facilitate sharing through Virtual Bill Accounts. A Virtual Bill Account is a single-purpose account that is created by the Financial Institution for the sharing of a specific medical bill. The Virtual Bill Account is opened and linked to the Bill Owner and the Medical Provider for a specific bill number. Funds shared for this specific medical bill are moved from the Contributor Account(s) to the Virtual Bill Account. Funds collected in the Virtual Bill Account are visible in the Share Account of the Bill Owner, but they are restricted and cannot be withdrawn since they are already designated to pay a medical provider. Once all the funds necessary to share the medical bill in full are collected in the Virtual Bill Account, the funds are then transferred to the Provider Account(s) and the Virtual Bill Account is closed. This approach protects the HCSO’s Members by ensuring that funds that are shared by Contributors are used to pay the medical bills, and only medical bills, of the HCS Community and that the trail of funds is fully auditable in the event regulators inquire.
- ENSURES PROVIDER PAYMENTS (PROVIDER ACCOUNTS) – HCSOs who facilitate P2P Sharing also employ Provider Accounts to ensure that Medical Providers are paid with shared funds. A Provider Account is a financial account that is specific to a single Medical Provider and their related NPIs (National Provider Identifiers). A Provider can also be a financial settlement account for multiple Medical Providers. After funds for a specific medical bill has been shared and collected (in full) in a Virtual Bill Account they are then electronically transferred to the linked Provider Account(s) as payment. In the case of a settlement account used for multiple Providers, the Financial Institution (or its Agency) will release a check to the Provider(s) as payment.
Sending payments directly to the Provider ensures the integrity of the Healthcare Sharing Process. Medical Providers are more likely to gain confidence in the Healthcare Sharing process and accept payments when they understand that the shared funds will be sent directly to them
Does it properly build and sustain medical reserves?
And lastly, the most reliable of HCSOs will engineer sharing protocols and practices into their HCS Program that enables them to build and sustain medical reserves but do so in a way that is proper and compliant with state regulations. Building and sustaining medical reserves is necessary to ensure the prompt payment of medical bills in both the health insurance industry, as well as the Healthcare Sharing Industry. However, some states have forbidden HCSOs from holding medical reserves in a centralized account. As previously discussed, this would be the practice of “pooling,” which is a specific attribute of insurance. But also, as previously discussed, HCSOs that deploy P2P Sharing operate through Member-owned Accounts which enables a HCSO to build and sustain medical reserves without violating state statutes.
- SHARES MEDICAL BILLS PROMPTLY (DISTRIBUTED RESERVING) – Publishing and sharing medical bills promptly is key to a positive member experience, key to the adoption of Healthcare Sharing among the Medical Providers, and key to the success of a HCSO. However, like an insurance company, a HCSO must build and sustain a medical reserve to share and pay bills quickly. To build a medical reserve, both an insurance company and a HCSO must collect and hold a surplus of funds that exceeds the forecasted flow of eligible medical bills. HCSOs that build their Programs on P2P Sharing protocols and operate through Member-owned Accounts will build medical reserves through the Monthly Share Notice process, allowing them to grow within the Member-owned Accounts. This is called “Distributed Reserving” which enables a HCSO to build and manage reserves (similar to an insurance company), but do so in a way that is compliant with state statutes, while assuring Members that they are in full control of shared funds. HCSOs that deploy P2P Sharing through Member-owned Accounts have historically built and sustained their Distributed Reserves to share and pay medical bills in 30 Days or less.
- REPLENISHES & SUSTAINS MEDICAL RESERVES (DYNAMIC RESERVING) – HCSOs that build Distributed Reserves in Member-owned Accounts can also dynamically replenish medical reserves through the Monthly Share Notice process. It is not unusual for HCSOs to experience varying levels of medical bills incurred by Members. It is also not unusual for a HCSO to periodically receive large medical bills that are tied to a catastrophic medical event. During periods of higher than average medical bills, the Distributed Reserves can fall to undesirable levels. HCSOs that deploy P2P Sharing can dynamically replenish those reserves by publishing and collecting a small additional amount (typically $15 - $30) through the Monthly Share Notice of each Member Household. This practice is called Dynamic Reserving and is engineered into the HCS Program to replenish the Distributed Reserves. Similarly, the Dynamic Reserving practice can be set to credit Member Households through the Monthly Share Notice during periods of low bill volume and when Distributed Reserves are sufficient. Thus, it becomes obvious that the use of both Distributed Reserves and Dynamic Reserving ensures the prompt sharing and payment of medical bills.
In closing, we want to reemphasize that Healthcare Sharing is an affordable alternative to the high cost of insurance for many families, individuals, and small business owners. Consumers should prioritize those HCSOs that have engineered certain consumer protections and fiscal soundness into their Sharing Programs. Consumers will find that HCSOs who have deployed P2P Sharing through Member-owned Accounts are more able to protect their Member’s interests while delivering a member experience that can exceed their expectations.
To further assist you in the evaluation of a specific HCSO and their Programs, you may want to visit our DECISION GUIDE: Choosing a Healthcare Sharing Program. An Insider’s Perspective. There you will find questions and prompts that you may want to consider when assessing the reliability of a HCSO, in terms of the sharing protocols and practices of its HCS Program.
In Part 4 of our series “Choosing a Healthcare Sharing Program: An Insider’s Perspective” we close our series by defining the level of visibility and transparency that a member (consumer) should have in the financial operations of a credible and reliable HCSO. We will identify how consumers can recognize the appropriate “Use of Funds” throughout the sharing process and can decide if member contributions are being shared appropriately.
DISCLOSURE: Sharable, LLC is a technology and services company that serves the Healthcare Sharing Industry. The Sharable team has more than 100 years’ experience in building and managing high-performing Healthcare Sharing Programs. Our mission is to advance the adoption of Healthcare Sharing as an affordable option to health insurance. Sharable does not endorse specific Healthcare Sharing Organizations or their Programs.