Part 1: Affordability (Why is Healthcare Sharing less expensive?)
The affordability of Healthcare Sharing has driven the industry’s growth of more than 10X since 2010, resulting in 28 new Healthcare Sharing Organizations (HCSOs). But is it a good option for you and your family?
Healthcare Sharing has a strong, proud, and reliable history of helping individuals, families, and small businesses meet their healthcare needs and we expect this to continue in the years to come. However, in recent months the industry has experienced the bankruptcy of one HCSO and legal action alleging inappropriate business practices at another. While we are excited to see the growth of the industry that we serve, we feel that time has come to better equip consumers with an insider’s perspective on how to best research and assess a HCSO’s ability to meet their family’s needs. We aim to help consumers understand that not all HCSOs are created equal and not all are operated in a manner that is worthy of the consumer’s full trust and dollars.
Most people are first attracted to Healthcare Sharing because of its affordability. The average Monthly Share for a family of four is typically around $500/month. Whereas Health Insurance will cost approximately $1,212/month for a non-subsidized ACA Silver Plan. That’s a 59% savings over insurance or $700 per month that can be spent on other needs. However, understanding how these savings are generated is key to understanding the difference between Healthcare Sharing and Health Insurance. More importantly, it’s central to understanding if Healthcare Sharing is appropriate for you and your family.
Health Insurance vs. Healthcare Sharing
Consumers must first understand the simple difference between Health Insurance and Healthcare Sharing. Health insurance is a product you purchase. It is a contract with a health insurance company to assume your risk and pay your eligible medical expenses per the terms of the contract (i.e., the Policy). Thus, health insurance is a guarantee or a “promise to pay.” With Healthcare Sharing there is NO ASSUMPTION OF RISK, NO GUARANTEE, and NO PROMISE TO PAY. Healthcare Sharing is a Membership that you join. It’s a large network of individuals, families (i.e., the members) who voluntarily share a portion of their monthly income to pay each other’s medical bills. Neither the HCSO nor its members have an obligation to pay your medical bills. Whereas a Health Insurance Company DOES have an obligation to pay your eligible bills.
Despite not being legally obligated, HCSO members have a very strong and proud history of sharing (i.e., paying) the medical bills of other members. If properly designed, managed, and governed, a Healthcare Sharing Program can be an affordable and reliable option to health insurance. But, if NOT properly designed, managed, and governed, a HCSO should not be trusted, no matter how affordable it appears.
Mandates vs. Flexibility
Health insurance is mostly regulated by statutes outlined in the Affordable Care Act (ACA) and a State’s Department of Insurance (DOI). Upon passage of the ACA in 2010, health insurance companies who targeted the individual insurance market had to make major changes to the products that they sold, to providing coverage in a “one size fits all” manner. The net result was a 137% increase in premiums and an 86% increase in deductibles. In return, consumers received a more robust health plan whether they needed one or not. In essence, the individual health insurance market transitioned from a “major medical” approach to an “all inclusive” approach with few limitations on what must be covered and no limits on how much would be spent. The ACA mandates now require insurance companies to pay for not only major medical needs, but also bills related to all pre-existing conditions, minor illnesses, prevention, wellness, and even bills related to controversial elective procedures such as contraceptives, abortion, and gender assignment. In the eyes of many Americans, particularly the faith community, these plans have become not only unaffordable, but immoral.
Since Healthcare Sharing is NOT insurance, and a HCSO is NOT an insurance company, they are not required to comply with ACA insurance coverage mandates. This enables HCSOs to design and operate Sharing Programs that are more flexible and affordable because they better align with the actual needs of most families. But it is important for consumers to understand that most Healthcare Sharing Programs are not designed to share in all the medical expenses that an ACA Plan will cover. For many Consumers, Healthcare Sharing makes good financial sense because they are relatively healthy and don’t need or desire all that is included in an ACA Plan. As memberships have grown, some HCSOs have begun to share a limited amount of bills related to minor illnesses, prevention, and wellness. But unlike insurance, the Guidelines of most all HCSOs prohibit the sharing in elective expenses such as abortion, gender assignment and contraception, and may impose limitations on the amount of sharing based on lifetime caps, annual caps, or event-based caps. It is also important to remember that most HCSOs do not share (i.e., pay) all the pre-existing conditions that are paid by insurance companies.
Insurance mandates is the primary driver to expensive health insurance. Healthcare Sharing is more flexible and can design programs that are more affordable. Insurance will be a better option if your family has a large number of medical needs. So, before you join a Healthcare Sharing Program, be sure you understand whether that program suits your personal needs.
Networks vs. Cash Pay vs. Hybrid RBP
In 2019, the RAND Corporation (an independent think-tank) found that private health plans paid on average 140% more than was paid by Medicare for the same medical procedure or service. So, it should come as a no surprise that both insurance companies and HCSOs use cost containment practices to avoid over-paying for medical services. Insurance companies are obviously incentivized to not over-pay for medical services because they desire profits for their Shareholders. HCSOs are incentivized to not over-pay for services because they want to be competitive with other HCSOs and to be good stewards of the members’ funds.
Insurance companies, especially the large ones, have built networks of Preferred Providers to better control costs. Medical providers are willing to discount prices and contract with insurance companies to gain access to large customer bases (i.e., patients), as well as to assure payment for part (or all) of their services rendered. In doing so, medical providers agree to serve the insurance company’s customers and to accept a pre-negotiated amount for their services. This is called the Network Model and it typically generates a savings of 50% or more off the provider’s billed charges. What many consumers do not realize though is that most providers, invoice “billed charge rates” that are 3-10x the price that Medicare pays for the same service. So even with a 50% discount, charges might still be 2-5x what a provider accepts from the US Government. However, the Network Model does provide consumers with confidence and convenience in knowing that the price for their in-network medical services has already been negotiated and agreed upon.
Though Healthcare Sharing has grown significantly over recent years, it is still a relatively small industry when compared to health insurance. The size of the Industry, combined with the prohibition of offering payment guarantees limits an HCSO (even the large ones) from leveraging the full potential of the Network Model for their members. Some HCSOs, do however, lease National Networks from Third Parties to gain a price advantage and reduce friction for members at the point-of-service (i.e., the Doctor’s Office). But these HCSO members are ultimately paying more because the National Networks of these Third Parties generate savings that are only discounted ~30% off billed charges. HCSOs who lever a National Network as their primary cost containment strategy will still be marginally less expensive than insurance. But research will show that these HCSOs are more expensive than HCSOs who lever contemporary cash pay strategies.
Historically, Healthcare Sharing has been a “Cash Pay Model” in the sense that the bill owner is ultimately responsible for payment of their medical bills. Though Healthcare Sharing members have an extremely strong history and reputation of sharing in the payment of member bills, there still is no guarantee or promise to pay. So, HCSOs who continue to deploy the Cash Pay Model must require and incentivize their members to negotiate the price of services and pay providers directly themselves. The paid bill is then submitted to the HCSO to be shared and reimbursed by its members. But experience shows that this approach is not only inconvenient for members, but it yields an average savings range that is only 35% - 45% off billed charges.
To offset the disadvantages of the Cash Pay and Network Models, contemporary HCSOs are turning to a Hybrid RBP (Reference Based Pricing) Model. In this model members are not required to negotiate prices or pay medical providers themselves. Instead, members will direct their providers to send their bills to the HCSO. The HCSO deploys a Hybrid RBP Service that will receive the bill and then reprices the bill based at a pre-negotiated Regional Network rate, a negotiated “single case rate” or a rate at ~150% of Medicare, whichever is lower. This approach has been proven to consistently generate savings of 60-70% off gross billed charges. Just as important, this approach generates less friction and inconvenience for members at the point-of-service than the historical Cash Pay Model.
To be clear, HCSOs cannot yet match the full convenience of the Network Model deployed by large insurance companies. However, many HCSOs can deploy strategies that enable them to pay less for medical services than insurance, while minimizing the inconvenience and friction that is sometimes experienced by HCS members. But Consumers must weigh the cost savings of Healthcare Sharing against the potential for minor inconveniences to make certain that Healthcare Sharing makes sense for them.
In closing, we should reiterate how important it is for every consumer to understand that Healthcare Sharing is NOT insurance. Just as important is understanding “why” it isn’t insurance and how it operates differently than insurance. Healthcare Sharing is and should remain more affordable than Health Insurance for the reasons stated above. For most individuals and families, a properly designed, managed, and governed Healthcare Sharing Program will become a strong option for meeting their healthcare needs. To help you further assess if Healthcare Sharing is right for you, we have provided some questions to consider in our DECISION GUIDE: Choosing a Healthcare Sharing Program. An Insider’s Perspective.
Now that you understand why Healthcare Sharing is more affordable and you might be thinking it could be a good option for your needs, we want to help you find a Healthcare Sharing Organization that is worthy of your trust. So, in Part 2, of our series we will be discussing the issue of Credibility. What does a “Credible” Healthcare Sharing Organization look like, and what kind of questions can you ask in your search for a properly designed, managed, and governed HCSO.
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.