Ah, let’s take a moment to reminisce about the good ole days of wild wild west individual health insurance plans of the pre-2010 era…
- Illusive coverage plans that would miraculously find a reason to deny payment or service.
- Lifetime caps that were quickly met (or exceeded) in the event of an emergency or illness.
- Slim-to-zero coverage for emergency room visits, prescription drugs, maternity care, or other essential benefits.
- Discriminatory pricing based on age and gender.
- No preventative care coverage.
- Deceptive marketing language and gimmicks.
- Premiums paid, but nothing gained in return.
Well, there are new types of plans that are growing in use that are equally as bad, if not worse, than the hated plans of yesteryear. And this time, they go by the names of: “Health Care Sharing Ministries” (aka “Health Sharing Plans”) and “Association Health Plans”, or “AHPs”, for short. Unfortunately, the impact of their growth could be devastating for everyone with health insurance.
Access to AHPs by small businesses and self-employed individuals was expanded by the Trump administration. AHPs allow businesses to swap in these much cheaper plans that don’t carry any of the mandatory basic requirements of the Affordable Care Act (ACA) plans. Many may not realize this, but the essential health insurance plan rules put in place by the ACA were not only for plans purchased on the individual ACA market – they were also for plans offered by employers. This change will allow businesses to dramatically decrease their costs at your expense by offering AHPs instead of real health insurance.
Then there’s the growing use of health care sharing ministries. In fact, these aren’t really health insurance plans at all. They are voluntary “programs” – not contractual plans between you and a health insurance company for coverage. One of the largest health sharing ministry programs has the following nugget of truth buried in its legal disclaimer:
This program is not an insurance company nor is it offered through an insurance company. This program does not guarantee or promise that your medical bills will be paid or assigned to others for payment. Whether anyone chooses to pay your medical bills will be totally voluntary. As such, this program should never be considered as a substitute for an insurance policy. Whether you receive any payments for medical expenses and whether or not this program continues to operate, you are always liable for any unpaid bills.”
In other words, these are self-pay programs that may reimburse you after the fact if someone voluntarily chooses to do so.
Oh, but the fun doesn’t end with just that deal-killer. With an AHP or Health Care Sharing Ministry, there are plenty of reasons why you should avoid them entirely. I’ll list just a few:
1. Per Incident and Lifetime Caps = Zero Safety: these programs have limited lifetime and/or per-incident caps (that’s bad). This puts you at extreme risk in the event of an emergency or serious illness – and you’re never truly in the clear. In fact, it’s worse than “catastrophic” coverage, in that it doesn’t truly guarantee coverage in a catastrophe if you meet a high deductible first, as a legitimate insurance plan would. ACA-compliant plans have no per-incident or lifetime caps.
2. Severely Limited Coverage (or Even Zero Coverage): AHPs and health care sharing ministries both do not guarantee the essential health benefits that are guaranteed under ACA-compliant plans. This includes:
- Ambulatory patient services (outpatient care you get without being admitted to a hospital)
- Emergency services
- Hospitalization (like surgery and overnight stays)
- Pregnancy, maternity, and newborn care (both before and after birth)
- Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
- Prescription drugs
- Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
3. No Premium Tax Credits or Cost Sharing Reductions: both AHPs and health care sharing ministries do not offer premium tax credits or cost sharing reductions (CSRs) for those who are eligible, as ACA-compliant plans do on plans purchased on the ACA insurance exchanges.
With premium tax credits, ACA-compliant plans offer premium tax credits for monthly premiums for households with income up to 400% of the US poverty line.
With cost sharing reductions, if eligible, you would get a lower out-of-pocket maximum with ACA-compliant plans and when you reach your out-of-pocket maximum, your insurance plan would cover 100% of all covered services.
In 2021, with the American Rescue Plan Act, premium tax credits and cost sharing reductions were made significantly more generous, further lowering the premium and out-of-pocket costs for ACA eligible health insurance plans, and making AHPs and health sharing ministries even less attractive.
4. No Annual Out of Pocket Maximum Protection
ACA-compliant plans have annual out of pocket maximums. This means that once you hit your maximum in a given year, you pay no more. You’re protected from catastrophically high costs. Health care sharing ministries, on the other hand, do not have out of pocket maximums. This means you could be on the hook for massive expenses and have no real safety.
5. Your Costs Could be Deemed Immoral, and Rejected
With health care sharing ministries, do not expect help with health-related costs that the programs deem to be “unbiblical”, or immoral. This may include payments for birth control, other reproductive health expenses, alcohol or drug related medical costs, and injuries from what they deem to be “hazardous” activities.
6. You’re on your Own on Negotiations with Health Care Providers
Most insurers have professional negotiators who set rates with providers, often at a discounted rate, due to the size of membership. Health sharing ministry programs typically do not. You’re usually on your own as far as costs go.
7. They are Not HSA Contribution Compatible
Both types of programs do not meet requirements that make them eligible for tax-advantage HSA contributions like HDHPs are. As you know, I’m a big fan of HSAs, as they allow tax-free contributions and withdrawals for medical expenses. And any unused funds can be used for any withdrawals, like an IRA, starting at age 65. With maximum HSA contributions totaling in the multi-thousands each year, this benefit can be significant.
8. No Compliance with the ACA’s Rating Rule
Both programs notably do not need to comply with the ACA’s rating rule – which prevents insurers from varying costs in a specific region based on sex, age or health status. Health sharing ministries don’t need to comply because they are not real insurance plans, but even AHP plans can freely discriminate in their pricing.
In effect – with health sharing ministries and AHPs, even though you’d be paying for membership or coverage, you would be getting zero-to-few of the benefits of legitimate health insurance – while taking on a huge amount of increased risk. That’s a bad deal. These are deceptive and hollow offerings that extract your cash while guaranteeing nothing in return and simultaneously taking a massive dump on the future of the Affordable Care Act and the consumer protections that it offers to every American. There is an illusion of safety, but no real safety with these programs.
The thing about health insurance is that you don’t know when you need legit insurance until it’s too late. The same goes for home insurance, life insurance, and auto liability insurance. If you don’t have these, you are rolling the dice. If you lose in this game of chance, it could cause complete financial ruin for you and your family. That is the short-term, red-alert reason why you need legitimate health insurance – and it is more than enough reason for you to avoid AHPs and health care share ministry programs. They are not legit alternatives.
As noted in the above legal disclaimer of one of the largest health sharing ministries – there is one thing you should take their advice on: “This program should never be considered as a substitute for an insurance policy”.
But there’s a longer-term reason why you should avoid these programs as well. These programs were created and expanded, in large part, to subvert the ACA by driving up the costs for participants in the ACA. Every young, healthy person that has a temporary sense of invincibility that leaves an ACA plan for one of these programs (or no plan, with the repeal of the individual mandate) is one less young, healthy person within the risk pool for the ACA. And if enough people do this, the end result is extremely high costs for those remaining in the ACA. Or worse, no ACA at all, and back to the days of insurance companies denying essential benefits, imposing lifetime caps, and denying coverage to those with pre-existing conditions.
Almost everyone, at multiple points in their lives, is going to wish that they had a legitimate health insurance plan with manageable costs. The way to keep costs down and more manageable over time, for everyone, is for the young and healthy people to stay within the ACA plans. And beyond the ACA, there are other health insurance options for newly uninsured individuals.
Just say “no” to AHPs (if self-employed or your employer wants to move to one) and health care sharing ministries. Over the long run, you will likely be much better off. And with recent enhancements to ACA plans, they are more affordable than ever for the large majority of families. You at least should take a look at ACA open enrollment to see what type of costs you may incur before committing to the less transparent and higher risk alternatives out there.