The cost of health insurance has skyrocketed over the past several years, particularly for people who do not qualify for a subsidy, and for small business owners trying to provide health benefits to their employees. That’s why some insurance agents have started recommending medical cost sharing plans as a superior, more flexible alternative to traditional health insurance.
Not only is medical cost sharing more affordable, but it comes with lots of other benefits including, in many cases, the ability to see the doctor of your choice.
Still, while medical cost sharing is effective for most individuals and small businesses, it’s not for everyone. Depending on your current finances as well as your healthcare needs, an insurance agent may still recommend you take out a health insurance policy.
That’s why, to make an informed decision about which method of healthcare is right for you, it’s essential to know important information such as:
- How does a medical cost sharing plan work?
- Health insurance vs health sharing
- Health insurance and medical cost sharing
- Health sharing plans and HSAs
- Are health share plans HSA eligible?
Read on to find the answers to all these questions.
How Does a Medical Cost Sharing Plan Work?
Most people are familiar with health insurance and how those policies look in action. But how does a medical cost sharing plan work?
Health sharing is a system of healthcare benefits provided by a non-profit 501(c) medical cost sharing organization. The latter is a group of people, also called members, who have decided to pool their money together to cover basic medical expenses. When one of the members needs to pay for a doctor’s visit, procedure, or something else healthcare-related, the money pool covers the cost in cash.
Each member must choose the type and amount of medical sharing they want. Their choices determine the amount of money they must contribute to the health share plan every month – sort of like a monthly health insurance premium. Also similar to health insurance plans, the higher level of sharing benefits the member opts into, the more money they must contribute.
Despite the fact that health sharing is not considered as health insurance, it still functions as a legal alternative to health insurance under the Affordable Care Act (ACA). To qualify under the ACA, the medical cost sharing organization must have been in continuous operation and sharing medical expenses since December 31, 1999.
Because the ACA does not regulate medical cost sharing organizations, they are not obligated to provide the same types of coverage that are required by the federal and state governments. This is the reason for the low cost of health share plans when compared to health insurance plans.
The price difference between health sharing and health insurance is stark. Typically, a health share plan will cost at least 50% less than unsubsidized health insurance.
Another aspect of health share plans that medical cost sharing organizations can control because they aren’t government-regulated is membership. Some organizations will limit membership to certain individuals or types of businesses. For example, certain groups stipulate that you can only join if you’re a Christian, and you must sign a piece of paper saying that you are to become a full member.
Despite the potential restrictions on membership and limitations on types of healthcare benefits provided, for Americans who are generally healthy and looking to get out of the expensive health insurance game, health sharing is a smart financial move.
But what if you have pre-existing conditions? Should you still take out a health share plan, or should you take out a health insurance policy? To choose the best route for your health as well as financial needs, it’s helpful to compare the two plans, which we do in the next section.
Health Insurance Vs Health Sharing
When comparing health insurance vs health sharing, you’ll find several major differences and just a couple of similarities.
How They’re Different
Below are 6 ways that health insurance plans are different from health share plans.
- Health insurance plans are provided by insurance companies, whereas health sharing plans are provided by non-profit 501(c) medical cost sharing organizations.
- Health sharing plans are significantly more affordable, both for individuals and small business owners, than health insurance and usually cost half the price.
- Because they aren’t considered health insurance, health share plans aren’t required to meet the same state and federal regulations as the former. This means they can also determine what medical costs they will share, and who qualifies for membership in their group. It is the biggest reason behind the lower cost of health sharing.
- On most health share plans, you’re able to see the doctor of your choice. On a health insurance plan, you’re required to choose from physicians within the insurance company’s network.
- Most health share plans require enrollees to have 1-2 years of membership under their belts before they will start covering pre-existing conditions or preventative care. Health insurance plans, on the other hand, usually begin these types of coverage right away.
- Health insurance premiums are tax deductible, whereas health share contributions are not.
How They’re the Same
Here are a couple of similarities you may notice between health sharing and health insurance.
- For both health share plans and health insurance plans, you must make a monthly payment. In the context of health sharing, your payment is called a “contribution.”
- Both health insurance companies and health sharing organizations allow you to choose the amount of coverage you want. This decision influences the cost of your monthly premiums or contributions.
The Bottom Line: If you have pre-existing health conditions or anticipate using your healthcare plan often, you may want to go the route of health insurance. Even though the costs associated with health insurance are higher than those for health sharing, you won’t have to wait 1-2 years to get coverage and you will have access to more comprehensive plans.
If, on the other hand, you’re generally healthy and want a care plan in place “just in case,” health sharing may make more financial sense.
Before you make your final decision, it’s usually best to speak to an insurance agent who can offer both health insurance and health sharing plans.
Compare Pricing on the Best Healthshare Plans Available
Health Insurance And Medical Cost Sharing
Health insurance is now unaffordable for most people who don’t receive a government subsidy. Ever since the federal government began footing the health insurance bill for many consumers, healthcare prices have soared. At this point, only 15% of the people buying health insurance through the government exchange are paying full price. Everyone else is getting subsidized. So, people need a more affordable solution.
When it comes to health insurance and medical cost sharing, the latter is dramatically more affordable than insurance. By asking for the cash price and simply doing some negotiating, health sharing organizations are able to share most major medical expenses at a cost that is typically less than half what a health insurance policy would cost.
Here are some more advantages to medical cost sharing.
- Individuals often like to associate with like-minded people. These may be people who practice a similar religion or who have identical ethical beliefs such as staying healthy and avoiding health-harming habits like drugs or excess alcohol For these reasons, many medical cost sharing organizations have prerequisites for membership. For example, some only allow Christians to join their group, whereas others may explicitly prohibit the alcoholics or drug addicts from becoming members.
- Health sharing companies have proven themselves to be reliable, effective, and affordable. At HSA for America, we estimate there are now over 2 million members of health sharing plans, and that number is growing every day.
Medical Cost Sharing Plans And HSAs
You may be wondering how medical cost sharing plans relate to health savings accounts (HSAs).
Health sharing plans and HSAs are two completely different forms of paying for healthcare. While a health share organization “shares” your medical costs with the other members, an HSA is a savings account that you pay into and that only you have access to.
To qualify to open an HSA account, individuals must have a high-deductible health insurance plan. The benefit of the HSA in this case is that the money you save in it can be used to cover deductibles or extra expenses that your health insurance won’t pay for.
Another benefit of HSAs is your contributions to it are tax-deductible. This means that for each contribution, you will receive a federal income tax deduction and potentially reduce the amount of taxes you’ll owe at the end of the year.
Are Medical Cost Sharing Plans HSA Eligible?
HSAs sound pretty great, but the question is, are health share plans HSA eligible?
The answer is tricky. On their own, health share plans are not HSA eligible. That’s because, as we mentioned in the previous section, to qualify for an HSA, you must have a high-deductible health insurance plan.
However, with the right plan, it’s still possible to combine health sharing with an HSA. There is a specific program that does this, and it’s called MPowering Benefits.
Here’s how it works. Individuals who join the MPowering Benefits program are enrolling in both a health share plan and a health insurance plan. The first one covers their medical expenses through cost sharing and the second one covers preventative care (i.e., checkups, mammograms, pap smears, etc.). The key point here is that the insurance part also allows the individual to start and HSA.
With MPowering Benefits, you get three forms of healthcare benefits: a health share plan, a health insurance plan, and an HSA. Between these, you should be able to cover the costs of your medical expenses without paying anything out of pocket.
Ready To Find Out If A Medical Cost Sharing Plan Is Right For You?
Are you ready to find out if a health share plan is right for you? Talk to one of our Personal Benefits Managers! Their first step will be to set up an appointment to speak to you over the phone or on a Zoom call, during which they will ask questions and learn more about your current healthcare needs. Then they will recommend the best healthcare benefits program for your situation.
Whether your best option is a health share organization like OneShare Health, a health insurance policy, or a program like MPowering Benefits that combines the two with an HSA, we offer all types at HSA for America.
Schedule your free consultation here!
Here are some additional articles on medical cost sharing programs: Is Health Sharing Tax Deductible? – Updated for 2023 | The Best Healthshare Plans for Smokers
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.