Insurance alternatives: High risks, questionable rewards
Health care sharing ministries, short-term coverage--these plans may cost less, but do consumers know what they're getting?
Even proponents of the Affordable Care Act (ACA) concede that American consumers have continued to struggle with high health care prices in the 10 years since the act’s passage. Those on the individual market who earn too much to qualify for ACA subsidies report being challenged by costs, and even members of employer-based group plans can be hit with high deductibles and copays.
The gap in what is truly affordable has created an opportunity for alternative types of health coverage to be marketed. Despite warnings from consumer advocates, both industry players and the Trump Administration have promoted solutions that can be limited at best—and totally fail to protect sick Americans at worst.
Related: Affordability of short-term health plans a draw for older enrollees
Three health coverage alternatives that have garnered recent attention are outlined here: health care sharing ministries (HCSM), short-term coverage, and Association Health Plans (AHPs). These plans often do cost less than most traditional health insurance products; but the risks that come with them are significant.
Health care sharing ministries
Possibly the most controversial of the insurance alternatives is not insurance at all. HCSMs are programs affiliated with Christian ministries that allow members to share medical costs. According to the Alliance of Health Care Sharing Ministries (AHCSM), HCSMs are organizations which facilitate “…the sharing of health care needs (financial, emotional, and spiritual) by individuals and families.”
In these arrangements, instead of paying premiums, members pay a monthly fee, or contribute directly towards payment of other members’ bills. AHCSM estimates that nearly a million Americans are part of an HCSM. The group notes that there are approximately 104 HCSMs in the country, although 97 of those are smaller, limited arrangements with closed memberships. Seven groups have open membership, and those groups have operations in 27 states.
HCSMs advertise lower costs and more flexibility than traditional plans, but there’s a reason the groups are careful to say they are not insurance. The internal workings of these plans are almost completely opaque.
The model was grandfathered in with the ACA to avoid raising religious freedom objections. But there is little or no regulation of these groups, either by states or the federal government, making it hard to ascertain how much money is going to medical costs.
In addition, HCSMs have a long list of pre-existing condition exemptions, usually require members to agree to some sort of religious statement, and can set dollar limits on what is paid for.
A story in the New York Times last month described many cases where HCSMs refused to cover costs of patients who had serious medical conditions. “Families who have joined the groups recount winding up with medical bills not covered by the ministries, with no legal way to appeal decisions to reject coverage for care,” the story said. “Some groups ask their members to push hospitals and doctors to write off their bills rather than use members’ money to pay their expenses.”
Many state regulators also have raised concerns about the HCSM model. Officials in states such as Colorado, New Hampshire, Texas, and Washington have called for more scrutiny of such plans.
“Though these Christian health-sharing ministries may have been launched with good intentions, they are now big businesses, selling a product to vulnerable families who have little capacity to weather the costs of serious illness,” said Karen Kahn, a writer for Nonprofit Quarterly. “As such, at the very least, these programs need to be subject to some regulatory oversight to ensure consumers know what they are buying.”
Short-term insurance
Short-term insurance plans are individual plans that in the past were seen as a way to bridge coverage for workers between jobs. Under the Trump Administration, the Centers for Medicare and Medicaid Services (CMS) pushed to expand the program, saying that consumers needed more flexible and affordable options.
“We continue to see a crisis of affordability in the individual insurance market, especially for those who don’t qualify for large subsidies,” CMS administrator Seema Verma said at the time. “This final rule opens the door to new, more affordable coverage options for millions of middle-class Americans who have been priced out of ACA plans.”
On August 1, 2018, CMS expanded the maximum length of time enrollees could be on short-term plans, from 3 months to 36 months. With the rule change, in theory, workers could stay on cheaper short-term plans well into their time at a new job. Self-employed people and those in the “gig” economy could also benefit, supporters of the change said.
However, Karen Pollitz, senior fellow at the Henry J. Kaiser Family Foundation, notes that short term plans usually have extensive pre-existing condition exemptions, and can refuse to renew members who develop health issues. “Virtually none of the rules that apply to other insurance plans apply to the short-term plans,” she said. “If you’re already sick, these plans don’t have to cover you; and if you buy the plans and then get sick, they don’t have to cover you.”
Association health plans
AHPs have long been promoted by critics of the ACA as a better solution for smaller employers in particular, allowing business owners to band together to purchase insurance. The devil is also in the details here, however. State regulators have pointed to a history of fraud and abuse by some AHP operators.
In 2018, as part of its efforts to provide alternatives to the ACA, the Trump administration dramatically loosened regulations on what companies and workers can join AHPs, only to have a court ruling knock down the new rules last spring. That decision means the Department of Labor has to either cancel its new approach or try to revise it in a way that the court will accept.
In the meantime, Pollitz cautions against taking a leap of faith. “These types of plans may try to ‘skinny-down’ their coverage,” Pollitz said. “Again, you’re getting a trade-off. Any time you’re looking at competing health insurance products and one is cheaper than the other, you have to think, ‘is that because they’re skipping something?’ By and large these products are cheaper because they’re offering you less protection.”
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