September 24, 2018- Interest and participation in Health Care Sharing Ministries (HCSMs) has soared in recent years. Due to the rising cost of medical premiums, deductibles, procedure and facility fees, individuals and business are rethinking their options to control medical expenses.

The Wall Street Journal reported in August that "Patient cost-sharing rose by 77% between 2004 and 2014, driven by a 256% jump in deductible payments.[1]" As a financial planner, it is common to hear frustration from families paying significantly more in recent years for high deductible policies requiring tens of thousands out-of-pocket before insurance contributes.

HCSMs offer substantially lower rates than traditional insurance, based on the premise that faith-based groups can uniquely lower costs by eliminating coverage for services that are not aligned with shared values, shifting costs for routine checks to the patient and removing insurance company profits. Medi-Share Christian Care Ministry, Samaritan Ministries, and Christian Healthcare Ministries are three of the largest and most established of these organizations. Medi-Share estimates they save the average family 55-70% per year, or about $3,000 to $5,000.

Eligibility varies by plan but generally requires attestation to a Christian lifestyle and agreement not to use illegal drugs or abuse legal drugs and if in a relationship, to be married and monogamous. Eligible expenses must pass a morality test, in essence. A car accident involving elevated blood-alcohol levels or an abortion procedure are considered objectionable and are explicitly not covered. Intent is also a consideration in certain coverage decisions. For example, a patient involved in a motorcycle accident during mission work is treated differently from that same patient who has a motorcycle accident on their way to work.

Additionally excluded are routine preventative care appointments such as physicals and well child check-ups, colonoscopies, and mammograms. In most cases, certain generic prescriptions may be included, but not brand name or long-term maintenance drugs. Dental and vision also are not standard.

All HCSM plans emphasize that they are not insurance. Although technically true, they operate in a similar fashion using different terminology. Like a premium, the plans require monthly shares or gifts in exchange for membership. The cost of these monthly shares is lower if the member takes an increased "personal responsibility" or "annual household portion" (read: deductible). When a medical event occurs, a "need" is filed instead of a claim. Similar to conventional insurance, Medi-share has a preferred network of providers that typically discount their bills for members.

Of the three plans mentioned above, Samaritan distinguishes itself as being the least similar to the traditional insurance model. Their "need and share" system does not facilitate the flow of money through their office. Instead, payments are directly sent from members to other member households with medical expenses. Some amount of confidentiality is sacrificed to foster a sense of community with the publishing of personal medical information in order to allow members to write notes of encouragement to each other.

From the perspective of the government, HCSMs are not currently considered to be insurance organizations and safe harbor exemptions in 30 states insulate them from liability. Because they are not regulated by state insurance commissioners, compliance with cash reserve requirements is not required, and they cannot be held liable for breach of insurance contract. There may be little or no scrutiny of business practices.

And there have been problems. In 2014, former officials of Christian Healthcare Ministries were ordered by a jury to pay more than $14 million for embezzling member funds.

Participation does exempt individuals from the Affordable Care Act (ACA) insurance mandate and corresponding penalties. From a federal perspective, some say these plans undermine one of the key components of the ACA: when the entire population buys into large, diverse insurance pools, healthier individuals in effect subsidize less healthy people. Therefore, a person who does not expect to incur medical expenses may join a HCSM to pay less, essentially driving up premiums for those in traditional insurance plans.

Key differences between HCSMs and standard ACA insurance coverage:

• Pre-existing conditions can be discriminated against. Enrollment is not guaranteed, and certain conditions that developed prior to joining, such as diabetes or pregnancy, may require significantly higher member contributions.

• Routine preventative services are not covered.

• Members who are overweight or smoke may pay a higher monthly amount.

• Most plans have a maximum amount of coverage per illness as well as annual limits, exposing members to catastrophic health costs. These limits can be increased by choosing optional add-on plans, with some claiming to be unlimited.

• There are no open-enrollment periods. Members can choose to join anytime.

• Monthly share contributions (premiums) maximize at three in a household. Parents with more than one child do not pay additional monthly share costs per family member.

• HIPPA (Health Insurance Portability and Accountability Act) does not apply: medical bills may be accessible to other members to allow for the coordination of sharing and spiritual encouragement, thus limiting medical confidentiality.

• Monthly shares are not tax deductible, but direct payment of medical expenses are allowed as an itemized deduction on Schedule A, subject to the adjusted gross income (AGI) limitation.

• Although plans have high deductible options, they are not eligible for contributions to Health Savings Accounts (HSAs).

As medical expenses continue to consume more of the average household budget, HCSMs will increasingly be considered. Before taking the leap of faith, you must consider the risks associated with reliance on an unregulated organization with no financial guarantees and whether your values and sense of community match a faith-based health plan.

[1] Louis Sussman, Anna. "Burden of Health-Care Costs Moves to the Middle Class." The Wall Street Journal. http://www.wsj.com/articles/burden-of-health-care-costs-moves-to-the-middle-class-1472166246 (accessed November 21, 2016).