Health Care Sharing: Hacking Insurance?

20 09 2017

Employer based health insurance is a curious fixture of the US health system. With approximately 56% of Americans covered under some type of insurance through their employer, we’ve come to accept this system as a given for most of us. Private payers control 33 percent of all the expenditures for healthcare, which translates (very roughly) into controlling six percent of the entire economy. Health insurance is a relatively new invention, beginning in 1929 as a means of managing the costs of an extended hospital stay. It became a fixture of employment during World War II. It has evolved into a massive industry with an outsized impact on the fortunes of Americans as it is a significant part of the total compensation package for employees.

Costs

The annual premium for family coverage in employer sponsored plans rose an average of three percent to $18,764 this year. While this is relatively modest growth compared to some of the increases we’ve seen from the Obamacare exchanges, these increases still outpace inflation and workers’ wage growth and premium increases are much higher for smaller businesses. And similarly, while there are many drivers of cost in the healthcare system, the administrative overhead to simply manage the commercial insurance system accounts for a significant percentage of every dollar paid in premiums. Regulations in the Affordable Care Act (ACA) set the Medical Loss Ratio (MLR) for commercial health insurers at 15% of premiums (for large group policies), mandating that 85 cents from every dollar must be paid for patient care. Similarly, the average physician’s office has a ratio of one to three administrative staffers to every full-time physician. Quite simply, a huge amount of overhead is devoted to the business of insurance: claims authorization, submissions, reimbursement, collecting from patients, etc.

As one thinks about “hacking healthcare,” hacking the traditional insurance model is clearly a possible point of leverage. Health Care Sharing Ministries may not be for everyone, but they exemplify a novel and community-driven approach to managing the cost of care. Health Care Sharing Ministries, or HCSMs, began with faith-based communities and were a means for like minded people to pool funds together to share in the cost of healthcare. In many ways they are the descendants of the “mutual aid” societies that flourished during the early 20th century. In keeping with their roots as ministries, most of these organizations require some statement of faith (typically Christian), adherence to principles of individual responsibility for one’s health and charity towards others. Most have a closed membership, like Mennonite/Old German Baptist communities, but some are open to the broader, and in some cases, the secular public.The trade organization representing some of the largest ministries reports that almost 1,000,000 people in the US are covered under some type of HCSM.

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It is important to be clear that these arrangements are not presented as health insurance even though they have a similar financial structure. HCSM organizations are not overseen by state governments, so typical insurance regulations about funding reserves, reinsurance, etc. are not applicable to them, although in order to be recognized as an HCSM by Health and Human Services under the ACA, these organizations must be regularly audited by a CPA for solvency as well as other specific requirements. Members in these types of faith-based organizations that meet the requirements would be exempt from the Affordable Care Act mandate to maintain traditional individual health insurance.

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Photo by Nina Strehl on Unsplash

HCSMs typically operate by having members identify as “self-pay” at the provider of their choice. Once the service or treatment is rendered, the provider bills the member directly as though they were uninsured. The member then submits the bill to the HCSM organization that will review the bill to see if it is within their “shareable” coverage. If it is, the HCSM organization will advocate on behalf of the member to negotiate the most favorable rate for the service and then pays the member directly, who then would reimburse the provider. Typically, there is some “personal responsibility,” or what we might call a deductible in health insurance language, for the incurred charges but then the HCSM would pay for the balance. Each ministry’s rules are slightly different with some items covered and others not, but the coverage can look very much like insurance and typically have significantly lower monthly costs.

“The night before my surgery, the lady who’d helped me locate the right providers and everything called me back and said, ‘Would it be OK if I prayed with you for your surgery tomorrow?'”

-Medi-Share patient, quoted on NPR

By pooling like minded individuals together to manage healthcare costs, HCSMs can attract a generally healthy selection of the population and by engaging members more directly in the discussions about the cost of treatment may be making them better consumers as well. Some ministries encourage mutual support and even prayer for members suffering from illness. This kind of community involvement may not appear to have measurable clinical impact, but it’s really not all that different from wellness programs that try to affect population health. A key element of the HCSM arrangement is the negotiation of rates with the provider. A ministry that pays every provider at “retail” uninsured rates (which can often be astronomically high compared to the negotiated rates of a public or private payer) is going to struggle with member costs and solvency. Policies and coverage vary greatly among HCSMs, so consumers should choose carefully. There have also been HCSM failures and missteps with members, but overall HCSMs generally have high rates of member satisfaction.

Want to go deeper on this issue? Contact me for a white paper on this concept that also includes:

  • How elements of Health Care Sharing Ministries could be leveraged in other alternative coverage arrangements and what those models could look like
  • In alternative models, what considerations need to be addressed for managing growth and member engagement?
  • Operational strategies for cost management
  • Management of social determinants of health for better outcomes
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