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Thursday, September 14, 2017

Quit Obamacare And Build Your Own Mutual Aid Organization

There is no reason why people can't organize their own health care sharing programs around common values and needs.

Ambitious politicians have a history of making promises they can’t keep. While they are partly to blame for this behavior, voters are also responsible when they pressure politicians to accomplish the impossible.

HCSMs act as clearinghouses for people with similar beliefs who wish to share their medical expenses with each other.

An example of one such impossible task is providing every American unlimited lifetime health care coverage at a price all of us are willing to pay. We all want the security of knowing unlimited checks will be written on our medical behalf, but few of us are willing to pay the requisite 30-50% of our incomes for that security. Politicians can promise that they will deliver such a plan, but they will fail because it is impossible for a centrally-planned program to provide that level of assurance.

A better way to manage health care costs without the federal government’s involvement is for us to do it ourselves through mutual aid. The mutual aid model has been around for decades in the form of health care sharing ministries (HCSMs). HCSMs are not-for-profit religious organizations that act as clearinghouses for people with similar strong beliefs and who wish to share their medical expenses with each other. HCSMs organize the efforts of their participants by funneling grassroots financial support towards those participants who incur medical expenses.

The most important thing people need to understand about HCSMs is that they are NOT insurance. Whereas the relationship between a policyholder and an insurance company is contractual, the relationship within an HCSM is a covenantal agreement between individual participants.

How My HCSM Works

Each month, the HCSM publishes a newsletter that it distributes to all participants. The newsletter lists participants who have incurred legitimate medical expenses, and it directs other participants to send a previously agreed-upon amount of money to those with medical expenses. Gift givers are also encouraged to pray for those to whom they send money. 

There are no financial reserves, no legal protections, and no lawsuits, only thousands of participants helping each other with medical expenses.

Recipients are given a list of participants the HCSM has assigned to send them money, and when they receive it, they cross that gift giver’s name off the list. Assigned gift givers who are late in sending funds are reported to the HCSM, who will remind them of their commitment. If they still don’t send the gifts they agreed to, they get dropped from the program.

There are no financial reserves, no legal protections, and no lawsuits; there are only thousands of participants helping each other with medical expenses, organized by an HCSM. Eleven months per year, gifts are sent to participants and one month per year, a gift is sent to the HCSM to cover the costs of running the organization. The overhead cost of the program is only 8.3%, which is significantly less than the 20% of overhead expenses and profit insurance companies are allowed under Obamacare.

Most HCSMs hold strict lifestyle and moral guidelines for participation: no tobacco, drug use, sex outside of marriage, and only moderate alcohol use. Some require overweight participants to demonstrate good faith efforts and progress towards losing weight. All participants are ultimately responsible for paying their medical bills, and participants are expected to negotiate lower fees from their health care providers before submitting a medical share need to the HCSM.

HCSMs don’t pay for preventive care; mammograms, pap smears, and annual physical exams; all these services are paid for by the participants themselves. Most HCSMs (but not all) require members to be active church attendees, and several require a pastor’s signature verifying a participant’s commitment to the HCSMs lifestyle and faith obligations. With that said, there is no reason (other than political) why people of different worldviews and values couldn’t organize their own health care sharing programs around common values and needs.

Advantages of an HCSM

There are many attractive features of HCSMs. First of all is the cost. Even though many Americans enjoy tax credits and subsidies for participating in Obamacare, the actual unit cost of health insurance is extremely high compared to an HCSM.

As a married couple in our 50s, we pay $440 per month vs. $1101 per month for an Obamacare insurance plan. Whereas our Obamacare deductible would be $6500 per person, our HCSM, out of pocket, is only $300 per incident (up to three incidents per year). Many folks – after discovering HCSMs – have been able to retire before the age of 65 because their HCSM costs significantly less than their previous health insurance plan. Secondly, HCSMs are much more liberal in what they are willing to cover. If your doctor says you need it, your procedure will be covered.

Although 99% of medical claims are less than $250,000, a major concern of many prospective HCSM participants is the fear of a catastrophic event, such as a million-dollar claim. In the plan we use, we have enrolled in the “Save to Share” program. In the Save to Share program, Linda and I agree to set aside $266 per year to be used in the event one of our members has a health care need in excess of $250,000. 

Current law doesn’t exempt HCSM participants from the Obamacare penalty.

In the 3 years we have participated in the Save to Share program, we have never been asked to contribute the full $266 in a single year. Unlike with conventional insurance, the Save to Share program allows members to keep their money until it is actually needed, which in turn helps keep costs down. Here is an example of how the Save to Share might work:

An individual has a $1 million medical need, and the HCSM covers up to $250,000. Assuming there are 30,000 families participating in Save to Share, each participating family would be directed to contribute $25.00 to cover the $750,000 difference.

Why Aren’t They More Prevalent?

There are only 6 HCSMs in existence today because current law doesn’t exempt HCSM participants from the Obamacare penalty for not having health insurance – unless the HCSM has been in operation since 1999. 

If the Obamacare penalty goes away, there would no longer be obstacles preventing new HCSMs from forming and new health care sharing programs, organized within affinity groups such as religious orders, fraternal organizations, or even local credit union memberships, could proliferate.

The prudent citizen should proactively investigate alternatives.

Rather than react to Obamacare’s ultimate demise, the prudent citizen should proactively investigate alternatives. For many middle-class families, health care costs can now be as high as 25-40% of a family’s annual income.

HCSMs have proven to offer lower costs, higher quality, and less uncertainty than conventional insurance or single payer systems. HCSMs have proven to be economically viable, but their future risk is primarily political. Unless HCSMs can generate more public interest, there is a risk these wonderful programs could be taken away.

  • Joe Coco is an investment advisor and Certified Financial Planner™ located in Whitefish, Montana. He also blogs on a variety of topics including economic liberty, personal finance, and excellent living.

    Joe Coco blogs at Coco Commentary.