Health Insurance Alternative

As of the date of this article, the Republican lead initiative to repeal and replace the Affordable Care Act also known as Obama Care, has not been approved by the Senate and remains the law of the land.  For those hoping for a quick fix to the rising costs of health insurance, it does not appear that a solution will arrive anytime soon. In fact, it is expected that the Health Exchange premiums will rise again in 2018.  For example, CareFirst of Maryland has asked the regulators for a fifty percent rate increase.  This article will inform you on why the healthcare costs are so high and why the Exchanges are in trouble.  We will introduce you to an alternative, which is based on sound insurance principles that can be purchased in all states at any time.  There is no annual Open Enrollment.

First, to address why the costs are so high for health insurance on the Exchanges now and will continue to rise in the near future.  The reason is quite simple: The Affordable Care Act did away with the ability of a health insurance carrier to underwrite the risk.  It sounds good to have no pre-existing condition waiting period and to have no medical questions to qualify to be fully covered, but these two components of the ACA are the two major reasons we are at this point.  This is causing the Federal and State Health Exchange to be on the brink of collapse.

All one has to do verify this, is to look at the major Health Insurance Carriers that have pulled out of the Health Exchanges.  For January 1, 2017, United Healthcare, the number one provider of individual health insurance nationwide, declined to sell on the Exchanges.  More recently, for 2018, Humana and Aetna have announced they are not going to participate in selling on the exchanges for individual health coverage.  Why?  The regulators will not allow the carriers to raise the rates enough to make a profit.  Several states are down to just one carrier.  New York is a prime example where no carrier on the State Exchange is offering a Preferred Provider Organization (PPO) plan that allows members to see any doctor they want even if they are willing to pay a higher deductible or coinsurance.  Only Health Maintenance Organizations (HMO) exist and some of these have very limited provider networks that a member must choose from.  The original promise of "if you like your doctor and plan, you can keep them" is a distant memory.  In this same New York market over three carriers have either gone insolvent or chosen to drop out leaving much less choice.

Here is the statistical reason why no underwriting and no pre-existing conditions are costing the majority of healthy Americans to pay high premiums and shrink provider networks.  Eighty percent of Americans are basically healthy and spend less than one thousand dollars a year on medical costs.  These are the people that would not mind answering medical questions and being subject to pre-existing condition waiting periods.  There is a very good chance you are one of this majority.  However, the other twenty percent have chronic ongoing conditions or have recently been diagnosed with an expensive or life threatening condition.  These pre-existing will cause medical bills that their premiums will never equal in cost.  So, all the healthy people must be charged higher premiums to pay for this twenty percent of people who generate over eighty percent of the claims cost.  These are the people who could never pass underwriting and need a safety net to guarantee them coverage.  Under the most recent fix proposed by the Republican Majority Congress, the are proposing some kind of separate government provided coverage like Medicaid or Medicare for the chronically ill.  If this happens, it may help with lowering costs down the road.  However, for now, their high claim cost is being paid by everyone who purchases a health insurance policy.

One of these new options comes in the form of an old concept called "Sharing Funds" or "Health Ministries".  These are not health insurance, but are a group of individuals who don't smoke, agree to live a healthy lifestyle, agree to follow a Statement of Standards, and who pay a monthly contribution to the fund.  Most important from a managed risk perspective, they are underwritten and can have pre-existing condition waiting periods like health insurance plans use to have.  Because of the ability to underwrite and have pre-existing condition waiting periods the rate can be as much as fifty percent lower than on the Exchange.  If you are a young person or have a young family in New York, it could be much more than that since these Funds also do age rating which is another underwriting concept that all New York plans abandoned several years ago.  It does not take a health expert to know a twenty-five year old healthy person is going to have less claims than a sixty-four year old person with a chronic medical condition.

Most of us if given the choice would want to be in the experience pool with the healthy people who passed underwriting.  The question you should ask is: Are these lower cost plans legal?  The answer is yes.  These funds are not only legal, but the people who go into them are exempt from paying the 2.5% Individual Shared Responsibility tax.  The plans are also Preferred Provider plans using a very large National Provider Network.  Even if you decide not to use the provider network, they still have a fifty percent benefit and an out of pocket maximum expense.  Most of the plan options have a ten month wait to cover pregnancy and the coverage has a one million dollar maximum.  These plans have office copays which many of the more lower cost plans on the Exchanges do not.  They do only come with a discount prescription card which is another reason the costs are kept down.  These plans are considered self pay by the doctors so the Sharing Fund administrators are able to negotiate deep discounts from the provider, which again helps keep contributions low.

These plans definitely are not for everyone, which is kind of the reson why they are so financially attractive to the majority of people who are healthy enough to pass underwriting.  People who cannot pass underwriting stay in the Exchange plans.  This means if you are one of the eighty percent of Americans who do not have a chronic illness and you and your family are covered with a Federal or State Exchange plan, you are already in the high risk pool.  Your premiums have to cover the twenty percent of people doing eighty percent of the claims, and that is why premiums are expected to continue to rise on all the Exchanges over the next several years.  What a Sharing Fund plan does is allow you to join a rate pool made up entirely of the eighty percent at the time of underwriting.  So it means what is being covered is the unplanned and unforeseen future risk.  That was originally how health insurance worked before the Affordable Care Act removed underwriting.  This approach for health coverage is definitely not for everyone, but it may be an option you did not know about and want to explore further.

If you are interested in getting more information about a Sharing Fund such as the Altrua Sharing Fund approach, please call Robert Dooley at 410-693-4703 or email at rdooley@mdpins.com