An Affordable Alternative to Traditional Group Health Insurance
A New Approach for the Small Employer
Group health insurance premiums have skyrocketed over the last twenty years. Making matters worse is the fact that deductibles and coinsurance costs have dramatically increased as well. In North Carolina, the average employee-only premium is between $450 and $600 per month. Unfortunately, as premiums increase, employee satisfaction is decreasing in direct proportion to the increase in out of pocket costs and employee contributions.
Sadly, even if the employer is paying 100% of the employee-only premium (very unusual with small employers) most employees cannot afford to pay for dependent coverage. But what is worse, is that as a result of the employer providing an ACA (Obamacare) compliant health insurance policy employees lose access to a subsidy on healthcare.gov. And the inability to qualify for a subsidy adds to employee dissatisfaction. The small employer with fewer than 50 employees is really caught between a rock and hard place when trying to provide healthcare benefits.
The Solution – Cutting Monthly Costs + Increasing Employee Satisfaction
Medical Cost Sharing is my favorite alternative to the traditional group major medical plan that most employers adopt today. Medical cost sharing has its roots in the faith-based health sharing arrangements. These programs have been around for a very long time but really launched in a major way in 1981 with Christian Healthcare Ministries. After the passage and implementation of the Affordable Care Act these plans received a lot of attention since satisfied the health insurance mandate.
Medical cost sharing is simply a group of people with a common bond who commit helping each other with medical bills. In today’s sharing society (think Uber, Air B&B) systems were put into place where members make regular monthly contributions to a personal account, held by a bank, and from which the plan administrator can withdraw money and share it within the community when a member incurs a medical bill. The shared amount is then used to pay any medical bills in excess of a specified dollar amount. As an example, a member might be responsible for the first $1500 in medical expenses for a given medical event. This is an important distinction. If this person had an accident and incurred medical expenses of $3000, the community would send him/her a check for $1500. Unlike a deductible, this initial unshareable amount is not an annual dollar limit but it is a per event member liability. To better understand this, consider the same individual above needed an appendectomy two months later. He/she would be responsible for the first $1500 once again. On the positive side, the medical cost sharing community would send the member a check for 100% of the remaining balance.
This per event liability is one reason why the costs are so much lower than a traditional major medical policy, but it is not the only reason. Other reasons include:
- Elimination of the claims adjudication bureaucracy
- Elimination of networks
- Preexisting conditions are covered gradually after year one
- Wellness and mandated coverages are eliminated
- No doctor copays
- No prescription drug copays
- Member’s get the “cash-pay” price which is often less than the negotiated network rates.
The question that I am sure is on your mind at this point is this: is the cost of Medical Cost Sharing sufficiently low enough to justify the preexisting condition limitation and the loss of doctor visit and prescription copays? The simple answer is that it depends. For some companies this is a very easy decision. This is especially true if there are not very many employees with major preexisting conditions. That said, I have two client companies where the owners each had preexisting conditions and yet both felt that making the switch was the right thing to do!
What is the Monthly Cost?
I typically recommend a plan where the member is responsible for the first $1500 in medical bills per illness or accident. The monthly cost for that plan is less than $200 per employee per month. Remember that this means that if a member is diagnosed with cancer, the member’s total liability would be $1500 with all other costs being shared with and reimbursed by the community. Compare that to the plan that one of my newer clients was on prior to switching to Medical Cost Sharing. The company’s group plan had a $3500 deductible with another $4500 out of pocket. The monthly costs exceeded $500 per employee per month. Changing to Medical Cost Sharing saved the company more than $300 per employee per month!
Are There Any Drawbacks?
There are two major drawbacks to the Medical Cost Sharing model. The first drawback is the fact that since this is not insurance, members are “cash-pay” patients and have to be able to deal with providers who want payment up front. This becomes a bit more complicated than simply showing your insurance identification card and receiving treatment. That said, it is important to point out that many of these cost sharing plans also include a support team that can provide guidance to the member in these cases.
Perhaps the biggest drawback is the fact that unlike health insurance, benefits are not guaranteed. None-the-less, the oldest of the Faith-Based medical cost sharing communities have been around since 1981 and have never not paid a medical claim. The secular plan that I represent is now in their sixth year and has also never not paid a claim. When one of my clients needed major surgery he worked closely with the support team of this medical cost sharing community and was able to have his claims (in excess of $40,000) paid by the day of surgery!
Medical Cost Sharing as an Employee Benefit
Not every medical cost sharing plan is right for use as an employee benefit. The faith-based plans probably should be avoided since they require that you adhere to their belief system in order to participate. As an employer you do not want to be in a position where you may have to encourage an employee to falsely swear allegiance to a faith in order to participate as that might lead to a declined medical claim. And since there are thousands of Americans who may not be able to affirm a specific belief system the secular version will make a better benefit.
After the implementation of the Affordable Care Act (Obamacare), several new medical cost sharing plans arose. These newer plans tried to mimic traditional health insurance and aligned themselves with healthcare networks. These plans then provided identification cards to members which allowed them to have a more traditional experience when seeking medical care. As a result of this, member satisfaction is significantly lower and complaints significantly higher than the medical cost sharing plans that do not use networks. Simply do an online search for complaints and you will see what I am talking about.
As an employee benefit you want a plan that is:
- Does not require any specific faith
- Affordable Monthly Costs
- Allows members to use any provider
- Minimizes member out of pocket costs
- Provides support to members dealing with a major medical event
Options to Improve Employee Satisfaction
While Medical Cost Sharing is great as a stand-alone benefit, employee satisfaction can be significantly enhanced by offering an additional benefit in conjunction. I often include a program that provides additional services that significantly improves employee satisfaction. For $125 a month this plan includes:
- Unlimited 24/7 Virtual Direct Primary Care (VDPC)
- Unlimited local Primary Care (must be referred by VDPC)
- Healthcare Navigation which assists members in talking with medical providers
- Medical Bill Negotiation which is especially useful when the member incurs expenses that may not meet the unshareable amount
- Assistance in finding prescription drug patient assistance programs
- Significant prescription drug discounts
When combined with Medical Cost Sharing, this creates a more comprehensive plan for members. It also makes dealing with a major medical event less stressful.
Another approach that works well is to combine the Medical Cost Sharing plan with a Fixed Benefit Health Insurance policy.
As the name of this type of implies, the policy specifies how much will be paid each specific medical event. Example of this might be:
Primary Care Visit: $120
Hospital Stay per Day: $3000 Day 1 and then $3000 a day beginning on Day 4
Surgery: Two times the Medicare reimbursement
MRI, CT Scan: $500
And many additional benefits
When combined with a Medical Cost Sharing plan the individual has the best of all possible worlds. He/she has first dollar benefits for most medical events, thus eliminating the biggest roadblock to seeking medical care early. And because this is a true health insurance policy, the member has an identification card that can be given to providers in advance of services. A robust fixed benefit health insurance policy will provide benefits that are large enough to satisfy the provider’s need for upfront payment. And in the unlikely case of a large medical bill where the Medical Cost Sharing plan may be unable to pay 100% of the bills, the Fixed Benefit policy will provide the funds to pay all or most of those costs. And in an ideal situation, the first dollar benefits will be more than adequate to cover the individual’s unshareable amount leaving zero payable by the member.
The biggest drawback of the fixed benefit policy as an employee benefit is that to qualify for a guaranteed issued benefit with preexisting conditions covered after 12 months there are participation requirements. As an example, in a company with 20 eligible employees a minimum of 12 employees would need to participate. Still, for the right group this a great option that makes the overall plan the best alternative to traditional group health insurance.
An Example of Cost for a 40-year-old Female non-smoker – This is only a partial listing of possible charges and cover expenses.
The Alternative – $260 monthly with No Network. Member can use any provider
Medical Cost Sharing with an Initial Unshareable Amount of $1500. All medical bills in excess of $1500 per event are shareable and reimbursable from the community.
Using this combination, the member would have zero out of pocket for most medical event. In addition, this is a permanent solution and can follow the individual anywhere in the country.
If you have any questions feel free to send me an email at email@example.com or schedule a time to talk by using my calendar at https://mels.youcanbook.me