Tom’s post on a woman in Massachusetts getting screwed on a cost-sharing ministry health payment plan is a good opportunity to talk about the alternatives to ACA individual market qualified health plans (QHPs) for people who want some cost protection. The ACA explicitly allowed for Cost Sharing Ministries as an exception to the individual mandate. These ministries were small at the time but have gotten larger as both a means of avoiding the ACA as an ideological committment and more often, as a means of getting some cost protection at a lower monthly output than an ACA plan would cost for someone who is not subsidy eligible.
I want to highlight one of the more useful chunks I’ve written — we were writing about silverloading and ACA plan affordability but broadened our perspective a bit here:
Given continued affordability challenges, particularly for unsubsidized enrollees, states are pursuing additional policy changes. States have three primary options for reducing premiums for households ineligible for federal APTCs: direct subsidization, indirect subsidization, and endorsement of parallel markets….
states can facilitate parallel markets for insurance or insurance-like products. Short-term limited-duration plans and association health plans30 are examples of non-ACA-compliant insurance that enlarge parallel underwritten markets.31 Farm Bureau plans in Kansas, Iowa, and Tennessee are insurance-like products that avoid insurance regulations. Finally, health care sharing ministries are unregulated organizations that facilitate the sharing of health care costs among members who have common religious or ethical beliefs, but their products may offer limited financial benefits and contain coverage exclusions for people with preexisting conditions.
There are a few different types of parallel market products that all have slightly different characteristics.
|Allowed to Underwrite & Price on Health Risk||Allowed to Prospectively Deny Coverage in part or in full||Issuer bears claims cost risk||Explicitly Regulated as an Insurance Product|
|ACA Qualified Health Plans||No||No||Yes||Yes|
|Short Term Limited Duration Plans||Yes||Yes||Yes||Yes|
|Farm Bureau Plans||Yes||Yes||Yes||No|
|Cost Sharing Ministries||Yes||Yes||No||No|
Cost-sharing ministries are explicitly not insurance and they are lightly regulated by states with general fraud/consumer protections the usual avenue of regulation. They are the Wild West of health insurance like products. Some may be good, some may be horrendous, but there is no guarantee from even the “best” that comprehensive care for a major medical event will be paid in full.
The short term limited duration plans and Farm Bureau “NOT INSURANCE” insurance plans are insurance or insurance like products. These products get better premiums for the people that buy the plans because they are actively cherry picking individuals with low risk of having big claims. Some plans may not renew coverage for the next contract period if someone has a huge claim that is likely to repeat. However, in the context of the ACA before the ARA where people earning above 400% FPL were facing the full premium on their own, there is a good amount of value here for relatively healthy people who prospectively know that they are likely to remain relatively healthy and can’t afford a mortgage payment for health insurance coverage while having the option of the ACA to protect them against next period reclassification risk.
With the passage of the ARA enhanced subsidies, the value proposition for new buyers for these parrallel market plans is far worse than it was in 2020 as ACA plans are likely to be more affordable. However, people who currently are covered by these plans may, very reasonably, not want to pay the transaction and hassle costs of switch or take on the policy risk that the extended subsidies aren’t renewed and thus stay in their current options.
Texas recently approved a Farm Bureau not insurance pseudo insurance option:
#HB3924 by @TomOliverson allows Texas Farm Bureau or affiliate to offer nonprofit agricultural organization health benefits in the state.
Read more about that bill here: https://t.co/3bOEWG9h7K
— Texas House Republican Caucus (@TXGOPCaucus) May 13, 2021
And as long as the Texas Farm Bureau is not a bottom feeding scum bag (which given that they have a reputation for several other lines of business to give a damn about, they have a reason to care about their perception of quality and fairness) this is no big deal. It is likely to be attractive to some individuals of relatively low risk and middle and upper middle class income but those folks historically have not gotten a good deal on the ACA due to the combination of age rating and the fairly rapid shut-off of ACA subsidies. Even with the ARA subsidies, it is not hard to imagine a decent Farm Bureau plan being priced below 8.5% of income for a double income, no kid couple in their late 40s or early 50s.
If our objective is to get people covered, then well disclosed and clear and fairly comprehensive non-ACA QHP products can have a place in the policy portfolio. I have a hard time seeing most of the cost-sharing ministries hitting the fairly comprehensive guardrail but the Farm Bureaus and some of the short term plans can and do hit those guard rails. And the secondary effects of slightly increasing the morbidity of the ACA risk pool is almost irrelevant to anyone who is not a deficit peacock.
David: “And as long as the Texas Farm Bureau is not a bottom feeding scum bag (which given that they have a reputation for several other lines of business to give a damn about, they have a reason to care about their perception of quality and fairness) this is no big deal. ”
I no longer believe such things:
1) Organizations tend to loven those sweet marginal gains.
2) I believe that low-information people simply don’t know that Org A is committing nasty things in line of business A1, when they are buying A2-An.
@Barry: You are assuming that they are low information. David’s post suggests that for some it might be a good buy.
Brand names do matter. I bought major medical insurance back in 1972 when being female was a pre-existing condition. The company immediately started raising the deductible and the premium to the point where it made no financial sense to carry it. I remember to this day which insurance company it was and they have never jad my business since.
@sab: “I remember to this day which insurance company it was and they have never jad my business since.”
Which they don’t mind, because they avoided massive losses.
Who else did you persuade to not deal with them?
What massive losses? I didn’t have a major medical expense for the next thirty years. My whole extended family, including my parents’ plan d.
@sab: The point is that raising the deuctible like mad is a way of getting rid of somebody that the company *wants* to get rid of.
Thank you for this, very informative.
Really, every time I read one of these “medical insurance” posts, I remind myself that the US, one of the richest countries in the world, has convinced their own population that a third party needs to be between you and your medical care, an abomination. Once we realized that so-called Medicare would eat up around 25% of our not-so-generous Social Security pensions, including parts ABCDEFG or whatever, the decision to emigrate became even more appealing. Happy to pay income taxes here in Italy to help fund universal healthcare, an EU human right, the total tax in both countries we file to is less than the “Medicare” burden would have been. All of our care is and has been covered, including some very expensive pharmaceuticals, continuing cancer treatments, some surgeries, and a broken wrist, and legal residence is all that is required. No such thing as a medical bankruptcy here. Americans put up with a lot.
@Barry: the company evidently wanted to get rid of females, since they get pregnant and stuff like that.
@La Nonna: Not knocking universal healthcare or European levels of taxation, but isn’t Italy rife with tax evasion?
Steve in the ATL
@sab: back in my heavy litigation days in the ’90’s I had to deal with certain insurance companies and their lawyers. Over 20 years later I still won’t give any business of any kind to any entity associated with State Farm, Allstate, or Georgia Farm Bureau, nor does anyone in my family.
I can carry a grudge too, and I’m not even Irish!
@Steve in the ATL: One of my friends in law school always said (jokingly?) that he went to law school so that he could sue State farm over something/anything.
Steve in the ATL
@Omnes Omnibus: perhaps a joke that turned out to be true. Isn’t that a sitcom trope?
@Omnes Omnibus: I started my legal career as a very small cog in a giant wheel: A gender discrimination class action against State Farm. Out of roughly 1000 State Farm agents in California at the time, there were only three women (late ’70s, early 80’s). All, basically, Lurleen Wallace-types who inherited their husband’s agency in some rural area. My hatred for them lingers….
@Steve in the ATL:
WARNING – Timesink Alert!!
Obligatory TVTropes – Disproportionate Retribution:
(See original for embedded links.)
I was just going to write that the health care sharing ministries are MEWAs for the new millennium. Most MEWAs were — and for all I know still are — not much better than pyramid schemes for the self-employed and very small businesses desperate to reduce the cost of health insurance. The organizers skim money off the top while they can. I had a regulated insurer client who was from time to time strong armed by various state regulators to conduct a special open enrollment for the customers of MEWAs that basically stopped functioning and left them without any insurance at all. This is the part of it you don’t see. State regulators who smirk about their business friendly regulations and then try to bully regulated insurers to cover for them when state residents end up being harmed.
Regarding the earlier post, even if I had $75K in the bank, I wouldn’t get surgery without knowing in advance that I had insurance coverage because, you know, complications. Not that I blame this lady directly. She probably thought she would be protected by all the various consumer protections that have been erected over the last two decades, including pre-existing condition prohibitions and a robust external review process for denied claims. Oops — those only apply to regulated entities.
Imagine if the world were like this: You can pay a toll for good roads without potholes with divided lanes and good lighting. Or you can drive on roads where there are no rules at all, including rules against drunk driving or unlicensed and uninsured drivers. There is a good reason we don’t want to live like this, but it does not seem to penetrate the brains of a lot of politicians that this might also be true for the sale of insurance.
Not on my part, but it seems as though the IRS is no better than the Guardia di Finanza.
With my work for a PBM, we have one cost sharing ministry client. We approve or deny requests for cost sharing help based on criteria. My understanding is that the plan has a preset amount of money available to help cover costs for all members per year, and when that money is gone, it’s gone.
I’m not on the finance side at all, but from a member’s perspective seems more reasonable as a young and healthy person versus as a now late 30s individual with higher actuarial health risks.
@La Nonna: It sounds like you are just taking advantage of their system, tell me if I’m incorrect.
I would expect things to change in the future to cover the increasing costs of their citizens.
@La Nonna: An Italian I made friends with while on an extended trip there told me everyone hides half their income but taxes are twice as high as they should be, so it all works out! Definitely a kind of logic at work there.