He was paying $10,000 a year LESS than just about everyone else I knew for healthcare coverage. I wasn't really sure what a "healthcare sharing plan" was, but if it was doing what I understood it to be doing, I knew it was really inexpensive.
To set up this story, I need to tell you how this topic came to my attention in the first place.
A few months ago, a fellow came through the door looking for help in designing a financial plan. He's a good guy....married, two kids, and a business he started a number of years ago. He's making good money....and like a lot of entrepreneurs, he's concerned that it won't last forever.
Now, when you're in the financial planning profession, you quickly learn that investment returns aren't always the most important way to help people. Helping improve your clients' cash flow can be huge, because money is usually seeping out the back door somewhere. For that reason, when evaluating someone's financial situation, I always inquire about life, health, auto & home insurance. Why? Well, insurance is expensive. Frequently, a tactic for improving a family's cash flow is finding them lower cost insurance options. For this client though, he had something that I really didn't know anything about. He was using an organization called Healthcare Christian Ministries to help his family with healthcare costs and was paying $700/month. That was $10,000 a year less than what I was accustomed to seeing. And that meant $100,000 saved in 10 years....$200,000 in 20 years. You get the picture.
I spent a lot of time researching what those programs were all about for his financial plan. Because there is so much money being spent on healthcare and the opportunity to save money is there too, I thought you'd find it an interesting topic as well.
What's the Big Picture?
The health insurance market place is a disaster. According to the National Conference of State Legislators, the un-subsidized cost for family coverage was $18,764 in 2017. That simple fact makes it clear that the Affordable Care Act is not "working" to make healthcare affordable. Not only is the price high, but rates keep increasing. The average premium for insurance purchased on an exchange or the private plan market increased 25% this year. Of course, subsidies reduced that pain, but as the federal government isn't collecting enough in taxes to pay its bills as it is, those subsidies just increase the federal debt.
Having health insurance isn't the same thing as having the health insurer pay for your medical care. After all, there are deductibles, co-pays, and co-insurance that must be paid, too. When buying health insurance on an exchange today, you choose a bronze, silver, gold or platinum plan where the coverage is 60%, 70%, 80%, or 90% of the covered costs after the deductible. The higher the percentage of covered costs, the higher your premium but the lower your deductible. Still, premiums and deductibles have been rising since the passage of the Affordable Care Act. Silver plans are the most popular plans and, back in 2015, the average Silver plan deductible was $2,656. As of 2018, the average Silver plan deductible is $3,937.
What are Healthcare Sharing Programs?
With the cost of traditional health insurance being so expensive, people are looking for options and healthcare sharing organizations have been growing as a result. Since the ACA was passed in March of 2010, the membership in healthcare sharing organizations has soared from 200,000 to nearly 1,000,000 today. As a financial guy, I can't help but notice that's a 22% growth rate. Impressive.
Healthcare sharing programs are Christian programs that promote the sharing of medical expenses among their members. Every month, members send in a monthly contribution - often called a "share" - that is then redistributed to pay for the medical expenses of other members in accordance with a given program's guidelines. If it sounds a lot like insurance, I agree with you. It's not though, but we'll get to that in a minute.
What makes these programs so popular is that they tend to be much less expensive than health insurance. Families in these systems usually pay a monthly "share" of $300 to $500 per month (and many people pay more to help those that can't afford to do so). When compared to the average premium of $1,564 per month - and you have to laugh at the irony of the ACA's name - you can see why these programs are so popular.
Now, before we go on, why do these programs exist at all? From a business context, the answer is "soft"...because these organizations are non-profits and there is no money to be made. The answer to the question relates to the Bible. These organizations exist to fulfill a responsibility that Christians have to help one another. As a representative of one of the healthcare sharing organizations told me, it is their covenant to one another and to God to help each members suffering. That's the "why" and it's an honorable one.
To become a member, healthcare sharing programs may require a statement of faith. Some programs even have a process for verifying regular church attendance. In many cases, members are not permitted to use tobacco in any form (including e-cigarettes) or illegal drugs (even marijuana in states where it is legal, because at the federal level, it is still illegal). Alcohol use is generally acceptable, as long as it is limited. Membership is not denied as a result of age, weight, or health history, but benefits are limited for pre-existing conditions (unlike actual health insurance available in today's marketplace).
As I said before and I must emphasize this, healthcare sharing programs are NOT health insurance....even though they look and feel a lot like health insurance. They are certainly less expensive than most health insurance plans, however. Part of the reason that the cost is less than traditional health insurance is the difference in coverage. For example, healthcare sharing programs may exclude payments for birth control, abortions, injuries related to alcohol or drugs, and injuries from certain hazardous activities (or even failure to wear helmets or seat belts in some situations).
Health Insurance vs. Healthcare Sharing
Health insurance companies guarantee that specific claims will be paid according to the insurance policy's language. State insurance departments exist to make sure that insurance companies follow the rules. Insurance guarantee associations exist as a back-up for the payment of claims if an insurance company goes out of business.
What kind of guarantees do healthcare sharing organizations make? None. You read that correctly..."None." Healthcare sharing organizations make it explicitly clear that they are not health insurance companies. Instead, they are organizations that believe in the mission of Christ as laid-out in the New Testament to "[L]love one another." Yes, there are prescribed guidelines these groups follow for the payment of medical bills, but the funding of those efforts come from the voluntary association of members.
Healthcare sharing organizations and health insurance companies do have terms that mean very similar things, though. For instance:
Healthcare sharing organizations and health insurance companies fundamentally use the same tactics in that each pools populations of people to pay the covered medical costs of that population according to guidelines. In the case of healthcare sharing programs, they have paid billions of dollars in in covered medical expenses over the last several decades. In my research and having read many, many anecdotal stories, those bills have been handled professionally.
TOP 4 HEALTHCARE SHARING ORGANIZATIONS:
There are many healthcare sharing groups in the US and in my research, the ones listed below are the most popular. I've summarized some of the key differences between them and I've hyperlinked their names so that you can dig into the details if you want more information.
Devil is in the Details
As I've mentioned a few times, healthcare sharing programs are NOT health insurance and each program has its pros and cons. Here are a few things to think about before joining one of them:
As a society, we are in a very awkward place as it relates to health insurance. While there are some people that are just born with bad genes, everyone knows that Americans are increasingly overweight and inactive. We know that being overweight and inactive is going to eventually cause illness or injury and that means medical bills. Big ones. For those that do try to control their diets and exercise, they are increasingly frustrated at being asked to pay more for their health insurance premiums....because they are being asked to fund the expenses of so many other people don't take care of themselves.
Where does individual choice come into play with sharing expenses in the form of insurance? I'm not sure where the lines are, but I certainly feel the frustration. Eat what you want. Smoke if you want. Jump out of a plane if you want. Just don't ask me to pay for it if you get hurt or ill as a result. Balancing individual choice and societal welfare is a bear of an issue. I don't envy the role of our political representatives as they try to walk that line.
Within the above observation is the fact that health insurance has evolved into more of a healthcare financing business. We go to doctors for a routine visit and expect health insurance to pay for everything. That's crazy. Administratively, doctors must keep track of different insurance companies, their paperwork requirements, and delays in getting paid. That costs a fortune. Furthermore, doctors don't have the incentive to keep costs (not associated with their practice) in check on behalf of their patients. I'm not knocking them for it, but they don't. When ordering a lab exam from one vendor or another...or an MRI from one hospital or another...they don't know the costs. You and I typically don't either. When milk goes up 50 cents a gallon, we know. Not for health costs, though.
Systems like healthcare sharing arrangements force members to be conscious of healthcare costs because they drive members to inquire about cash prices and discounts. As I've researched this subject, the stories I've read about the difference in prices laboratory services, MRIs, and prescriptions (i.e. same drug, one is a tablet and the other a capsule) is mind boggling. The socialization of costs usually allow individual players to game the system to their advantage. I better see that now. Capitalism requires consumers to understand costs. Clearly, consumers don't know costs....so we don't really have a capitalist-driven healthcare system. Things have to change.
For those that are healthy, are comfortable with the risk, and believe in the mission, healthcare sharing arrangements may be a good option. And those people may be part of a movement that makes for a more cost effective health care environment.
Anyway, I hope you found this valuable. If so, do me a favor and give this article a "like" and share it with others. If I can be of help, just let me know.
Bruce Wing is the president of Strategic Wealth, LLC, a Registered Investment Adviser located on the north side of Atlanta.
"The power to tax involves the power to destroy."
- Chief Justice John Marshall
Benjamin Franklin is one of my favorite "founding fathers." Most people know him as a famous inventor, diplomat, and key contributor to the writing of America's Declaration of Independence. What fewer people know or think about is that Mr. Franklin wasn't always the fascinating man that history now paints him to be. More to he point, he knew it. Because of that fact, at the age of twenty, young Mr. Franklin identified thirteen traits that he felt made one a virtuous man and he then created a system to develop those traits within himself. We are glad he did, because without him, who knows where we'd be today.
Neat story, isn't it? A timely one, too.
In three days, an entirely new year will be upon us. A fresh start in 2018. A new opportunity for each one of us to become a better person. What is that you want to do? To become? Good questions.
I've been holding on to the video below for months and believe it may help you think through those questions a bit. Before you read further, please watch it. You have my word that it is good. Oh, and share this article too!
"The U.S. Senate is considering a bill that would tax Botox. When Botox users heard this, they were horrified. Well, I think they were horrified. It's difficult to tell."
- Craig Ferguson
By a vote of 227 - 203 in the House and 51 - 48 in the Senate, the Republicans have just passed the most significant new tax legislation in 20-30 years. Before jumping into the details of the new tax plan, I want to ask that everyone reading this first ask the "why" question. Why is the administration doing this at all? The answer is "to lower corporate tax rates" in the hope of creating more jobs and generating more corporate tax revenue. You have to recognize that the highest marginal corporate tax rate in America, practically speaking anyway, is 35%. That is the 4th highest rate in the world (the highest being 55% in the United Arab Emirates). Now, just because we have such a high marginal tax rate does NOT mean that every corporation in America is paying taxes at the level. What is the AVERAGE tax rate of American corporations? According to the Tax Foundation, that rate is 24.71%. A tax rate of ~25% doesn't sound nearly that bad until you realize that the average corporate tax rate in Europe is 18.7%. That 6-point difference in taxes means that American corporations are paying 31% MORE in corporate income taxes than their European counterparts. In China, if you're a technology company, the difference is even greater.
Think about it this way: If you can imagine yourself bypassing your local grocery story and going to Walmart or Target for an item that is 25% less, then you can appreciate the conundrum that corporate CEOs face when managing the relatively uncompetitive "price" of their corporate income tax liability. Few of us are willing to pay more than the lowest price we can find....and none of us want to pay more than a competitive price. US corporate tax rates have been less than competitive for years now.
According to a 2015 Forbes article, corporations have nearly $2.1 trillion in accumulated profits sitting off-shore to avoid US corporate taxes. What the Trump administration is trying to do is to lower the corporate tax rate to create an incentive for those corporations to bring that money back to the US. The administration's view is that it's better to get a lower percentage of something vs. a higher percentage of nothing...in terms of tax revenue. As a result, the new tax plan lowers corporate income tax rates from 35% to 21%. To me, this makes all kinds of sense.
Ok, so what about personal income taxes. Why all the changes here? To make a long story short, the changes in personal taxes are simply the result of the negotiations that made the changes to the corporate rates possible.
What follows is a summary of the big issues as I see them from both a personal and business perspective.
Imagine it’s you and 101 others crammed into 1,632 square feet of living space. For 66 days in the North Atlantic Ocean. No air. No heat. Oh God…no bathrooms.
Welcome to the Mayflower. It's the year 1620.
""I told them how much money we had, how much money we could expect, and how I planned to spend it. I put on a brave show, but inside I was terrified."
Paul Downs wrote those words to describe what it was like the day after laying-off 13 of his 23 employees. He was in agony worrying about the people he'd just let go, the people that still counted on him for their jobs, and his own family. If you've never owned a business, it's difficult to appreciate just how much of your identify is wrapped up in the business you're trying to build. In Paul's case, if he couldn't turn things around, that was it. Twenty-two years of his life wasted. He'd be a failure.
"As for the rest of us left behind, I hope this is the beginning of a time of healing and learning to be a family again. There will be no service, no prayers and no closure for the family she spent a lifetime tearing apart. We cannot come together in the end to see to it that her grandchildren and great grandchildren can say their goodbyes. So I say here for all of us, GOOD BYE, MOM."
This was the last paragraph of the obituary of Dolores Aguillar, published in the Vallejo Times Herald on August 17th - 18th, 2008.
Many of you may have read something like this on Facebook recently. It was floating around in a story about a woman in Florida that had died early last year. That obituary itself was plagiarized from the one above...which is true. It shocked me because I had never read anything quite like like it (except for the story I'll share in a minute). Unlike others that we might read today, the traditional platitudes to kindness or love do not exist in this obituary. This daughter writes that her mother "made no contribution to society and rarely shared a kind word or deed in her life." Painful, isn't it? She's sharing too much. Yet when I ask myself why, I easily understand that Mrs. Aguillar was a poor human being and her daughter merely provides an honest description of her mother's life. What makes this unusual is its truthfulness. As we know, the truth of one's life is not often found in an obituary.
Out of kindness.
I sometimes wonder if that is good for us. At one's death, does our avoidance in recognizing some of the mistakes made in the lives of those now dead make it too easy for the living to be less than we can be? Less than we should be?
Think about it. If we knew that more of the truths of our lives would be written and spoken at our deaths, would the living work to be better? To be more?
Yes, I believe we would.
I know of only one man in history who was given a chance to read his own obituary before he died. What he did as a result of that experience changed the world. Here is his story....
“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.” - Aristotle
The Biltmore House in Ashville, NC is one of America's castles. It's a magnificent structure that honors human achievement. The wealth that made it possible came from Commodore Vanderbilt of steamship and railroad fame. With a net-worth of nearly $150 billion in today's dollars, Vanderbilt created one of the largest fortunes in American history. At a 1973 Vanderbilt family reunion however, not a single descendant was a millionaire. How did that happen? Clearly profligate spending, gambling, and poor business decisions had an impact. In a word though, the answer that broadly explains the travesty is "affluenza".
Vanderbilt's legacy was one of money - not of values - and a fortune was lost as a result.
You can create a very different legacy. To elaborate, I want to share a story about another family's path to wealth. It's a true story and it involves my best friend from childhood. You'll enjoy this, so let's get started....
It's a dream job for many a college student - making beer! Of course, some of the brews must taste pretty bad....but still...what a job! And you're telling me that I can get tax credits for doing it? Yes, that's exactly what I'm saying.
While there are no guarantees, commercial property can be a great investment for those in the medical community. Certainly, there are many that put their proverbial toes in the water, but a lot more professionals sit back and wonder "Should I take the plunge?"
After spending many years in commercial property consulting, we have identified four common reasons why those in the medical profession should NOT own commercial property:
Entrepreneur, financial guy, husband and father of two great kids.