In last week’s post: What is Health Cost Sharing? Part 1: The History, we covered the decades-old background of cost-sharing and how recent political events led to its rise in popularity.
In part two, we’ll unpack the basics in: Health Cost Sharing 101, including the terminology, typical cost sharing rates, what’s expected of members within a cost sharing program, and how the whole thing works.
Health Cost Sharing Terminology
If you’re new to cost sharing, knowing the terminology and how it compares to traditional insurance jargon is key to understanding the model.
The following are some key terms to know:
- Traditional Insurance: “Monthly rate/premium”
- Health Cost Sharing: “Monthly share amount”
- Traditional Insurance: “Deductible/co-pay”
- Health Cost Sharing: “Annual unshared amount/Individual responsibility amount”
- Traditional Insurance: “Claim”
- Health Cost Sharing: “Medical expense”
- Traditional Insurance: “Uncovered expense”
- Health Cost Sharing: “Unsharable expense”
How does health cost sharing work?
It’s kind of like a savings account for your health, but it’s much safer for your financial health than a personal savings account would be because you don’t have to save up lots of money before you can draw out money if you incur unexpected medical expenses.
For example, suppose 10,000 people are in a health-sharing pool together (which is a common amount in the health cost-sharing field,) and they’re all contributing a monthly share averaging $250 into the pool.
That works out to $30,000,000 a year.
Compare that level of assurance to the level you’d have if you just put that $250 a month into your own savings account ($3,000 a year.)
Wouldn’t you like to have $30,000,000 a year backing up your healthcare needs, rather than $3000 a year?
You can see why this is a cost-effective way communities have been coming together to safeguard their health for decades.
Why is health cost sharing so much cheaper than health insurance?
If you calculate your savings from health cost-sharing, via our free, handy Savings Calculator, you’ll see that you can often save up to 33% versus a comparable health
How and why is Knew Health cost-sharing so much cheaper than health insurance?
For 2 basic reasons:
Reason #1: Well Visits vs. Sick Visits
Most people view health insurance as an ATM by which they try to cover as many of their healthcare costs as possible, to make up for their high premiums. This means they try to get every last medical expense paid for, including annual checkups, long-term maintenance medication, psychotherapy, etc.
Of course, none of this is free for the insurance company, so premiums go up for everyone. Including healthy people who don’t need all of this ongoing medical support every year.
In contrast, Health Cost Sharing is not designed to be an ATM for every medical expense you might incur.
Health Cost Sharing is there to support you in paying for unexpected medical expenses. These are the ones that are unlikely, but could make a major dent in your finances if they came out of nowhere.
The Health Cost Share Community funds share costs for what are called “sick visits”- those visits to medical professionals that happen if/when you get sick or have an injury or accident. Since you don’t expect to get sick, these are the unexpected medical expenses you might incur and which you truly want peace of mind against.
However, Knew Health doesn’t provide for what we call “well-visits” – those regular expenses, such as annual checkups and long-term maintenance medications, that you know about in
advance and can therefore plan for.
The distinction between “sick-visits” and “well-visits” is part of what allows us to provide you with monthly medical sharing costs that are often one third cheaper than comparable health
It’s likely that you consume far less medical care than the average American. We know that, rather than subsidizing the monthly, yearly, and even daily medical costs of those who need regular, ongoing medical attention all the time…
And rather than pre-paying for medical care that you’ll likely never use, via insurance premiums…
We know you’d rather keep that money for yourself. That’s money you can use for anything. Including, if you choose, to fund preventive wellness.
We thought so.
Reason #2: Health Insurance Companies Prioritize Shareholder Profit, While Health Cost Shares Prioritizes Individual Savings
Nationally, benchmark health insurance rates, for those not receiving employer or government-subsidized health insurance, increased by about 25% in 2017 and by 30% in 2018.
But in recent years, due to uncertainty around the Affordable Care Act, the increases have
been truly eye-popping.
After rent or mortgage, health insurance is one of the biggest costs your personal finances face. Can you imagine any other major cost increasing by 15%-30% year after year? Why are health
insurance costs so out of control in America?
The main reason is that health insurance companies are publicly traded companies, which have a fiduciary responsibility to their investors to maximize profit… i.e., to raise your premiums as much as they can. Since it’s a highly-regulated industry, startup costs are high and competition
is low. Which means it’s dominated by only a few major players, who set the prices to basically whatever they want.
Because they’ve basically been operating as a monopoly, with no efficient competition, health insurance companies know they can pass large medical bills onto you, in the form of your spiraling premiums – knowing you have few other options. That is, few other options. Until now.
Health Cost Shares are building an alternative to the health insurance industry. An alternative based on your health needs. An alternative based on getting you the care and protection you need, at a price you can afford.