How Have You Planned for Healthcare Expenses?

Good to Know

How will you cover your retirement healthcare costs if you retire before age 65?  There may be more options than you think!  Over the next few weeks, the author will highlight key alternatives for retirees too young to qualify for Medicare. This article, Part 1 of a series, will highlight the pros and cons of Faith-Based Cost-Sharing.

Faith-Based Healthcare Cost-Sharing

Defined—healthcare cost sharing is not a new concept, simply an overlooked or misunderstood one—it is not considered health insurance but can cover many, if not most, of the same healthcare costs.  Most cost-sharing arrangements (CSAs) are sponsored by Christian not-for-profit religious organizations such as Christian Healthcare Ministries.  The strong appeal for CSAs is the potential for dramatically lower premiums—referred to as contributions—versus COBRA continuation, Affordable Care Act premiums,1 and private health insurance premiums. Caveat—be sure to exercise careful due diligence when considering a specific CSA.  Customer service, coverages, claims-paying history, and customer reviews differ significantly among the choices (just as would be the case in choosing a healthcare insurance provider).  Many—but not all—CSAs operate under a Preferred Provider Organization (PPO) model in which:

  • The CSA contracts with a network of healthcare facilities and professionals,
  • The network offers a discounted rate for “in-network” healthcare services, and
  • Members can obtain care outside of the network but will pay more for their healthcare costs.

Here’s how funding and bill payment works for most CSAs:

Pros and cons compared to traditional health care insurance policies are summarized below.

Potential for significantly lower monthly contributions (premiums) Must abstain from smoking, alcohol, non-prescription drugs, and pre-marital sex3
Discounted dental & vision care plus free Telehealth Services2 Limited regulatory oversight and no legal protection if CSA goes bankrupt
Membership cannot generally be terminated on account of claims Annual and lifetime benefits may be limited
Payment of benefits may take longer than in traditional health insurance policies4

The Bottom Line

The traditional approach to early retiree healthcare costs is to continue group healthcare coverage under COBRA for as long as possible after retirement and then purchase an individual policy through a private insurance company for coverage until age 65. This traditional approach requires relatively high premiums and, for individual policies, potentially reduced coverages.  Healthcare Cost Sharing Arrangements may be appropriate for cost-conscious retirees that retire before their Medicare-eligible age of 65.  Stay tuned for the next blog in this series where we will evaluate other alternatives to Medicare.

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The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide financial advice of any kind—including but not limited to legal, identity theft protection, investment, income tax, risk management, retirement, or estate advice.  Consult an experienced, credentialed expert for detailed guidance.

1 Premium subsidies phase out at about $73,000 in income for a retired couple.

2 Not available with all CSAs.

3 Healthcare costs arising from behaviors contrary to Biblical values are not generally covered.  

4 One prominent CSA recommends not paying for the treatment upfront but entering into a deferred payment agreement to manage this contingency until the CSA pays the healthcare provider.