Faith-Based Insurance Products for Agents: What They Are and How They Work

By Jonathan Decker

While most Americans are only familiar with the standard way of receiving health benefits, small religious communities have cared for each other outside the traditional healthcare system for decades.

The idea of health sharing dates to the Middle Ages when craftspeople entered guilds to protect their families from hard times. The modern American system was developed in the 1980s when faith-based communities — mostly Christian — started organizations to help those struggling to keep up with rising healthcare costs.

Today, about 1.7 million Americans are enrolled in this evolving alternative to standard health benefits. It is a very similar concept to traditional insurance and serves the same purpose, but there are many differences upon closer inspection.

What is Healthcare Sharing?

Healthcare sharing is a cost-sharing model organized by religious-based, non-profit groups called health care sharing ministries (HCSMs). It is a more flexible, safety net-like system where members contribute to a shared pool to help cover each other’s medical expenses.

However, HCSMs do not provide health insurance coverage. These products are not legally considered insurance, and HCSMs are not insurance companies. Unlike regular insurance, it is common for members to pay for small expenses on their own, only requesting assistance for bigger, costlier treatments.

Joining an HCSM

Memberships are typically limited to those who share common beliefs, usually a religious faith. This varies from one organization to the other, but it’s common to have strict requirements adhering to the group’s values and lifestyle, such as:

• Regular service attendance.
• Prohibiting the use of alcohol and smoking products.
• Forbidding intimate relations before and outside of marriage.

However, these products have been more broadly marketed in recent years. Roughly 10% of HCSMs offer open membership, which was further encouraged after enrollment spiked upon the enactment of the Affordable Care Act (ACA) in 2010.

Costs of Healthcare Sharing

Cost is another factor that widely varies, especially for individuals and families and the type of HCSM one chooses to join.

Most HCSMs have payment structures similar to those of traditional insurance carriers. In addition to requiring a small enrollment fee, most HCSMs charge members:

• Monthly sharing amounts – These fees are the HCSM version of regular insurance premiums ranging from $100 to $500.
• Sharing responsibilities – These costs are like deductibles and out-of-pocket costs and can range from $500 to $10,000.

Overall, the costs of healthcare sharing plans are usually much lower than those of traditional insurance.

Coverage and Regulation of HCSMs

The primary difference between HCSMs and traditional healthcare programs is that HCSMs bring people together to share costs rather than insure members.

Simply put, HCSMs are not regulated under the Affordable Care Act (ACA) because they do not meet the federal definition of health insurance. This means they can deny coverage to members for any reason, such as pre-existing conditions or religious beliefs. They also do not have to cover the 10 essential health benefits under the ACA.

Because these organizations are loosely regulated and less stringent in their mandates, they vary in coverage details, such as:

• Provider networks – Some have provider networks, others don’t. Some HCSMs with provider networks require members to stay in-network, while others allow members to choose professionals.
• Negotiated costs – Members may have to negotiate costs, although some HCSMs help with this task.
• Exclusions – HCSMs have varying policies on what benefits they cover, such as preventative care costs, small expenses and treatment for pre-existing conditions.
• Coverage levels – Many also have coverage levels, much like traditional insurers.

However, while exempt from ACA mandates that apply to traditional insurers, the ACA does have specific requirements for HCSMs:

• All members must share a common religious or ethical belief system.
• HCSMs cannot discriminate based on employment or residence.
• Plans must share medical expenses regardless of state residency.
• Members can’t lose status because of developing certain medical conditions but can be disenrolled if they don’t pay their share.
• Organizations must be subject to an annual audit.

At the state level, 30 states explicitly exempt HCSMs from their insurance regulatory codes. The other 20 do not exempt them and can practice some oversight to protect consumers despite limited capabilities.

HCSMs vs. Traditional Health Insurance Markets

HCSM plans may have some advantages over traditional health insurance, such as:

• Lower costs – Less expensive enrollment and monthly fees compared to traditional insurance premiums. 
• More flexibility – Fewer organizational processes and regulatory mandates than traditional providers.
• Belief-driven healthcare – Funds treatment in alignment with members’ religious beliefs.
• Sense of community – A feeling of belonging by participating in healthcare with other members who share your beliefs.
• Medical conditions can’t end membership – If a person develops a new medical condition while a member, an HCSM can’t terminate their membership due to the condition.

With little regulatory oversight, there are also drawbacks to healthcare sharing. Some common disadvantages and risks include:

• No guarantee of coverage – There are fewer consumer protections for HCSMs, and they are not obligated to grant any request for financial assistance.
• Belief-driven healthcare – Most groups have lifestyle requirements, such as required church attendance, and won’t fund treatments with which their faith disagrees.
• No requirements for ACA’s essential health benefits – HCSMs aren’t legally obligated to cover certain benefits traditional insurance policyholders are guaranteed — such as ambulatory and emergency services, mental health treatments and maternity and newborn care.
• Higher costs and exclusions for pre-existing conditions – It’s common for HCSMs to raise costs, have mandates (like being symptom-free for five or more years) or not cover pre-existing condition treatments.
• Benefit limitations – HCSMs can cap coverage in a year or lifetime.

Individual Insurance Agents Selling Faith-Based Health Coverage

To become a faith-based insurance agent, you would likely have to join a specific HCSM. However, it is possible to get involved by acting as a broker and partnering with providers, similar to how independent agents work with traditional insurers.

Some HCSMs have begun to work with brokers to market and sell their products to prospective members. They can pay generous commissions ranging from 15%–20%. You may be able to sell programs to individuals and families or help sell partner programs, providing organizations have access to an HCSM so they can offer services to customers and employees.

While adding this as a niche area of expertise could be lucrative, as healthcare sharing has grown and some HCSMs are marketing more broadly, its potential could be limited. Those seeking these programs make up a small fraction of Americans; only about 1.7 million people in the U.S. are HCSM members, and a mere 107 HCSMs are certified by the Department of Health and Human Services.

Risks of Selling HCSM Plans

As mentioned above, healthcare sharing services are not insurance policies and are in a completely separate regulatory category. This also applies to agents selling benefits.

Traditional errors and omissions (E&O) policies will not cover liability risks related to the sales or services of HCSMs. If a healthcare sharing provider or member were to file a lawsuit against you for malpractice, any financial coverage and legal expenses required to protect your business are on you.

For example, you are a licensed insurance agent who sells traditional insurance and healthcare sharing services. You have a standard E&O policy.

One day, you are helping a family find the right HCSM for their needs. They ask about one provider’s likelihood to offer financial assistance for a specific procedure. You respond with off-the-cuff advice about how it is more likely to provide coverage for the procedure by saying, “They never deny requests for that operation.”

Somewhere down the road, the family requests coverage for that specific operation and is denied. The family brings a malpractice lawsuit against you, claiming your advice misled them.

You will not receive coverage from your E&O insurer, as traditional policies do not cover sales and services associated with HCSMs.

This is a crucial consideration if you are interested in faith-based insurance sales, as one liability lawsuit could cause significant harm to your business and livelihood. Unless you hold very deep religious beliefs and are passionate about the communities HCSMs serve, the risk may not be worth any perceived benefit.

Importance of E&O Coverage for Insurance Agents

By focusing on selling traditional, officially licensed health insurance, you are less likely to encounter situations where your professional E&O insurance policy would not cover you.

You don’t have to look any further for affordable, top-rated liability coverage when you join the Association of Insurance Professionals (AIP). Our E&O program starts at just $28.75 per month for Colonial Life insurance agents and brokers and connects policyholders with:

• Easy online enrollment and instant proof of insurance.
• Free continuing education (CE) courses.
• Dozens of insurance agent benefits to help you save and grow your business.

To learn more about our E&O Insurance, see our coverage options page.

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