Cost-Sharing Plans vs Private Health Insurance: Risks and Tradeoffs

If you are a freelancer or small business owner, you have likely seen ads for “Health Sharing” communities like Crowd Health or Samaritan Ministries. They often use sleek marketing and lower monthly “sharing” costs to lure you away from traditional insurance.

But before you sign up for what looks like a bargain, you need to understand the “Hidden Tax” of cost-sharing and the fundamental difference between a community promise and a legal contract.

1. The Tax Trap: Deductibility Matters

For the self-employed, the IRS offers a massive “above-the-line” deduction for health insurance premiums.

Private Insurance (Short-Term Medical or Fixed Indemnity): Because these are regulated insurance products, your premiums are generally 100% tax-deductible from your gross income.

Sharing Ministries: The IRS generally views “monthly shares” as voluntary gifts to a community, and not insurance premiums. This means they are NOT deductible for most self-employed people.

The Math in Action

Imagine a Private Insurance plan costs you $500/month and a Sharing Plan costs you $450/month. On the surface, the Sharing Plan looks $600/year cheaper. However, if you are in a 25% tax bracket, the Private Insurance plan effectively costs you only $375/month after the tax deduction. The result: the “cheaper” sharing plan actually costs you $900 more per year in real dollars.

2. A “Promise to Pay” Is Not a Contract

This is the high-level issue that often catches people off guard when they have a $100,000 medical emergency.

Insurance is a Legal Policy. When you buy a plan through Coverbrook, you are signing a legally binding contract regulated by the Department of Insurance in your state of residence. If your claim is covered by the policy, the company is legally obligated to pay. If they don’t, you have the full weight of the law and state regulators on your side.

Sharing is a Voluntary “Gift.” Most sharing ministries explicitly state in their fine print: “This is not insurance. There is no guarantee that your medical bills will be shared or paid.” You are essentially joining a non-profit club. If the community runs out of money or decides your specific surgery doesn’t align with their “values,” you have zero legal recourse.

3. The “Negotiation” Burden

When you have a private insurance plan, you are part of a PPO Network. The insurance company has already fought the battle for you, negotiating 40–60% discounts with doctors and hospitals before you ever see the bill.

With many sharing plans, you are a “Cash Payer.” You are responsible for receiving the bill, negotiating the price with the hospital billing department, and then begging the community to reimburse you. For a busy entrepreneur, the time and stress of being your own “claims adjuster” is a massive hidden cost.

How the Plans Compare

Private Insurance through Coverbrook is 100% tax-deductible for the self-employed, backed by a legally binding contract, regulated by state insurance departments for your protection, and compatible with Health Savings Accounts (HSAs) when paired with qualifying high-deductible plans.

Health Sharing Plans are generally not tax-deductible (the IRS usually views contributions as voluntary gifts), offer no legal guarantee of payment (voluntary community sharing only), operate outside state insurance laws with no regulatory oversight, and are not compatible with HSAs.

The Bottom Line

Health sharing plans can feel like a “friendly” alternative to big insurance, but for a serious business owner, they often fail the suitability test. They trade legal certainty and tax efficiency for a “promise” that might not hold up when you need it most.

At Coverbrook, we believe in the “Doctrine of Certainty.” We help you find private plans that provide real legal protection and maximize your tax savings.