HospitalRe – Turning Tax Exempt Hospitals Into Insurers

Most self-funded health plans have traditional stop loss insurance to protect against unexpected and catastrophic claims. But many are not aware there is another risk transfer strategy – HospitalRe.

Most plan sponsors have no idea this risk transfer strategy exists. It’s memorialized the “We-Have-To-Pass-The-Bill-So-That-You-Can-Find-Out-What-Is-In-It” Affordable Care Act.

Not-for-profit hospitals don’t pay taxes representing millions and millions of dollars. In return these hospitals are required to have financial assistance policies in place for qualified members within the community. Not all financial assistance policies are the same. Some are more generous than others.

These financial assistance policies are called by different names. “Charity care” is one. It’s name by definition is “the voluntary giving of help, typically in the form of money, to those in need.” However that’s not the case in this instance. There is nothing “voluntary” about it when non-profit hospitals are required to provide financial aid under threat of punishment by loss of tax exempt status.

Hospitals like to use the term “charity care” because it makes them look like the good guys. So let’s play along with that shall we? Helping hospital achieve their charitable mission should be every plan sponsor’s responsibility because its an honorable thing to do. Now we both look good.

We prefer to call hospital financial assistance HospitalRe. It sounds better and it’s appropriate.

Here’s an example. Christus Spohn Hospital has a policy in place to provide care for patients in need of financial assistance. “Patients with family incomes at or below 300 percent of applicable federal poverty guidelines are eligible for charity care. In addition, patients with significant medical bills and income above 300 percent of applicable federal poverty guidelines may be eligible for charity care as well. To qualify for financial assistance applicants will need to apply for financial assistance and provide proof of income.”

Employees who fall below the family income levels shown below receive free hospital care. Those making more may qualify for financial assistance for their out-of-pocket expenses such as deductibles, coinsurance.


Family Size       

  1. $40,770
  2. $54,590
  3. $69,090
  4. $83,250
  5. $97,410
  6. $111,570
  7. $125,730


Employers may take advantage of this little known risk transfer strategy. But how do they do that? Risk management experts know how.