As healthcare costs rise, individuals and families are increasingly exploring alternatives to traditional insurance. Health shares offer a values-based, flexible, and more affordable way to manage medical expenses. These programs are NOT insurance—and that’s actually the point. They are built around the idea of community members helping one another with unexpected medical needs through voluntary cost sharing.  When you understand how health shares work and what to expect from the membership, they can offer a meaningful alternative to traditional benefits. As the recent settlement involving Sedera in California shows, it’s also important to understand the boundaries—especially since regulations can vary significantly from state to state.

Here are a few key things to know about how health shares are defined and treated across different states:

  • Safe Harbor provisions from the Affordable Care Act (ACA) define what qualifies as a health share.
  • Some states adopt these federal standards, while other states apply their own definitions or criteria for recognizing health shares.
  • Each state may handle regulations differently, so what’s permitted in one state may be restricted or treated differently in another.

Lessons from Sedera’s Settlement in California

Sedera is one of several well-known health share organizations offering an alternative to traditional insurance. However, in California, complaints about how Sedera marketed its programs led to a $1.3 million settlement. Although Sedera discloses that it is not health insurance, state regulators determined it did not meet California’s criteria to operate as a Health Care Sharing Ministry (HCSM) and was therefore operating without the appropriate recognition or exemption.

The state alleged that Sedera’s nonprofit entity, Sedera Medical Cost Sharing Community (SMC), falsely claimed nonprofit status while selling “unauthorized health plans” through Sedera, Inc., its for-profit administration arm. In addition to concerns about SMC’s nonprofit status, regulators also concluded that Sedera did not meet the legal requirements to qualify, specifically because its programs did not provide the “essential health benefits” required under California state law.

According to a statement from California Attorney General Rob Bonta:

“SMC, a corporation that falsely purported to be a non-profit, created, operated, and sold unauthorized health plans through its for-profit administrative vendor, Sedera.”

California’s Department of Insurance emphasized that simply calling something a health share does not exempt it from state insurance laws. Marketing language that resembles traditional coverage or implies guaranteed benefits may lead to enforcement—especially in states with stricter consumer protection laws.

Restrictions for HCSMs in California:

  • Founded after 1999 — does not meet California’s nonprofit exemption criteria.
  • Using insurance-like terms (such as “coverage” or “benefits”) — may trigger regulatory enforcement.
  • Selling through unlicensed agents or brokers — may violate state insurance regulations.
  • Lacking religious affiliation — may not meet exemption requirements under California’s specific regulations.

Know Your State’s Rules

Not all states view or regulate health shares the same way. Some have strict criteria for how these programs must operate and may restrict those that don’t meet established definitions. Others are more flexible, allowing health shares to operate as long as they clearly disclose that they are not insurance and participation is voluntary.

Find out how your state treats health shares and HCSMs:

  • Check for state notices or guidance in the organization’s guidelines.
  • Visit content.naic.org to locate your state’s Department of Insurance.
  • Call your state’s DOI or the health share directly to ask about state regulations.

Why Clarity and Communication Matter

Situations like Sedera’s highlight the importance of transparency and education—both from health share organizations and from consumers doing their research. One common source of confusion is language. Health shares often use terms that sound similar to insurance, but they function very differently—and the terminology reflects that.

Understanding correct terms, reading member guidelines, and asking questions are key to avoiding confusion. For example, using words like “claim” or “coverage” may unintentionally give the impression that health shares function like insurance, when they do not.

Clarity around how sharing works—and what is or isn’t included—helps set realistic expectations. When health shares communicate openly and members are well-informed, it leads to greater confidence in making an informed decision.

Insurance vs. Health Share Terms:

NOTE:

***Insurance companies are legally obligated to pay for covered services outlined in the plan, and they are regulated by state and federal laws who enforce those protections.

***Health shares are not insurance. Participation is voluntary, and while many health share communities are reliable, there is no legal obligation to share or pay for submitted medical needs.

Building Confidence in Your Health Share

When choosing a health share, look for organizations that are transparent about how their programs work. Reputable groups provide detailed member guidelines, use clear terminology, and have a support team ready to answer questions. Member reviews and organizational history can also offer helpful insight.

Some things to look for:

  • Clear definitions of “needs,” “pre-share,” and other terms, along with what is eligible for sharing
  • Values-based or faith-based structure
  • Transparent operations and responsive communication
  • State notices or regulatory acknowledgments
  • Positive community feedback

Empowering Your Health Decisions

The goal isn’t to discourage people from choosing a health share. In fact, when used correctly, they can be a powerful and affordable healthcare strategy—especially for the self-employed, growing families, or those priced out of traditional insurance.

The key is confidence through education. By asking questions, reading the fine print, and understanding how your state views these programs, you can make a decision that aligns with both your budget and your values.

*As of this writing, we were unable to find any public statements or official response from Sedera regarding the settlement.