This month, an open comment period to a proposed IRS rule has revealed how misinformed many are about health care sharing ministries. These unexplored comments seek to deny Christians and other religious Americans the ability to choose health care that matches their beliefs and their budgets.
Freedom to choose alternatives in health care is threatening only if your business model is built on monopolistic control over the marketplace. The 1.5 million Americans who have chosen an innovative, community-focused option for their healthcare should be admired, not feared. Disrupting the status quo creates opportunities and choices for Americans to manage their health care costs.
The Alliance of Health Care Sharing Ministries (Alliance) has submitted a letter with recommendations to the IRS’s proposed rule on Certain Medical Care Arrangements (RIN 1545-BP31) Department of the Treasury, Internal Revenue Service 26 CFR Part 1 [REG-109755-19]. The Alliance commends the IRS for moving to better equalize the tax treatment for health care expenses borne by religious Americans who choose Health Care Sharing Ministries (HCSMs) with the tax breaks received by people with health insurance. The Alliance strongly disagrees, however, with the IRS categorization of HCSM membership as “insurance” for the purposes of this tax deductibility and provides an alternative statutory basis and regulatory approach to achieving the same goal. Finally, the Alliance supports the IRS proposal to extend these tax benefits only to members of HCSMs as defined in the Affordable Care Act.
In response to the proposed rule, many critics have voiced concern with certain elements of the rule. The Alliance would like to take this opportunity to respond to concerns that we’ve heard.
The proposed rule will drive up costs for those in the individual market, by luring healthy individuals away from the ACA exchanges, leaving the ACA pool less healthy, and more expensive.
The reality is that many religious Americans never would have chosen insurance in the individual marketplace in the first place, because of conscience objections arising from their religious exercise or expression. But worse, instability, unaffordable deductibles/copays and premium hikes in the insurance market drove many middle class Americans to seek more affordable, off-exchange insurance plans, or priced them out of insurance altogether. The individual mandate was designed to keep all of these Americans in the insurance market, even if insurance didn’t comport with their beliefs, if they couldn’t afford it, or both. Critics argue that exempting HCSM members from this mandate destabilized enrollment and drove premiums up for those remaining on the ACA exchanges. But this argument that exemptions from the mandate harm the exchange stability is more easily tested now that the whole country is exempt from the individual mandate penalty. If this argument were correct, then exchange enrollment, after the individual mandate was zeroed out by Congress in 2017 for all Americans, should have plummeted and premiums should have increased.
The opposite is what actually happened. Effectuated enrollment today in the ACA marketplace is the same as it was the last year the mandate penalty was in place. And premiums? After more than doubling during the first five years of the ACA exchanges, premiums actually dropped for the first time in 2019, the first year without the individual mandate penalty, and continued dropping in 2020.
The truth is – for most of ACA history, marketplace enrollment had been unstable and premiums had been skyrocketing. It’s only recently that these metrics have begun to stabilize. Blaming religious Americans who objected to or couldn’t afford to purchase insurance at the hyperinflated prices on the exchanges for the challenges that have nothing to do with them is misguided at best and mean-spirited at worst.
The proposed rule will increase consumer confusion and fraud in the healthcare marketplace.
The Alliance condemns any and all fraudulent or misleading tactics in the marketplace, including any carried out by for-profit entities masquerading as HCSMs. Legitimate HCSMs are upfront with consumers and transparently describe to consumers how they are not insurance to prevent confusion. That is why the Alliance of Health Care Sharing Ministries opposed the IRS’ proposed classification of Health Care Sharing Ministries as insurance for tax deductibility purposes. When critics express concerns about fraudulent activity, they almost always cite complaints and cases related to Aliera Companies. But Aliera is not an HCSM under the ACA. Aliera Companies, a for-profit company, has recently come under investigation from a number of state regulators and class action suits, in part due to alleged marketing practices relating to products offered by a “nonprofit” organization which appears to have been started by Aliera.
The good news, however, is that the IRS proposal wisely extends tax deductibility only to members of HCSMs as they are defined in the ACA. The nine HCSMs with large, open, nationwide memberships are independent 501(c)(3) nonprofits that have been certified as meeting the ACA-defined standards by the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services.
HCSM are merely insurance dressed up in the language of religion, mimicking traditional insurance plans, for example, using the ACA’s “bronze, silver, and gold” terminology for their ministry programs.
Health Care Sharing Ministries facilitate a community-based health care solution, fundamentally different from the top-down, bureaucratic, and opaque insurance paradigm. A Health Care Sharing Ministry is not an insurance company, which is why the Alliance of Health Care Sharing Ministries opposes the IRS’ proposed classification of Health Care Sharing Ministries as insurance for tax deductibility purposes. To our knowledge, the only HCSM that uses “gold, silver and bronze” categories for their ministry programs did so long before the ACA was enacted.
Health Care Sharing Ministries depart from the insurance model in significant ways:
- Unlike insurance, HCSMs help members mitigate each others’ medical expenses – not through an enforceable contract between the members and the ministry – but rather through the voluntary sharing of expenses. The ministries facilitate this sharing of bills by other members, but do not financially participate in the sharing. There are no contractually required payments by the HCSM.
- Unlike most of the biggest insurance companies, HCSMs are 501(c)(3) nonprofit organizations who do not acquire profit and do not have a fiduciary duty to shareholders.
- Health Care Sharing Ministry members do not pay “premiums” or submit “claims” – instead they pay a monthly “share” amount as part of their mutual agreement to share each other’s medical expenses, and when a member is in need, ministries help facilitate the transfer of funds from one or more members to the member in need or that member’s health care provider.
- Insurance companies pay claims from their own funds, held in reserve. With HCSMs, the money to assist with medical needs of a participant comes from contributions from other participants, not from the ministry’s funds.
- Unlike insurance policyholders or participants in the typical employer-provided group insurance plan, members of an HCSM are bound by common religious beliefs. This moral, but not legal, obligation is the glue that holds HCSM communities together.
- The sharing guidelines that govern the eligibility of expenses that may be shared are developed by HCSMs with member participation – in some cases, members directly vote on the guidelines and proposed changes to them. In some ministries, this participation includes members voting on the amount of the monthly contribution amount. This is in stark contrast to insurance policies where enrollees have no voice.
- Unlike an insurance policy, the sharing guidelines are deeply shaped by the shared religious beliefs of the members. They reflect the members’ mutual commitment to God and to their fellow members to remain accountable for living out their shared beliefs, both with respect to how they treat their bodies and avoid unhealthy behaviors, and also what sorts of procedures are eligible for sharing or not.
- Unlike an insurance company, HCSMs’ practices and services reflect the Judeo-Christian tradition that people are created in God’s image as body and soul. As such, HCSMs offer ample opportunities for members to pray for other members, to pray with ministry staff, particularly when facing a serious health challenge, and to receive pastoral or faith-based mental health counseling.
- Unlike insurance companies, which strictly limit benefits to people who are enrolled in their plans, some HCSMs, because they recognize that all people need the grace and mercy of God and His Church, have newsletters and other mechanisms to request prayer and additional financial support for extraordinary needs of members and non-members with needs outside the sharing guidelines.
These dramatic differences between insurance and HCSMs are precisely why the Congressional authors of the ACA – such as President Barack Obama, then-Chairman Max Baucus, and the late Senator Ted Kennedy – recognized HCSMs as a legitimate alternative solution to health care expenses worthy of exemption from the requirements of insurance.
The growth of HCSMs will accelerate medical debt and poor health outcomes.
Medical debt and predatory collections are widespread problems due to corrupt billing practices by profiteering and private equity-owned providers, as well as predatory collections practices by mostly tax-exempt, so-called “charity” hospitals. The vast majority of Americans have health insurance and still, unaffordability and medical debt is a huge problem.
Most people with high deductible plans have less in savings than their deductible. A third of Americans with private insurance received a surprise bill during the past few years. One in five Americans has been in medical collections, and half of all collections are medical collections. Clearly, insurance itself is hardly a silver bullet. The voracious tapeworm of secret prices, price gouging, undisclosed conflicts of interest in the health care supply chain and perverse incentives throughout the system is stealing the American Dream from the middle class. That a tiny sliver of the population has voluntarily opted out of the broken status quo for a values-based, member-to-member alternative is neither the cause of our crisis nor worthy of such open contempt.
The proposed IRS rule is arbitrary and capricious.
Some critics, in their hostility to providing tax deductibility for religious Americans, have gone so far as to accuse the IRS of being arbitrary and capricious for not considering their criticisms in the proposed regulation. Irony alert: they made this complaint in their comment letter to the IRS, invited by the IRS, for consideration as the agency weighs how and whether to finalize its proposal.