If your employer doesn’t provide you with healthcare insurance, you face a choice – purchase healthcare insurance on the ObamaCare exchange or pay a penalty to the IRS. For many people the cost of the insurance isn’t worth it and they choose to pay the fine instead. The fine (really a tax according to The Supreme Court) was only $95 or 1.0% of income (maximum $285) in 2014, but in 2016 it will be $695 or 2.5% of income (maximum $2,085).
But for an increasing number of Americans there is a third choice – healthcare sharing ministries. These faith-based healthcare ministries have been around since at least 1994, but they have grown rapidly since the passage of ObamaCare. According to Stephanie Armour, writing in The Wall Street Journal, when the law was passed in 2010 there were about 200,000 Americans enrolled in these plans but in 2015 their numbers have grown to over 500,000.
Reasons for Growth
In the original drafting of the Affordable Care Act a provision was carved out for these ministries giving them an exemption to the Individual Mandate. Those who enroll are exempt from the IRS tax imposed on those who fail to purchase healthcare insurance. This exemption was granted on the basis of religious freedom and the architects of the law considered them an insignificant portion of the population.
But now their growing numbers have raised concerns with officials of the Obama administration and with state insurance commissioners. In fact, these healthcare sharing ministries are not insurance plans at all. Therefore they are not regulated by state insurance commissioners, giving them an independence that infuriates regulators.
The popularity of these plans is due to their lower costs and eligibility to avoid the Individual Mandate tax. Enrollment is restricted by membership rules that usually require statements of faith and agreement to abide by Biblical principles of living including abstaining from sex outside marriage and use of illegal drugs. Such principles lower healthcare treatments and keep expenses more manageable.
To be eligible for exemption from the tax penalties of ObamaCare, a healthcare sharing ministry must:
- Be a 501 (c)(3) organization (non-profit)
- Members must share common ethical or religious beliefs
- Must not discriminate membership based on state of residence or employment
- Members cannot lose membership due to development of a medical condition
- Must have existed and practiced continually since December 31, 1999
- Must be subject to an annual audit by an independent CPA which must be publicly available upon request
Four healthcare sharing ministries meet these qualifications:
- Christian Healthcare Ministries
- Liberty HealthShare
- Samaritan Ministries
Two other healthcare sharing ministries exist:
- Medical Cost Sharing (MCS) – does not qualify for the exemption but promises to pay the tax penalties for its members
- Altrua HealthShare – though founded in 2000, after the 1999 deadline, it has been approved for an exemption to the tax penalty.
How They Work
Members usually pay a set monthly amount that funds a general account used to pay the medical bills of other members. They can also submit their own eligible bills to be shared by members. Sometimes members pay bills directly to other members, and send personal notes of encouragement to those who are ill. It is not true insurance but rather cost-sharing among members.
An increasing number of doctors are willing to accept these patients on a discounted basis. Payments are sometimes delayed until the ministry is able to raise the funds necessary to pay the medical bills from other members. Ministries generally prohibit their members from filing lawsuits and require them to sign arbitration and mediation agreements.
Insurance Industry Reaction
It’s no surprise that insurance industry representatives and state insurance commissioners consider these healthcare sharing ministries a problem. They compete with them for healthy, profitable patients and don’t conform to the myriad of insurance regulations government officials require. “They (ministries) have the potential to destabilize the market by drawing off the good risk,” said Mike Kreidler, Washington’s state insurance commissioner.
He’s right, of course. But ObamaCare is doing the same thing by making the young and healthy paying exorbitant insurance premiums for healthcare coverage they don’t need. The solution is not limiting consumer choices – it’s offering them better value for their healthcare insurance dollars.