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Health care sharing ministries as an alternative to exchange coverage
By Employee Benefits Practice Group on January 26, 2018 at 9:16 AM

Stethoscope, money and a calculator on a tableAs previously noted, the individual mandate under the Patient Protection and Affordable Care Act (also known as the ACA, or more informally as Obamacare) still applies in 2018. Finding affordable coverage to avoid the penalty is essential.

One option available to individuals and families is joining a “health care sharing ministry” (HCSM) under Section 5000A of the Tax Code. If an individual is covered by an HCSM in any given month in 2018, then the individual will not be subject to the tax penalty for that month.

According to the Alliance for Health Care Sharing Ministries, there are 104 HCSMs operating in the U.S., providing coverage to nearly 970,000 individuals.

Under federal law, an HCSM must meet six criteria:

  • It is a 501(c)(3) tax-exempt organization;
  • It has existed and operated continuously at all times since December 31, 1999;
  • It conducts an annual audit that is made available to the public upon request;
  • Members share common ethical or religious beliefs;
  • Members share medical expenses in accordance with their beliefs (and regardless of the state in which a member resides or is employed); and
  • Membership is not cancelled after developing a medical condition.

HCSMs do not offer traditional health insurance coverage. Rather, they offer a “bill-sharing” program, in which members pay each other’s medical bills. At least 30 states have passed laws exempting HCSMs from state insurance requirements. As a result, HCSMs are largely unregulated by the states or the federal government.

Membership in an HCSM is typically much less expensive than traditional health insurance on a state exchange or otherwise. But there are a lot of potential drawbacks. For example:

  • Benefits and coverage are not guaranteed, even if a member makes required contributions.
  • An HCSM could become insolvent and claims may not be paid as expected.
  • Participants have limited rights to appeal denials of coverage and/or bring lawsuits.
  • An HCSM may have a preferred provider network; so an individual’s current providers may not participate.
  • Unlike exchange plans, which must provide certain types of coverage under federal law, an HCSM typically has many exclusions from coverage. For example, they may not cover:
    • Preexisting conditions;
    • Routine or preventive care;
    • Anything related to an “unbiblical” lifestyle, such as sexually transmitted diseases, contraception, and substance use disorders;
    • Mental/behavioral health;
    • Durable medical equipment (DME); and
    • Many other categories of conditions and treatments.

If you are considering joining an HCSM, you should review the details of the program to determine whether the coverage it offers is right for you and your family.

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