Health Care Sharing Ministries: Not As Comprehensive As Insurance

More people making the leap of faith to health care sharing ministries

Health care sharing ministries have grown substantially in membership, but there are caveats to understand
Health care sharing ministries offer Christians an alternative to ACA-compliant health insurance. But there are drawbacks too. Paul Burns/Creative RF/Getty Images

The Affordable Care Act has required most Americans to maintain continuous health insurance coverage since January 2014. This is known as the shared responsibility provision or individual mandate, and it's enforced with a tax penalty that's expected to average almost $1,000 per uninsured household for 2016 (penalties for being uninsured in 2016 will be assessed in early 2017 when 2016 tax returns are filed).

But there's a long list of exemptions from the ACA's individual mandate. One of them is available to people who are members of a health care sharing ministry (HCSM) that has been in existence and continuously sharing members' health care costs since at least December 31, 1999. 

The ACA's requirements for HCSMs are outlined on page 148 of the text of the law (Section 1501). The HSCM must continue to include members after they become ill, and must have an annual audit performed by an independent accounting firm. And the members of the HCSM must "share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs." 

As of 2014, there were 53 HCSMs that had been certified by the federal government, and their members are exempt from the ACA's shared responsibility provision. Many of the certified HCSMs are run by small Amish and Mennonite churches, and have fewer than 100 members (note that the ACA's religious exemption from the individual mandate - which is different from the HCSM exemption - also applies to Amish and Old Order Mennonite congregants).

But there are several large HCSMs, and total membership has grown from about 110,000 people in 2010 to about 530,000 people in early 2016. Several factors account for the growth, including some Christians' desire to avoid health plans that cover services like contraception and abortion, and opt instead for plans that share health care costs with fellow Christians in a more Biblical manner.

In addition, HCSM memberships are often less expensive than health insurance premiums, although that varies considerably depending on whether or not the household qualifies for premium subsidies in the health insurance exchanges. 

If you're considering dropping your health insurance in favor of HCSM membership, here's what you need to know:

  • HCSMs are not health insurance, and they don't come with the guarantees, mandates, and consumer protections that are standard on health insurance plans. According to the Alliance of Health Care Sharing Ministries, 30 states have "explicitly recognized the ministerial nature of health care sharing in their state statutes and clarified that state insurance codes are not applicable to the ministries or their participants." In other words, the insurance laws and regulation in those states do not apply to HCSMs, and the state insurance department will not be able to intervene on a member's behalf if problems arise.
  • However, HCSMs are 501(c)(3) charities, so they are regulated by the Internal Revenue Service and state attorneys general. 
  • HCSMs do not have to follow ACA regulations. This means they don't have to cover the essential health benefits, they can (and do) still exclude pre-existing conditions, and they can (and do) impose annual and lifetime benefit caps
  • There are concerns that HCSMs could undermine the stability of regular health insurance risk pools. That's because HCSMs tend to attract healthy enrollees since they don't cover pre-existing conditions. They also require members to shun things like sex outside of marriage, tobacco use, illegal drugs, and alcohol abuse, which further helps to improve the overall health of their membership. But by default, that results in a less-healthy overall risk pool for health insurance plans, and ultimately, higher premiums.
  • HCSMs can refuse to share claims that result from prohibited behavior. So an unmarried pregnant woman would be ineligible for maternity benefits, and things like treatment for alcohol or drug abuse wouldn't be shared with other members.
  • If you end up needing healthcare that's not covered by your HCSM, or if your bills exceed the sharing caps imposed by your HCSM, you'll have to wait until the next open enrollment period to sign up for an ACA-compliant health plan, unless you have a qualifying event.
  • HCSMs can have PPO networks (members would be responsible for additional charges if they go outside the network), or can share members' costs regardless of what doctors and hospitals are used - it depends on the HCSM.
  • If you're an HCSM member, you don't have to pay the ACA's penalty for being uninsured, and you'll use Form 8965 to indicate this when you file your tax return. The form has two parts - the top part is where you put exemptions that are granted by the exchange in your state, and the bottom part is where you put exemptions that you get from the IRS when you file your return. The exemption for HCSM members is available both ways:
  1. To get an exemption from the exchange, contact the exchange in your state (if you're in one of the 38 states using Healthcare.gov, this is the exemption request form you'll use). You'll use the exemption certificate number you get from the exchange to fill in the top part of Form 8965.
  2. To claim the exemption when you file your tax return, you'll use the bottom part of Form 8965, and enter code "D" in the "exemption type" column. If you're not sure whether your membership counts as one that will exempt you from the ACA's individual mandate penalty, contact your HCSM for more details (if for example, your HCSM hasn't been operational since at least December 31, 1999, you'd still be responsible for paying the individual mandate penalty if you don't have any other form of minimum essential coverage). 

Disclaimer: This article is for general informational purposes, and is not intended to provide tax advice. Consult with a tax advisor before claiming the HCSM exemption to the individual mandate penalty.

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