Health Care Sharing Ministries Plans – Pitfalls Individuals Should Consider

Christian Health Sharing Ministries

Under the Affordable Care Act (ACA), members belonging to a certain number of organizations known as Health Care Sharing Ministries – sometimes called Christian Health Plans or Christian Ministries Plan – were granted an exemption from the personal tax penalty (up to 2.5% of one’s household income in 2016 and beyond) for not having a qualified plan under the Act. The basic concept behind these plans is to have those who meet certain membership qualifications (attend church regularly, do not smoke or drink, declare their belief in the Trinity, etc.), co-op and share in the costs of the other participants medical expenses. Sometimes this is accomplished by a level monthly contribution to the sponsoring organization, other times participants are asked to write a check directly to another member to cover their medical expenses.

This paper primarily focuses on the dangers and potential pitfalls an individual should consider before using a Christian Ministries Plan as a replacement for their health insurance plan.

The legal term in Latin, caveat emptor, or Let the buyer beware, applies here. In order to qualify for membership you must be screened for medical conditions and can be rejected if you are in poor health. Often times pre-existing conditions are not covered until a person has been on the plan for twelve months. In a number of plans, prescription drugs are not a covered expense. Thus individuals may be inadvertently subjecting themselves to potentially staggering out-of-pocket expenses and assuming personal financial risk when using these programs.

It is a well-known insurance underwriting fact that when a program does not cover pre-existing conditions, the plan will run very profitably as long as there is a constant flow of new members whose claims can be denied because of conditions that existed before joining the plan. Profitability also occurs through the use of medical questions where only the healthiest people are accepted into the plan. If new membership declines and the “pool of members” becomes stagnant, claims and costs can begin to soar as these two “underwriting effects” wear off. As costs rise, the healthiest participants, being rational consumers, have every incentive to drop the coverage altogether or find other less expensive alternatives. Decades of experience have proven that a pattern of healthy people abandoning a plan, leaving those with medical conditions to face rapidly increasing contributions, creates an almost irreparable death spiral. At that conjuncture, new, healthy participants who have no coverage for pre-existing conditions must be added at an aggressive rate in order to stave off an unavoidable plan insolvency. This can be problematic as many would contend that there are a finite number of people either eligible or interested in a Christian Health Plan, including healthy participants who are: willing to subject themselves to pre-existing conditions; are willing to attest or adhere to the required Christian values; are aware these plans even exist; or, do not consider it a viable option because they are receiving a subsidy under their employers plan or the Affordable Care Act. Thus it is plausible that it only is a matter of time before the pool of applicants is exhausted and a death spiral occurs.

While Martin Luther posted 95 ninety theses, here is a list of seven reasons why our agency and its licensed and credentialed professionals cannot recommend this product to individuals in any manner:

• Because the Health Care Sharing Ministries offering is not a fully insured product, there is no protection or oversite from the states’ Insurance Departments. Complaints to the Insurance Department in your state will not be addressed because they have absolutely no jurisdiction over these organizations;
• Because this is not an insured product, it is not covered under any state-guaranteed funds, which promise to pay policyholders in the case of bankruptcy or insolvency of an insurance company. In Utah, this is the Utah Life and Health Insurance Guaranty Association;
• The normal fallback federal regulatory agency for health insurance complaints is the Department of Labor. They regularly deal with complaints on self-funded plans. They have no oversight or regulatory authority over Heath Care Sharing Ministries offerings. Complaints lodged here will go unheard and unresolved;
• Individuals who replace their personal or group health plan with a Health Care Sharing Ministries offering may be at risk for a number of uninsured expenses (pregnancy, pre-existing conditions, prescription drugs, etc.);
• Because the Health Care Sharing Ministries offerings is not insurance, they are not covered by an agent’s Errors and Omissions policy for lack of performance, leaving the consumer and an agency exposed to undue liability exposure;
• A recent IRS ruling regarding Health Care Shere Ministries plans (https://www.irs.gov/pub/irs-wd/16-0051.pdf) regarding employer contributions to these plans, states: “the law does not exclude employer payment for the cost of employee participation from the employee’s gross income. Instead, the law considers it as taxable income and wages to the employee.” This clarification reminds individuals that this is not a tax deductible expense on a person’s tax return and if an employer offers to reimburse part of the cost, an employee must pay Federal, State, Local and Social Security taxes. This could be a 30%–50+% cost differential to the Christian Ministry Plan over an employer-sponsored medical plan. Additionally, many Christians tithe at 10% of their wages, this additional income could take a bigger bite out of the employee’s purchasing power;
• Because these plans reimburse claims at Medicaid, plus a certain percentage, more and more hosptials and physicians are refusing to accept these reimbursements as “payment in full.” Before being admitted to most any facility, a patient typically signs a mountain of paperwork including an agreement to be personally liable for any expenses not covered by their insurance. The Christian Ministry Plan is not health insurance and there is no provider network with pre-negotiated discounts. We are seeing a greater number of medical providers collecting the difference.

The bottom line is that these programs are not insurance and rely totally on the trust and goodwill of the other members in the co-op. Should there be an economic downturn or any number of other reasons where a substantial number of members leave the plan, there is tremendous potential that claims may be unpaid as promised. Furthermore, without any regulatory oversite for these offerings, no liability protection for an agent or agency, we cannot in good conscience recommend or place these offerings for our valued clients or prospects.

©Copyright 2016 by Scott E. Deru and Fringe Benefit Analysts, LLC. Reproduction permitted with attribution to the author.