While listening to the radio over the past couple of years, you may have heard an advertisement for “faith based health programs” but have you considered the implications of the consideration of purchasing these products?
Since 2010 and the passage of the Affordable Care Act (ACA), the volume of enrollments in these plans and the investments in marketing have increase. The reason for the increased participation is largely due to the exemption with the ACA from the individual mandate for those enrolled in these programs.
Most importantly!! For employers and individuals alike, a health care sharing ministry is not health insurance. Instead, they are faith-based organizations that provide “financial, emotional, and spiritual support” to members. Participating individuals pay a monthly membership fee, not premiums, if they meet the qualifications to join the ministry. In many cases, the monthly membership fee is lower than a health insurance plan.
Qualifications may require regular attendance at worship services, abstention from tobacco and alcohol and other unhealthy activities. In some cases, applicants must pledge to live a particular faith based lifestyle or get a recommendation from their clergy.
Since these plans are not insurance, states are generally unable to require the ministries to meet solvency requirements or establish required reserves for claims. Why is this important? The requirement for insurance companies (i.e. health plans) to have reserves for claims is the result of incidents where claims have eliminated the available funds to pay health care claims. The absence of this requirement increases the risk substantially that, when cash is limited, that claim payments will be delayed or not paid at all.
For employers, apart from the concerns regarding solvency and minimal state or federal oversight, there are tax implications to consider. A letter from the IRS unequivocally states that a health care sharing ministry is “not employer-provided coverage under an accident or health plan.” As a result, the cost of employee participation is “not excluded” from the employee’s gross income. The IRS letter can be reviewed here.
With regard to the Employer Mandate (i.e. Employer Shared Responsibility), they face additional hurdles if considering these plans. A health care sharing ministry plan, faith based program, is not considered minimum essential coverage (MEC). As such, employers will likely face ESR penalties if they cannot meet the required 95% offer of coverage requirement to avoid the “no offer” penalty of $2,320 per employee in 2018.
Finally, what do you think is likely to happen when you call a hospital or provider to inquire if they accept a faith based program as a method of payment? In review of one company that promotes faith based programs, “Ultimately our members are cash payers, so you can go to whatever provider you want and pay cash and be reimbursed so long as the expenses are eligible to be shared per the guidelines. You may want to go this route, or you may want to find another doctor.” In other words, you pay for your visit and “hope” the program reimburses your cash payment OR be forced to find another provider.
Bottom line, although these programs may result in a lower monthly costs; the absence of solvency requirements, tax penalties, employer mandate penalties, and access to providers / physicians should result in avoiding the consideration of these plans.