Religious Exemptions from the Health Care Individual Mandate
The January 2014 Tax Practice Corner, "Calculating the Health Care Individual Mandate Penalty," (page 54) outlined how the penalty under Sec. 5000A, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, is calculated. The column also listed individuals to whom the mandate does not apply, including two groups that are the subject of this column: members of "health care sharing ministries" and certain religious groups. HEALTH CARE SHARING MINISTRIES A health care sharing ministry (Regs. Sec. 1.5000A-3(b)) is an organization * Described in Sec. 501(c)(3) and tax-exempt under Sec. 501(a); * Whose members share a common set of ethical or religious beliefs, according to which they share medical expenses among themselves; * Whose members retain membership even after they develop a medical condition; * That (or a predecessor of which) has been in continuous existence and operation since Dec. 31, 1999; and * That conducts an annual audit performed by an independent CPA firm in accordance with GAAP and makes the audit report available to the public upon request. At least three organizations state that they meet these requirements: Samaritan Ministries, Christian Care Ministry's Medi-Share program, and Christian Healthcare Ministries Inc. According to their websites, these ministries act as clearinghouses for members' medical bills. Each organization handles the transactions in its own way, but in essence, the ministry takes members' monthly "share payments" and directs them to other members' health care expenses. They require members to make certain representations regarding their Christian faith, health practices, and in some cases personal morals, such as agreeing to a statement of Christian faith; pledging to attend regular worship; and promising to abstain from extramarital sex, abstain from tobacco use and drug abuse, and abstain from or limit alcohol consumption. Health care sharing ministries take pains to clarify that they do not provide medical insurance, describing themselves as more akin to charities. Because they are not insurance companies, they do not guarantee that they will pay any medical bills. They have no actuarial calculations and no reserves and do not negotiate with medical providers. They are not subject to most state insurance regulations. In fact, according to the Alliance of Health Care Sharing Ministries (tinyurl.com/kace2bf), health care sharing ministries have been granted statutory safe harbors from state insurance codes in more than two dozen states. Insurance commissioners in a few states have sued to stop the organizations' activities, out of concern that they look and act like insurance without state regulatory safeguards. However, in at least two such states, Oklahoma and Washington, legislatures have responded by enacting a safe harbor. Members are usually treated as "self-pay" patients and, as such, are expected to negotiate lower rates directly with health care providers. Additionally, members are expected to budget for their own preventive care. Health care sharing ministries are not required to comply with the PPACA minimum standards for "core" medical services and do not cover costs that do not conform to ministry guidelines, such as abortion. …