This week, Medicare Rights submitted comments in response to a proposed rule from the Internal Revenue Service (IRS) that would set a dangerous precedent by treating health care sharing ministries (HCSMs) as medical insurance for tax purposes.
HCSMs allow people who share religious beliefs to pool funds to pay for the medical expenses of members, but they are largely unregulated and of limited benefit to participants. HCSM members make monthly payments in the hopes that, if that member incurs medical bills, the HCSM will choose to pay. Unlike insurance, HCSMs are not required to pay anything and members generally have no legal recourse when claims are denied. HCSMs are also not required to have sufficient funds to pay claims and do not have to follow general insurance laws. They can deny coverage for pre-existing conditions, set limits on the amount of covered costs, and have complete free rein when it comes to determining what they will pay out, if anything.
Because HCSMs do not guarantee any payment, they can charge less than true medical insurance and lure unsuspecting people away from genuine insurance products. But the monthly costs are still high—easily thousands of dollars per year—for many families.
Worse, HCSMs are rife with fraud and abuse. Many states have had to take legal action based on misleading marketing and deceptive business practices where HCSMs illegally advertised their plans as health insurance.
Current tax law allows taxpayers to deduct certain medical expenses from their incomes. This includes amounts paid for medical insurance. Traditionally, the IRS has not included payments to HCSMs, because they are not insurance. In this new rule, the IRS proposes to change this by making expenditures for HCSM memberships deductible medical expenses, thus making HCSMs more attractive by both subsidizing their cost with taxpayer dollars and lending them the reputational benefits of being “approved” by the federal government. By claiming HCSM payments “are payments for medical insurance,” the IRS risks taxpayers being even more confused about the differences between HCSMs and legitimate insurance. This will likely lead to even greater confusion, more financial devastation, more opportunities for fraudulent practices, and worse health outcomes for those who thought they were buying health insurance but were not actually gaining any guaranteed coverage.
Because HCSMs do not provide actual medical insurance, we strongly disagree with any proposal that would treat them as insurance in any way. Health insurance coverage is meant to protect people from economic harm and allow them to seek appropriate medical care. Fake health insurance—which collects real money in exchange for the unenforceable promise to maybe pay for needed care—does neither of these things and must not be promoted nor subsidized.
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