Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to AskBud@zenefits.com.
I have a question that relates to a possible unique niche as an employer. We are a religious non-profit, and we’re interested in providing a different type of coverage for medical costs that’s not insurance, but rather cost sharing through Health Care Sharing Ministries. There are a number of organizations that provide this type of service. How would this work with our obligation as an employer under Obamacare?
Religion & Insurance Coexisting Kindly?
Health Care Sharing Ministries (HCSMs) are one of a few exemptions that people can claim from the individual shared responsibility provision of the Affordable Care Act (Obamacare). HCSMs have existed as non-profit alternatives to private health insurance carriers for many years, but it’s important to note that they’re neither health insurance nor minimal essential coverage. Rather, in the age of the ACA, HCSMs provide individuals with a faith-based exemption from the requirement to maintain coverage for themselves and their tax dependents (and the related penalty). Proponents say that HCSMs honor shared religious beliefs while keeping healthcare costs low through shared expenses. Critics argue that HCSMs go against the principles of healthcare reform, leaving members exposed to risk and illness. Let’s take a closer look.
HCSMs follow a biblical mandate vs. the employer mandate. According to the Alliance of Health Care Sharing Ministries, HCSMs “operate as a clearinghouse for those who have medical expenses and those who desire to share the burden of those medical expenses.” Typically, members pay for small medical expenses out-of-pocket, while paying monthly dues into a shared group account. When members have eligible expenses beyond their means, the Health Care Sharing Ministry steps in to allocate the shared resources and call for voluntary contributions. The HCSM can also reject claims, which can then usually be appealed to a jury of peers.
HCSMs have strict faith-based rules by which all members must abide. These include policies limiting the use of tobacco and alcohol, requiring church attendance and prayer, and banning pre-marital sex and contraception. Faith-based objections to government mandates are nothing new. Last year, the Supreme Court voted 5-4 that arts and crafts store Hobby Lobby did not have to comply with the employer mandate to cover contraception. Even further back, in 1965, Congress passed a law allowing the Amish to opt out of government benefits.The exemption is based on the idea that as a religious faith, the church community should take care of its own members. Health Care Sharing Ministries follow the same principle, without requiring their members to sue or give up electricity.
There are a handful of things an individual should carefully consider before joining an HCSM. Health Care Sharing Ministries are not required to offer the same rights, benefits, and protections provided by the ACA. Preventive care is often not covered, and individuals can be denied membership for pre-existing conditions. HCSMs also may not cover medically necessary procedures that they find morally objectionable. And unlike ACA-compliant plans, HCSMs can put lifetime caps on coverage.
Some 400,000 people nationwide belong to Health Care Sharing Ministries as an alternative to traditional health insurance or a supplement to Medicare. Comparatively, 9.6 million people are enrolled in employer-sponsored coverage. As an employer, it’s your responsibility to ensure your HCSM meets the necessary criteria to be exempt from the tax penalties outlined in the Affordable Care Act. There are currently four ministries that satisfy the requirements. If your employees join one of these groups, they will be exempt from their obligations under Obamacare and, as a result, may not apply for and receive the premium tax credit to purchase Marketplace coverage.
While your company will still be subject to the employer mandate (assuming you have 50 or more full-time employees, taking into account full-time equivalents), you may not have to pay any penalty–as long as your full-time employees don’t obtain subsidized Marketplace coverage. You’ll report on Form 1095-C that you didn’t offer coverage to your full-time employees, and the IRS will look at Forms 1094/1095-A from the Marketplaces and note that none of your employees got the subsidy. As a result, you should not be assessed a penalty.
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