SACRAMENTO, August 11, 2020 – California Attorney General Xavier Becerra, leading a coalition of 20 attorneys general, submitted a comment letter opposing the Department of the Treasury and Internal Revenue Service’s (IRS) proposed rule which seeks to treat payments made to healthcare sharing ministries (HSMs) as deductible medical expenses under Section 213(d) of the Internal Revenue Code —expanding non-ACA compliant coverage in the market. The letter urges the agencies to withdraw the proposed rule, arguing that allowing tax deductions for payments made to Healthcare Sharing Ministries (HSMs) undermines the ACA and leaves consumers with junk coverage. 

“We are in the middle of a global health crisis in which millions of Americans have lost their jobs and their health insurance,” said Attorney General Becerra. “So what does the Trump Administration propose? A rule that would treat junk insurance plans as the real deal. Healthcare sharing ministries are not full coverage health insurance, should not be treated as such, and will only cause confusion and harm as families desperately seek to get covered. We urge the Department of the Treasury and the IRS to withdraw this proposed rule immediately before it leaves even more Americans without robust health coverage.”

Prior to the passage of the ACA, HSMs allowed people to pool their money with others who shared their religious beliefs in order to assist each other in times of medical crisis. When the ACA was passed, millions of uninsured Americans became insured and gained access to quality, affordable health insurance. However, many companies began to capitalize on the exemption of HSMs from many of the coverage mandates in the ACA by marketing them as a less expensive alternative to ACA-compliant health insurance. Unlike ACA-compliant health insurance, HSMs do not guarantee payment for covered services and fail to cover essential health benefits, like birth control, prescriptions, preexisting conditions, and mental health care.

In their letter, the attorneys general argue the proposed rule will:

  • Further increase consumer confusion and fraud in the healthcare marketplace: HSMs are not mandated by the ACA to provide the ten essential health benefits required of health plans sold in the individual market, including coverage for preventive care, services for mental health and substance use disorders, and reproductive care. The letter explains that many HSMs have chosen to capitalize on this by mirroring the structure of ACA-compliant insurance plans in order to market themselves as a less expensive healthcare option, while not actually providing full coverage insurance to their members. By treating expenses for HSMs as deductible medical expenses, HSMs will further resemble traditional health insurance companies while continuing to dodge the requirement to provide their consumers with essential health benefits; and
  • Worsen market segmentation: If companies are able to use the proposed rule to boost confusing marketing tactics that paint HSMs as a quality health insurance option, market segmentation will occur as younger, healthier people choose them over ACA-compliant coverage. The letter argues that this will increase the cost of premiums for older and less healthy Americans who must remain in ACA-compliant health plans in order to receive full health coverage.

The letter also argues that the proposed rule is in excess of authority and is an example of capricious rulemaking as it does not take into account the consumer confusion, fraud, and risk of market segmentation the rule could cause.

In sending the letter, Attorney General Becerra was joined by the attorneys general of Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Virginia.

A copy of the letter can be found here.