Health care sharing ministries: scam or solution?

• Author: Boyd, Benjamin
• Position: I. Introduction to Health Care Sharing Ministries through VI. How Should Courts and State Regulators Treat HCSMS? B. Recognize the Logical Difficulties of Equating HCSMs with Insurance, p. 219-254

1. INTRODUCTION TO HEALTH CARE SHARING MINISTRIES II. INTRODUCTION TO THE REGULATORY LANDSCAPE III. WHAT ARE HEALTH CARE SHARING MINISTRIES A. Christian Care Ministries--Medi-Share B. The Christian Brotherhood Newsletter Christian--Healthcare Ministry IV. WHAT LAW APPLIES TO HCSMS? V. HOW HAVE COURTS TREATED HEALTH CARE SHARING MINISTRIES? A. Commonwealth v. Reinhold: Medi-Share is Insurance B. Commonwealth v. Reinhold: Medi-Share Does Not Qualify for the Religious Publication Exemption 1. The Reinhold Dissent: Medi-Share is Not Insurance 2. The Reinhold Dissent: If Medi-Share is insurance, it should Fall under the Religious Publication Exemption C. Barberton Rescue Mission, Inc. v. Insurance Division of Iowa: the Christian Brotherhood Newsletter is Not Insurance VI. HOW SHOULD COURTS AND STATE REGULATORS TREAT HCSMS? A. Recognize the Legal Difficulties Of Equating HCSMs with Insurance B. Recognize the Logical Difficulties Of Equating HCSMs with Insurance C. What to Do With the Dearth of Case Law on HCSMs 1. Some Guidance from U.S. Supreme Court Precedent 2. Courts Should Apply the "Safe Harbor" HCSM Statutes 3. Should Courts Review other Analogous Case Law? VII. SOME FINAL CONSIDERATIONS FOR COURTS AND STATE INSURANCE REGULATORS A. The Freedom to Contract/Public Policy B. The Freedom of Religion C. The Separation of Powers D. Implications of HCSMs' Status as Charitable Organizations E. Federal Preemption Under PPACA VIII. CONCLUSION: THE REINHOLD EPILOGUE IX. CONCLUSION: OBSERVATIONS AND ANALYSIS APPENDIX A: STATE AND FEDERAL CASE LAW LISTING THE ASSUMPTION OF THE RISK AS AN ELEMENT OF INSURANCE APPENDIX B: STATES WITH "SAFE HARBOR" STATUTES FOE HCSMS I. INTRODUCTION TO HEALTH CARE SHARING MINISTRIES

   Individuals and families face difficult choices about health care as the costs of medical care and health insurance continues to rise, and as the Patient Protection and Affordable Care Act's "Individual Mandate" approaches. Well over 160,000 Americans have found a solution for the high costs of medical care and health insurance through the services of Health Care Sharing Ministries (HCSMs). (1) Members of HCSMs also have the benefit of a religious exemption from the "Individual Mandate" in the Patient Protection and Affordable Care Act (PPACA). (2) In brief, these ministries provide "a health care cost sharing arrangement among persons of similar and sincerely held beliefs." (3) HCSMs are not-for-profit religious organizations that act as clearinghouses for "those who have medical expenses and those who desire to share the burden of those medical expenses." (4) The Alliance of Health Care Sharing Ministries, which represents two of the three major HCSMs, provides this further information: (5)

   * HCSMs receive no funding or grants from government sources.

   * HCSMs are not insurance companies. HCSMs do not assume any risk or guarantee the payment of any medical bill. Twenty-one states as of August 2012 have explicitly recognized this and specifically shelter HCSMs from their insurance codes. (6)

   * HCSMs serve more than 160,000 people, with participating households in all fifty states. (7)

   * HCSMs' participants share more than $120 million per year for one another's health care costs.

   * HCSMs strive to be accessible to participants regardless of their income.

   * Traditionally, HCSM costs are a fraction of the cost of insurance rates. (8)

   Health Care Sharing Ministries have operated in the United States for about thirty years. (9) HCSMs are "founded on the biblical mandate of believers to share each other's needs." (10) HCSM members "seek to apply Galatians 6:2, 'Bear one another's burdens, and thus fulfill the law of Christ' to ... ever-rising medical costs which can be quite burdensome for anyone ..." (11) HCSMs enshrine "a principle that has been around since the birth and growth of the early Church. The Book of Acts reports, 'All the believers were together and had everything in common. Selling their possessions and goods, they gave to anyone as he had need.'" (12) Christian members of HCSMs "are making a decision to be there for their neighbor in need and bring glory to God in the process of sharing." (13)

   This Article begins with a survey of the general regulatory landscape for HCSMs. Following that, four key questions about HCSMs structure the rest of this Article. The first question asks, what are HCSMs? To answer that question, this Article examines the basic aspects of the Medi-Share program and the Christian Brotherhood Newsletter. Second, this Article asks, what law applies to HCSMs? In reply, this Article briefly surveys the key elements of insurance law and the law governing HCSMs. Third, this Article asks, how have courts treated HCSMs? To answer, this Article surveys two key state court decisions involving HCSMs. Fourth, this Article asks, how should courts treat HCSMs? To answer the last question, the Article examines U.S. Supreme Court precedent, the legal and logical problems courts and insurance regulators face by forcing HCSMs into insurance law, and lastly examines some important considerations lingering on the sidelines--the freedom of contract, the freedom of religion, the separation of powers, the implications of HCSMs' status as charitable religious organizations, and federal preemption of the regulation of HCSMs under PPACA. This Article concludes first by examining the epilogue to the Reinhold (14) decision in Kentucky and second by providing some general observations and analysis about HCSMs.

2. AN INTRODUCTION TO THE REGULATORY LANDSCAPE

   HCSMs certainly sound commendable, but how have state and federal government officials viewed HCSMs? HCSMs do have some friends in the corridors of state power. (15) James Atterholt, Indiana Insurance Commissioner, opined that HCSMs are "a group of charitable organizations ... are providing a much needed answer to one of the greatest problems affecting all Americans today: the payment of medical expenses." (16) Atterholt continued: "[t]he members of these organizations have voluntarily joined their respective communities to put their faith into practice by supporting one another in some of their most serious times of need, much like religious communities such as the Amish have done for centuries." (17) Further:

   [t]hese charitable organizations have already been there providing the solution, one individual at a time. HCSM members are putting their beliefs into actual, day-to-day practice, that it is their responsibility to bear burdens of the members of the community which they voluntarily joined because of their common faith and values. (18) Atterholt concluded, "I would encourage all regulators to respect citizens' rights to freely pursue their own solutions for their medical expenses, and recognize HCSMs for what they are: charitable organizations serving individuals who voluntarily support one another in their time of need." (19)

   Likewise, Ralph Hudgens, Georgia's Commissioner of Insurance, found HCSMs "a remarkable free-market approach to paying for medical bills." (20) Hudgens reported Georgia has "not had any problems with Health Care Sharing." (21) Mr. Hudgens concluded, "Health Care Sharing Ministries are not insurance companies but charitable organizations helping participants pay their medical bills. I applaud your efforts to find free market solutions to improve access to health care." (22) Further, Mr. John Doak, oklahoma insurance Commissioner, wrote that "[m]any members of these organizations say they also receive spiritual support from their health-care sharing ministry, beyond the financial impact of the group." (23) After noting that PPACA exempts "members of a health-care sharing ministry from being required to purchase private insurance," Doak continued: "[a]s a man of great faith, an opponent of PPACA, and an advocate of free-market solutions to insurance issues, I support health-care sharing ministries as an option for oklahoma consumers." (24)

   Apparently, HCSMs also have some allies in the halls of Congress. As noted above, PPACA contains a religious exemption for HCSM members from the mandate to purchase insurance. (25) Why would these relatively small ministries receive a religious exemption from the individual mandate? HCSM representatives persuaded Senate staff members with "more than just an argument based on freedom of religion. ..." (26) "[T]hey pointed to the Obama administration's promise that those who were happy with their current health coverage could keep it." (27) HCSM subscribers received a religious exemption from PPACA's individual mandate precisely because HCSM members are paying their bills and sharing other members' medical expenses. (28) In the words of the Act, the "medical expenses of its members have been shared. ..." (29) The HCSM religious exemption from PPACA's individual mandate, coupled with HCSMs' remarkably low rates when compared to the costs of health insurance, have contributed to an increased interest in HCSMs. (30)

   However, HCSMs do have some foes in the corridors of state power. HCSMs have not gone without challenge, despite their evident charitable and religious emphasis. The Kansas insurance Commissioner, while recognizing the truly "religious programs," nevertheless believed PPACA's religious exemption for HCSMs will lead to "scammers ... creating fake ministries and soliciting members." (31) One observer called an HCSM a Ponzi scheme. (32) An appellate judge voiced concerns that an HCSM subjected subscribers to "potential scams and other unscrupulous tactics." (33) Judge Nickell of Kentucky's Court of Appeals thought Medi-Share was "at best, a supplemental plan for payment of the health care needs of its trusting subscribers, and, at worst, a poor substitute for regulated health insurance." (34) A few state insurance departments have gone farther, and brought legal challenges to these ministries, maintaining HCSMs operate as illegal insurance companies. (35)

   Most recently, the...