Blurred Lines: Backed by Consumer Complaints, State Cracks Down on Health Care Sharing Ministries

In late May, the Colorado Division of Insurance (DOI) posted a consumer advisory warning Coloradans about the risks of health care sharing ministries (HCSMs). These arrangements, which are faith-based and make use of social contracts among members to pay the cost of each other’s medical bills, are not insurance — yet, according to the DOI, they sometimes “mimic the look and feel” of Affordable Care Act (ACA)-compliant insurance plans. The advisory minced no words: “If it sounds too good to be true, it probably is.”

Yesterday, the DOI took a clear step to crack down on such plans. The office issued immediate cease-and-desist orders for two groups: Trinity Healthshare, an HCSM, and Aliera Healthcare, an administrator, marketer, and program manager for Trinity. The consumer advisory announcing the decision states that the DOI is concerned about “misleading marketing practices [that are] blurring the lines” about what qualifies as insurance. The DOI says a number of consumers have complained to the state about Trinity and Aliera. The advisory concludes that “the companies may be putting consumers at risk and violating Colorado insurance law.”

Led by Mike Conway, the state’s insurance commissioner, DOI has been investigating HCSMs for months, and the office has been collecting complaints since the first advisory was posted in May. Yesterday’s action is one of the most decisive steps taken by any state to curb the operations of health care sharing programs. Conway has compared HCSMs to the emergence of subprime mortgages, which he said also “looked fantastic to people” before they resulted in catastrophe for many who took the bait. Washington state took a similar step to halt the same groups' operations in mid-May, and Texas followed suit last month.

DOI’s order requires Trinity and Aliera to honor their existing contracts with Colorado consumers.

CHI has been watching the emergence of HCSMs in Colorado for a few years. Given yesterday’s news, it’s time for a refresher on these recent entrants into the complex landscape of health coverage.

What are HCSMs?

Unfamiliar with HCSMs? You’re not alone. The Commonwealth Fund defines them as “a form of health coverage in which members — who typically share a religious belief — make monthly payments to cover expenses of other members.” These groups either collect the monthly payments and then administer payments to members, or match members directly to pay (or, more often, reimburse) those in need for approved services.

The Alliance of Health Care Sharing Ministries, which advocates for HCSMs nationwide, says that the agreements facilitate “the sharing of health care needs (financial, emotional, and spiritual) by individuals and families.” HCSMs are not health insurance and must legally avoid claiming to be a form of insurance; however, this clarification is sometimes buried in fine print and overshadowed in their marketing.

The DOI is purportedly going after them now because membership in HCSMs has experienced substantial growth since the ACA was enacted.  Although the absence of reliable data on HCSM membership makes it difficult to precisely quantify this growth, it has led to the increasing numbers of consumer complaints that have caused the DOI to act.

Much of the reported growth in their popularity has been attributed to the now-defunct individual mandate. Under the ACA, the mandate required people to have insurance coverage or pay a penalty. Despite not being insurance carriers, HCSMs lobbied successfully to count as coverage under the ACA for the purpose of exempting their members from tax penalties, making them the cheapest mandate-satisfying coverage available.

How popular are they?

While exact membership numbers are impossible to determine, a Commonwealth Fund issue brief stated that enrollment in HCSMs has risen from fewer than 200,000 people prior to 2010 to around 1 million people by last summer. The estimates are self-reported.

Independent data on HCSMs are not available at state or national levels, and even the six states that require annual audits from HCSMs don’t have enrollment numbers, according to Commonwealth. Internal Revenue Service estimates from 2016 show that more than 330,000 Americans claimed exemptions to the individual mandate because of membership in an HCSM, per the Chicago Tribune, before the mandate was eliminated.

More than 100 HCSMs reportedly operate throughout the United States, though Buzzfeed noted in 2017 that the HCSM landscape is “dominated by five major players with the largest memberships and highest revenue.”

The number of Coloradans enrolled in HCSMs is unknown. Colorado is not among the 30 states that have explicitly exempted HCSMs from their state insurance code, though it’s unclear if this has limited their proliferation. State exemption efforts were reportedly boosted thanks to support, including model exemption legislation, from the conservative American Legislative Exchange Council (ALEC).

What draws people to HCSMs?

The affordability of HCSM arrangements seems to be the top draw for consumers. While the “non-insurance” nature of HCSMs is clearly stated in some places, consumers have proven willing to overlook it for low-cost coverage that sounds a lot like insurance. Conway’s opinion? “The costs for these health sharing arrangements are low because, when you look closely, they don’t cover much.”

But the appeal is broader. In the in-depth Buzzfeed research piece on HCSMs, reporter Laura Turner notes:

Many of the members I spoke with appreciated the fact that their hard-earned money isn’t going to line the pockets of an ultra-wealthy CEO … they don’t cover abortion or birth control, so members with ethical objections can be certain their money isn’t funding procedures or medication they don’t support … [And] ultimately, ministry members seem to find value in the human connection of sharing their health care needs with fellow Christians, often in stark contrast to the impersonal nature of traditional insurance.

Recent focus group sessions commissioned by Connect for Health Colorado, the state insurance exchange, found members of HCSMs to be generally happy with their coverage, with participants saying they were both an “excellent deal” when compared to the cost of insurance plans and “in line with their own Christian values.” Brokers sometimes suggest that the arrangements work best for people who are both in good health and struggling to afford plans on the individual market.

What are the drawbacks?

HCSMs are not insurance, at least not insurance that meets the guidelines for coverage under the ACA. They involve agreements among people to help each other but come with few to no guarantees.

They have the same drawbacks as other loosely regulated types of coverage, such as short-term plans: typically failing to provide coverage for preventive care, pre-existing conditions, and chronic conditions; limiting coverage for mental health services and prescription medications; and enforcing lifetime limits for each illness. HCSMs often specifically exclude coverage for illnesses stemming from the use of tobacco, alcohol, and drugs, or for contraceptive and abortion services.

Peruse articles online and you’ll find stories of families who were denied coverage for hip replacements, cancer treatments, and even preventive care for their adoptive children — who are generally considered to arrive with “pre-existing conditions” not covered by most HCSMs. The summary document from the Connect for Health Colorado focus groups noted that some of the participants enrolled in HCSMs “had problems with getting reimbursed after having to pay out of pocket, but this is not a major concern to them [because] they feel these are problems with all insurance.”

At the end of the day, some people don’t mind HCSMs’ uncertain coverage because they feel the faith-based nature of the arrangements is worth it, the limited coverage is justified by the low costs, or they don’t feel ACA-compliant insurance is any more transparent and fair to enrollees — a point that underscores the need for effective customer service and consumer education from carriers, the DOI, and Connect for Health Colorado.

The road ahead

Yesterday’s DOI announcement puts HCSMs and groups affiliated with them on high alert, in Colorado and other states. The office maintains that its sole purpose is protecting consumers. According to Conway, “Regulation exists because the product being regulated can be dangerous and can cause damage to individuals and communities.”

Expect pushback and questions from Coloradans who participate in these arrangements and feel strongly about their ties to faith, with that pushback aimed both at the DOI from consumers who feel the cease-and-desist order was unfairly targeting them and at HCSMs that may have misrepresented their services or put Coloradans on thin ice financially. It’s possible that this week’s actions will encourage other states to take steps to regulate HCSMs — or at least take a closer look at how well they are meeting the needs of the growing number of consumers who are choosing them over regulated health insurance products.

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