Former Competitive Enterprise Institute Research Associate Michael Mayfield provided invaluable assistance with this post.
Matt Drudge's widely discussed tweet that he has already paid Obamacare's "liberty tax" highlights the uncertainties the self-employed face both from the health care law and the tax code in general. As pointed out by an editorial in Investor's Business Daily, "self-employed entrepreneurs ranging from Drudge to small-shop proprietors and independent contractors have long been aware of the requirement to estimate their tax liability and send a quarter of it in every three months, and that this amount includes 'other taxes' such as the ObamaCare opt-out penalty."
The threat of the IRS penalty from Obamacare's individual mandate, perhaps more than the president yukking it up with comedians like Zach Galifianakis, may be driving the apparent pickup in enrollment in advance of the law's March 31 deadline. "Worries over fines aid health insurance sign-ups," reads the headline of a March 23 Wall Street Journal article. Even if the penalty this year is relatively small for many Americans, fear of the IRS can be a great motivator.
The good news -- for Drudge and other Americans who don't want to buy an Obamacare-compliant plan due to personal objections or just plain cost -- is that in many cases there is a practical escape hatch from the IRS penalty. And this option may end up offering better and more affordable care than Obamacare. The only catch is you've got to have a little faith.
Buried in Section 1501 on page 148 of the so-called Patient Protection and Affordable Care Act is an exemption from the individual mandate for a “health care sharing ministry,” a group whose members “share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs.” For any member of such group, the law says, "No penalty shall be imposed."
It's somewhat of a mystery how those pushing the law allowed such a potentially large exemption to the individual mandate to be inserted in the first place. This is definitely a case in which the law's supporters, four years after the law has passed, don't seem to know what's in it. But fortunately, many Americans are finding and utilizing this escape hatch.
Health care ministries have been around since the 1990s, but they have grown by leaps and bounds since Obamacare passed and especially since the disastrous launch of the exchanges last fall. According to FoxNews.com, “Since the launch of HealthCare.gov on Oct. 1, membership at each of the ministries has exploded, with nearly 30,000 new enrollees -- more than the number of people who selected a plan through Obamacare in 24 states."
Health care ministries are not insurance in the sense that there is no contractual obligation to cover any service. As described by CatholicVote.org, "It’s a program in which members make a monthly monetary donation which is matched with the needs of other members who face medical bills, thus covering each others’ medical costs through a program of mutual, voluntary giving." Yet, the article notes:
The programs are structured in such a way that it’s not just a “give what you want, when you can” situation. There are coverage levels. There are tiers. If you pay so much a month, your annual out-of-pocket expenses will be adjusted accordingly. It looks and feels a lot like insurance, and based on the satisfied testimonials of many who have participated over the years, it operates in a similar, if more personal way.
Two out of the four health-care ministries eligible for the coverage exemption -- Medi-Share and Christian Healthcare Ministries -- have A-plus ratings from the Better Business Bureau. And Medi-Share utilizes the MutiPlan PHCS network, the same large physician providers network that many insurance companies use. So even if Medi-Share's members pay for medical services out-of-pocket, they often get the same in-network discounts that insurance policyholders do.
A January Religion News Service article found that monthly dues for Medi-Share for a family of four were almost $300 cheaper than the monthly premiums for a similar Obamacare insurance plan, though the Obamacare plan might be slightly cheaper if the family were eligible for all the subsidies offered (a big if!).
Health care sharing ministries are similar to the voluntary mutual aid societies that supported many social welfare institutions in early 20th century America among nearly every demographic community. Mutual aid societies, including the Masons and the Odd Fellows, collected dues from each member and assisted members in need with covering the costs of necessities like medical care and funerals.
In fact, as historian David Beito has documented, mutual aid societies were the primary source of health care coverage in many communities before the New Deal of the 1930s. "Mutual aid was a creature of necessity," Beito writes in a Heritage Foundation paper, but "a reinvigoration of mutual aid ... is not out of the question in the 21st century."
And now the Obamacare mandates on individuals, employers, and insurance firms, have left the descendants of mutual aid societies as the only entities left with pre-Obamacare freedoms. Ironically, a health-care ministry has more freedom to price for risk and to exclude coverage of certain items -- whether for religious objections or budgetary reasons -- than an insurance company. These savings can be passed on to members.
Though it is a miracle that the health care ministry exemption exits at all in Obamacare, it is still unduly narrow. The exemption, for whatever reason, does not apply to any ministry created after December 31, 1999. So only four organizations meet the criteria.
These four groups are Christian, but vary in membership requirements. According to Delaware's The News Journal, "three of the four require members to share their Christian faith, attend church regularly, submit a letter of reference from their pastor and live by standards they say are mapped out in the Bible."
But the paper notes that one -- Liberty HealthShare -- "has a broader umbrella, inviting all who can embrace its members' "shared beliefs" in God as the source of all rights and liberties, freedom to worship 'the God of the Bible' in his or her own way, the obligation to assist others, the duty to maintain a healthy lifestyle and the right to direct one's own health care free of government dictates." The Liberty HealthShare communications director told The News Journal that his ministry accepts Jews, Muslims, and same-sex couples as members.
Congress should expand this mutual aid "ministry" option to groups of all faiths and no faith, in addition to liberalizing all mandates that impede quality, affordable health care. In the meantime, there may be a whole bunch of Obamacare victims suddenly getting religion!
The four health-care sharing ministries are: