Tax Breaks for Alternatives to Insurance Would Drive More Coverage Gaps

As part of a recent executive order that the Trump Administration claims would “improv[e] … transparency in American healthcare,” it’s seeking to increase the tax advantages for two products — health care sharing ministries and direct primary care arrangements — that don’t provide the same benefits and consumer protections as comprehensive health insurance. Far from improving transparency, new tax incentives for these arrangements would almost certainly leave more people with large coverage gaps that they don’t understand.

The Trump executive order calls for the Treasury Secretary to propose regulations that would define expenses related to “certain types of arrangements, potentially including direct primary care arrangements and health care sharing ministries,” as eligible for certain tax breaks under the tax code. Specifically, that could let people use health savings accounts or other tax-advantaged accounts to pay the fees associated with sharing ministries or direct primary care or let them include these costs when deducting medical expenses from their federal income taxes.

With such tax incentives, more people might enroll in these plans instead of comprehensive health insurance, likely leaving them exposed to significant benefit gaps and catastrophic costs if they get sick. That’s because both arrangements have major weaknesses that may be unclear to consumers, particularly when misleading marketing convinces them that they’re enrolling in comprehensive health insurance.

With sharing ministries, members pay monthly fees to cover the health expenses of other members. With direct primary care, a patient pays a fee (usually monthly) to contract with a primary care provider to receive certain services that are generally not billed to health insurance. Neither arrangement is usually subject to the same consumer protections as health insurance plans, and they provide far more limited benefits.

Health care sharing ministries have grown significantly beyond their original purpose, which was for religious communities to use them to help members contribute funds toward other community members’ medical needs. Large organizations often now sell them – sometimes using aggressive marketing and insurance brokers — to people who have much looser ties, if any, to a religious group.

Ministries don’t guarantee that they’ll pay members’ medical bills and often exclude certain types of coverage (like for pre-existing conditions) or benefits (such as mental health and prescription drugs) because the ministries are exempt from health insurance standards. Yet some members of sharing ministries said they were led to believe that they were signing up for health insurance and only found out that wasn’t the case when the ministries rejected their costly medical claims. In Washington State, one member of the health care sharing ministry Aliera Healthcare, who was attracted to the arrangement by low monthly premiums, was diagnosed with throat cancer and left with $81,000 in unpaid medical bills. A Texas couple ended up in collections for $129,000 after the same ministry declined to cover a surgery, deeming it a pre-existing condition, though the couple had paid thousands of dollars in premiums.

Some state officials have raised concerns about the spread of health care sharing ministries. Texas is the most recent of several states to take action against Aliera for allegedly misleading consumers about what they were buying. Yet 30 states exempt ministries from state insurance regulation.

Proponents of direct primary care arrangements, meanwhile, tout their consumer benefits (such as rapid access to a physician and help managing chronic conditions) and often recommend that participants also maintain a health insurance plan. But people who opt for a direct primary care arrangement in lieu of health insurance will find themselves without coverage if they need prescription drugs, hospital or specialty care, or anything else that isn’t included in the contract.

Some organizations offering ministries or direct primary care are careful to point out that they’re not health insurance. But other times, these arrangements are marketed or used by consumers as a substitute for comprehensive health insurance, sometimes in combination with each other. Boosting these arrangements with new tax benefits would only expose more people to costly risks.