Treat Small Businesses Better Under Medical Care Regs, Group Says

August 6, 2020

CC:PA:LPD:PR (REG-109755-19)
Room 5203
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Re: REG-109755-19 – IRS Proposed Rulemaking: Certain Medical Care Arrangements

To Whom It May Concern,

We are writing on behalf of the Small Associations Leadership Alliance (SALA) in response to the IRS's proposed rulemaking that would extend tax benefits to individuals who have memberships in healthcare alternatives, including health care sharing ministries (HCSMs). We are generally supportive of the rule's goals, but take issue with the proposed definition of health care sharing ministries because it would exclude the very entities that are most small business-friendly from the proposed tax benefits.

SALA is focused on connecting small associations to provide solutions for organizations that often do not have the necessary resources to advocate for themselves at the national level. These organizations are often priced out of the market by large associations. We work with members across the country to provide guidance on general management, finance, employee benefits, and governance. Notably, all of our members bring in less than $2 million in revenues each year, so coordinating all of these things independently can be burdensome. By bringing these similarly-situated organizations together, SALA is able to provide more cost-effective and comprehensive solutions.

One of the main things we help members with is coordinating employee benefits. Given the rising costs of healthcare, especially for small businesses, many of our partners come to us seeking alternative solutions to the expensive health insurance plans available on the exchange. Membership in the medical cost-sharing organization Sedera has quickly become a popular alternative, and SALA currently supports approximately 450 people's healthcare through Sedera.

While it is not health insurance, medical cost sharing is a feasible and sustainable alternative for many individuals and small businesses. This model gives people a community that they can work with in the event of a significant medical event to pay their bills and simultaneously keeps costs down for small business owners. Of the members that we work with, many live in areas where there are limited healthcare options and close to 25% of the local population does not have access to healthcare; membership in a cost-sharing organization helps many afford healthcare that they would otherwise likely go without.

On top of offering this alternative to many of our members, both of us are members of Sedera. Membership in an ethically-based HCSM has been an affordable, high-quality experience and a good fit for our needs and lifestyles. We appreciate that the IRS is looking for ways to make health care sharing ministries more accessible, including through this rule, because they are a great fit for the many families and small businesses we work with. However, for the sole reason that Sedera was created after 1999, its members would not qualify for the tax advantages contemplated by the proposed rule. Denying the members of newer otherwise qualified HCSMs tax benefits is unfair, as SALA would not feel comfortable sponsoring memberships to pre-1999 ministry because they limit their memberships to only a limited number of Christian denominations.

The IRS should amend the proposed definition of health care sharing ministries by removing the provision that would limit favorable tax treatment only to those health care sharing ministries created before December 31, 1999. This revision will give equal treatment to all qualified HCSMs, instead of granting preferential status to the few religiously-focused ministries created before the arbitrary 1999 date. The proposed definition ignores that HCSMs formed in the past 20 years, or at any point in the future, offer the same important services as those HCSMs created more than 20 years ago. The IRS does not give any justification for the cutoff date and it is unnecessary to limit the number of organizations that are entitled to tax advantaged status in this space when there is no functional difference between health care sharing ministries created before or after December 31, 1999. These organizations are a good solution for many in need of ways to address large medical expenses and the IRS should encourage growth and competition in this space.

The IRS should encourage innovation and competition in the healthcare space and removing the 1999 provision from this proposed rule helps to accomplish that goal by removing barriers to competition and innovation. This will be beneficial not only to individuals and families, but also to small businesses across the country.

Thank you for considering our proposed changes to the rulemaking.

Sincerely,

Kevin Kennedy, CEO

Richard Lawson, President

Small Associations Leadership Alliance
Washington, DC