Leukemia Group Seeks Withdrawal of Medical Care Arrangement Regs

August 10, 2020

The Honorable Sunita Lough
Deputy Commissioner for Services & Enforcement
Internal Revenue Service
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

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

Dear Deputy Commissioner Lough:

On behalf of patients, families, and caregivers affected by blood cancer, The Leukemia & Lymphoma Society (LLS) welcomes the opportunity to comment on the Internal Revenue Service (IRS) proposed rule regarding certain medical care arrangements, including health care sharing ministries (HCSMs) and direct primary care arrangements (DPCAs).¹

LLS is the world's largest voluntary health agency dedicated to the needs of blood cancer patients. Each year, over 150,000 Americans are newly diagnosed with a blood cancer, accounting for nearly 10 percent of all new cancer diagnoses in the United States, and today, across the country, there are more than 1.4 million people with blood cancer. The LLS mission is to cure leukemia, lymphoma, Hodgkin's disease and myeloma, and improve the quality of life of patients and their families. LLS funds lifesaving blood cancer research, provides free information and support services, and advocates for public policies that address the needs of patients with blood cancer. Since our founding over 70 years ago, LLS has invested more than $1.3 billion into research for cures, and LLS-funded research has been part of nearly all of the Food and Drug Administration (FDA)-approved therapies for blood cancer.

LLS is concerned that the proposed rule would, if finalized, encourage enrollment in substandard health insurance that fails to cover affordable, comprehensive care. We therefore urge the IRS to withdraw the proposed rule.

The rule further promotes alternatives to insurance, which lack patient protections

The proposed rule stems from the Administration's Executive Order Promoting Healthcare Choice and Competition Across the United States, issued on October 12, 2017.^{2 3} The types of insurance-like products and arrangements promoted in the executive order — and which are discussed in this proposed rule — include short-term limited duration plans (STLDs), multiple employer welfare agreements (MEWAs) and association health plans (AHPs), HCSMs, (DPCAs) that are unaccompanied by comprehensive coverage, and excepted benefits plans.

These products and arrangements are not compliant with the consumer protections that the Affordable Care Act (ACA) applies to qualified health plans (QHP). Those protections ensure that consumers, both healthy and sick, have the opportunity to access comprehensive and affordable healthcare services and therefore are critical to patients with blood cancers.⁴ Thus by extending federal subsidies to the products and arrangements referenced above, the proposed rule promotes non-ACA-compliant coverage and, in so doing, lends taxpayer support to products that expose consumers to the risk of great financial harm and the inability to access necessary care, should they receive a blood cancer diagnosis. LLS strongly opposes subsidizing such coverage with the same federal tax benefits intended to support the affordability of comprehensive health insurance.

Health Care Sharing Ministries

In the draft rule, IRS proposes to define fees to HCSMs as payments for medical care or medical insurance, making those fees tax-deductible as a qualified medial expense. Yet HCSMs are not health insurance, as they offer no guarantee of payment and cap coverage to amounts that are of limited utility to patients with blood cancer. Moreover, HCSM consumers have often struggled to receive promised benefits. Indeed, HCSMs have been the subject of numerous complaints from consumers since their inception in 1993, most relating to their lack of coverage of health services, non-payment of stated covered benefits, and financial fraud.⁵ Given the record of HCSMs in failing to meet the needs of consumers — and, too often, even their legal obligations — LLS urges the IRS to withdraw its proposal to subsidize HCSMs with federal tax deductions intended to subsidize comprehensive health insurance.

Currently, the Alliance for Health Care Sharing Ministries reports that approximately 1.5 million individuals are enrolled in HCSM coverage, compared to fewer than 200,000 less than a decade ago.⁶ LLS is concerned that the growing numbers of consumers enrolling in HSCM and other non-ACA compliant coverage will continue to have deleterious impacts on people enrolled in comprehensive coverage through the ACA marketplace, as they would face increased premiums and cost-sharing as people leave the market to purchase non-ACA-compliant coverage. LLS is also concerned that those currently enrolled in these alternative plans — and those who enroll in the future, should this trend continue — will encounter serious harm as we detail below.

HCSMs do not provide comprehensive, affordable, reliable coverage

HCSMs are subject to neither key consumer protections nor regulatory oversight, and this yields primarily two consequences: HCSMs are fully permitted to engage in practices that threaten harm to patients and consumers and, when issues arise, patients and consumers have no avenue for legal recourse. Not having to comply with a range of consumer protections regarding comprehensiveness of coverage, HCSMs are free to discriminate against people with pre-existing conditions by excluding or limiting coverage for such conditions — a practice that is particularly concerning for blood cancer patients. For example, some HCSMs require that a member be symptom-free from a condition for 1-5 years prior to enrolling in order to receive coverage for that condition,⁷ and in other HCSMs, birth control, mental health and substance use disorder services, certain routine care, preventive services, and prescription medications are not covered.^8,9 It's no surprise, then, that in 2018, the Texas Medical Association issued a warning to consumers stating that HCSMs can leave consumers with "unpaid medical bills or without coverage when they really need it."¹⁰

What's more, while health insurers selling QHPs must comply with minimum loss ratio (MLR) standards where HCSMs are not required to do so. An important consumer protection, MLR standards guarantee that at least 80 percent of a member's monthly payment will go toward health care expenses rather than advertising, broker commissions, and other administrative costs. Similarly, HCSMs are also exempt from solvency standards. Simply put, HCSM members must hope that funds will be available when submitting a claim for payment. Perhaps most worrying of all is that consumers have few, if any, avenues available for legal recourse, should they be harmed by their HCSM's lack of basic insurance protections or inability to cover its obligations.¹¹

HCSMs are sometimes marketed to misleadingly imply they provide comprehensive insurance

Typically, HCSMs offer memberships that help cover health expenses to individuals who share similar religious beliefs however anecdotal evidence suggests that they are often marketed more broadly regardless of the individuals' religious affiliations.¹² One hallmark and source of controversy regarding HCSMs is that while these organizations state plainly that they do not offer "health insurance,"¹³ they employ models that closely mimic the structure of traditional insurance products including reference to "provider networks", levels of coverage, preauthorization for medical necessity, and claims processing. This is confusing for consumers who may not be aware that they are signing up for coverage that is not comprehensive.

For example, with a company called Christian Healthcare Ministries, members pay monthly "shares" based on their chosen participation level (i.e. Gold, Silver, and Bronze) ranging from $78 for an individual on the Bronze plan to $516 for a family on the Gold plan.¹⁴ These shares effectively amount to premiums, and members must also pay for "unshareable" amounts of medical costs, akin to a deductible.¹⁵ The phrasing identifying these plans by a metallic level mimics the similarly named Affordable Care Act marketplace coverage options and appear designed to mislead consumers into believing that these products offer similar patient protections to those offered on the ACA marketplaces.

Consumers are left to hope that authorities in their states will take action on behalf of broad groups of consumers, as has been the case in a number of states. Indeed, at least seven states have taken legal action against one HCSM, Aliera, for stranding members with exorbitant unpaid medical bills. At least three more states are investigating Aliera for operating as an unlicensed insurer (NY, NC, RD.)¹⁶ Additionally, at least 15 states and the National Association of Insurance Commissioners (NAIC) have posted consumer alerts about the risks posed by HCSMs.^{17 18} Yet, the very existence of these legal actions and broad regulator warnings to potential consumers is evidence that indeed HCSMs engage widely in these practices and that consumers suffer as a result of those practices.

Designating HCSMs as insurance, while not regulating them as insurance, will exacerbate consumer confusion

By treating consumer payments made to HCSMs as "medical insurance" for purposes of determining whether expenses are deductible, the proposed rule builds upon and would exacerbate existing consumer confusion will likely to lead to additional misleading and deceptive marketing of these plans and further consumer confusion.

In the past, some HCSMs, and brokers that market them, used the inclusion of HCSMs in the ACA to market ministries as a "viable health care option." Thus by stating that "medical insurance includes health care sharing ministries that share expenses for medical care," the rule will likely spark new efforts to market HCSMs as similar to ACA-compliant insurance plans, despite HCSMs offering no guarantee of payment. While the proposed rule states that the regulation "has no bearing on whether a health care sharing ministry is considered an insurance company, insurance service or insurance organization . . . for other purposes . . . or any other State or Federal law," it is unlikely that this language, by itself, will prevent the dynamic described above from taking root.

Direct Primary Care Arrangements

In addition to allowing HCSMs to qualify for tax-deductible status, the proposed rule would allow fees paid to DPCAs to qualify as a medical expense that can be deducted from personal income taxes or be reimbursed from a Health Reimbursement Account (HRA).

DPCAs are sometimes used by consumers in combination with comprehensive health insurance coverage as a means to provide enhanced primary care services to individuals who have coverage for specialty and other care outside the scope of the DPCA. Yet, DPCAs are also marketed as a substitute for comprehensive coverage. Individuals who enroll in DPCAs in the absence of additional comprehensive coverage are exposed to claims for care that are not covered under the terms of their arrangement. Nevertheless, despite the health and financial risks posed in this case, the proposed rule fails to require individuals to have comprehensive insurance coverage in order to be eligible for the tax benefits under section 213 of the Internal Revenue Code.

Individuals in need of services beyond the capacity of the providers in their DPCA, like oncology services, are likely to be referred to specialists outside of their contract that consumers may assume are covered. As such, LLS has significant concerns that subsidizing the purchase of DPCAs through the federal tax code — absent a requirement to also hold comprehensive coverage — would promote additional consumer adoption of DPCAs among those who are unaware of or have been misled about the limitations associated with DPCAs in the event of an injury or serious medical crisis.

Given that DPCAs fail to provide adequate coverage and financial protection for patients and do not serve as a form of or alternative to comprehensive health insurance, LLS urges the IRS to withdraw its proposal to use federal tax dollars to subsidize DPCAs, unless the proposal is paired with a clear and enforceable requirement that such subsidy only applies when DPCAs are purchased as a supplement, rather than replacement, to comprehensive coverage.

Conclusion

It is clear that HCSMs and DPCAs expose blood cancer patients to an unnecessary and unacceptable degree of financial and health risk. As a result, LLS strongly encourages the IRS to withdraw the proposed rule. Should you have any questions about our comments, please do not hesitate to contact Katie Berge, Director of Federal Government Affairs, at katie.berge@lls.org.

Sincerely,

Brian Connell
Executive Director, Federal Affairs
The Leukemia & Lymphoma Society
Washington, DC