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Lung Association Presses for Exclusion of ‘Skimpy Plans’ From Regs

OCT. 13, 2020

Lung Association Presses for Exclusion of ‘Skimpy Plans’ From Regs

DATED OCT. 13, 2020
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October 13, 2020

Charles Rettig, Commissioner
Internal Revenue Service
P.O. Box 7604, Ben Franklin Station
Washington, D.C. 20044

RE: Hearing on Internal Revenue Service Proposed Rule on Certain Medical Care Arrangements (IRS REG109755-19)

Dear Commissioner Rettig:

The American Lung Association was pleased to testify before the Internal Revenue Service panel on October 7 regarding healthcare sharing ministries. I am writing to you today to provide additional context on the testimony that Emma Will delivered (attached).

The Lung Association shared a story about a woman who was diagnosed with stage IV lung cancer while enrolled in a healthcare sharing ministry. Renee's story is shared on our website in a posting about plans with inadequate or “skimpy” coverage which includes healthcare sharing ministries and short-term limited duration plans. Renee's plan — the one that failed to cover both her car accident and her lung cancer treatment — was a healthcare sharing ministry plan. The inadequate coverage that is provided by these plans is highlighted by Renee's story and is why the American Lung Association believes that payments to these plans should not be granted the same tax status as traditional health insurance premiums.

To reiterate and summarize the Lung Association's testimony, Renee believed she had comprehensive healthcare coverage, only to realize that she did not have adequate healthcare at a time when she needed it more than ever before. She was in a car accident and had to be treated for injuries related to the accident. At that time, her doctors also discovered her lung cancer. Her healthcare sharing ministry declined to cover expenses relating to both the car accident and her lung cancer.

She owed $60,000 in medical bills because neither her emergency care nor cancer treatment were covered by her healthcare sharing ministry. Fortunately, she was able to enroll in comprehensive healthcare coverage at the next open enrollment and begin cancer treatment. Renee's story illustrates one of the Lung Association's key concerns about healthcare sharing ministries. Because healthcare sharing ministries have many of the same components as traditional health insurance — cost-sharing requirements that function just like an insurance plan deductible, provider networks, coverage tiers based on metal levels, monthly costs that vary by age, and defined covered services — consumers can easily be misled into believing they have comprehensive healthcare when in fact they do not. Like other skimpy plans, they fail to cover a patient's healthcare needs.

As stated in our written comments with 17 other patient organizations,1 the Lung Association does not believe that this rule should be finalized because it will contribute to consumer confusion, drive enrollment in non-comprehensive coverage and invite fraud.

Thank you for the opportunity to provide this additional information and to clarify any misimpressions the healthcare sharing ministry representatives may have raised.

Sincerely,

Paul G. Billings
Senior Vice President, Public Policy
American Lung Association
Washington, DC


October 7, 2020

Department of the Treasury
Internal Revenue Service
1111 Constitution Avenue NW
Washington DC, 20224

Re: Public Hearing on Proposed Regulations — “Certain Medical Care Arrangements” [REG-109755-19]

Testimony of the American Lung Association

My name is Emma Will and I am with the American Lung Association.

Thank you for the opportunity to provide testimony on the Internal Revenue Service Proposed Rule on Certain Medical Care Arrangements.

The American Lung Association is the oldest voluntary public health association in the United States, representing the millions of Americans living with lung diseases, including chronic obstructive pulmonary disease (COPD), lung cancer, asthma, cystic fibrosis and pulmonary fibrosis. The Lung Association is the leading organization working to save lives by improving lung health and preventing lung disease through research, education and advocacy.

Adequate, affordable health insurance is critical for people who have and are at risk for lung disease to maintain their health and well-being. The American Lung Association has serious concerns that the proposed rule would promote coverage that does not include the benefits and services our patients need and would create confusion among patients looking to purchase quality, affordable coverage. As we expressed in comments submitted with 17 other patient organizations in August, the American Lung Association urges that the proposed rule not be finalized.1

The proposed IRS regulations would treat payments to health care sharing ministries and to direct primary care arrangements as medical expenses under section 213 of Internal Revenue Code. This would give the payments the same tax status as health insurance premiums so that they could be deducted as medical expenses from personal income taxes or reimbursed using funds from health reimbursement arrangements (HRA). The American Lung Association strongly opposes giving preferential tax status for membership in a health care sharing ministry; these entities do not provide the same guaranteed financial protection as health insurance and are not regulated as insurance by any state. That means that these plans are not subject to oversight by state insurance commissioners and there are no patient protections. The Lung Association also expresses our concern that the proposed rule may encourage enrollment in health care sharing ministries as a substitute for comprehensive coverage. Health care sharing ministries confuse consumers, drive enrollment in non-comprehensive coverage and invite fraud.

I would like to share a story about Renee, a woman in Kansas who belonged to a health care sharing ministry. Renee had a car accident, and while she was being examined for injuries related to the crash, she found out that she had stage IV lung cancer. Her health care sharing ministry would not cover the costs of her car accident and would not cover cancer treatment until after a year of coverage. If she had waited a year to begin treatment, she would not have survived. Renee received $60,000 in medical bills, before she was able to enroll in comprehensive coverage on Healthcare.Gov. Once she had comprehensive coverage, she received treatment, but she was still on the hook for $60,000.

Renee's story illustrates a major risk of the proposed rule. Individuals who belong to a health care sharing ministry may believe that they have traditional health insurance, only to realize that they do not in the wake of a health emergency. Health care sharing ministries may have features that closely resemble those of insurance, including cost-sharing requirements that function just like an insurance plan deductible, coverage tiers based on metal levels, monthly costs that vary by age, and defined covered services. Yet, because they do not assume responsibility for paying claims, health care sharing ministries have long argued, and assert repeatedly on their websites, that they are not health insurance and should not be regulated as such. (These website disclosures are in fact legally required by most states.) This IRS rule ignores how health care sharing ministries classify themselves and blurs the lines between health care sharing ministries and insurance, which will make it harder for consumers like Renee to understand the benefits and risks of their coverage options. This puts patients, like Renee and many others, at risk. While Renee was able to financially recover from her medical bills, many more would not.

The Lung Association is also concerned that the proposed rule will drive enrollment in non-comprehensive coverage. In order for health care sharing ministry fees to be eligible for the proposed tax benefits, the health care sharing ministries must meet a definition that is the same as the definition used in the Affordable Care Act's exemption from the individual mandate penalty for qualifying health care sharing ministry members. This means that brokers selling memberships for health care sharing ministries will likely use this federal recognition and tax benefit to market memberships and drive enrollment.

The proposed rule also invites fraud. Recent stories of healthcare sharing ministries refusing to pay claims have prompted regulators in multiple states to take action, including issuing consumer warnings and imposing new requirements on brokers who sell these “skimpy” plans.2 Thirty states specifically exempt health care sharing ministries from insurance regulation, but no state regulates them.3 Given the lack of regulation of health care sharing ministries, it is particularly concerning that the IRS is proposing tax benefits for enrollment fees for health care sharing ministries, which is likely to give new life to fraudsters during a pandemic when tens of millions of newly uninsured may be searching for coverage that advertises low upfront costs, yet comprehensive healthcare coverage is more important than ever.

The American Lung Association believes that the proposed rule should not be finalized. Additionally, we believe that the IRS must improve the transparency around health care sharing ministry enforcement. The proposed rule defines health care sharing ministries using the same definition as the ACA, yet the process for considering health care sharing ministries for approval for the ACA exemption and the list of health care sharing minstries that met the ACA criteria was never made public.4

While the American Lung Association urges the opposite, if the rule is finalized, the IRS must implement a transparent process for considering health care sharing ministry requests for recognition, publish the list of approved health care sharing ministries, and require health care sharing ministries to annually demonstrate compliance with the definition and provide enrollment data and other information about their operations to assist in IRS oversight of tax filings.

Again the American Lung Association urges you to protect patients with lung disease and other pre-existing conditions and not finalize the proposed rule. Thank you for the opportunity to submit feedback.

FOOTNOTES

1Health Partner Comment to IRS re Proposed Rule on Certain Medical Care Arrangements (REG-109755-19). August 10, 2020. Available at https://www.lung.org/getmedia/49d84e89-8a0a-4bd5-8e1b-1d3fc84562f8/partnership-to-protect-coverage-comment-on-irs-proposed-rule-hcsm-dpca.pdf.

1Health Partner Comment to IRS re Proposed Rule on Certain Medical Care Arrangements (REG-109755-19). August 10, 2020. Available at https://www.lung.org/getmedia/49d84e89-8a0a-4bd5-8e1b-1d3fc84562f8/partnership-to-protect-coverage-comment-on-irs-proposed-rule-hcsm-dpca.pdf.

2Jenna Carlesso, “'I'm relying on prayer.' Complaints pile up against health care sharing ministries as state mounts a defense,” Connecticut Mirror, Mar. 2, 2020. See also, J J. Volk, J. Giovannelli and C. Goe, “States Take Action on Health Care Sharing Ministries, But More Could Be Done to Protect Consumers,” The Commonwealth Fund, Feb. 19, 2020.

3J. Volk, E. Curran and J. Giovannelli, “Health Care Sharing Ministries: What Are the Risks to Consumers and Insurance Markets?” The Commonwealth Fund, Aug. 8, 2018.

END FOOTNOTES

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