Religious exemptions from the health care individual mandate


The January 2014 Tax Practice Corner, “Calculating the Health Care Individual Mandate Penalty,” (page 54) outlined how the penalty under Sec. 5000A, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, is calculated. The column also listed individuals to whom the mandate does not apply, including two groups that are the subject of this column: members of “health care sharing ministries” and certain religious groups.

Health Care Sharing Ministries

A health care sharing ministry (Regs. Sec. 1.5000A-3(b)) is an organization

  • Described in Sec. 501(c)(3) and tax-exempt under Sec. 501(a);
  • Whose members share a common set of ethical or religious beliefs, according to which they share medical expenses among themselves;
  • Whose members retain membership even after they develop a medical condition;
  • That (or a predecessor of which) has been in continuous existence and operation since Dec. 31, 1999; and
  • That conducts an annual audit performed by an independent CPA firm in accordance with GAAP and makes the audit report available to the public upon request.

At least three organizations state that they meet these requirements: Samaritan Ministries, Christian Care Ministry’s Medi-Share program, and Christian Healthcare Ministries Inc.

According to their websites, these ministries act as clearinghouses for members’ medical bills. Each organization handles the transactions in its own way, but in essence, the ministry takes members’ monthly “share payments” and directs them to other members’ health care expenses. They require members to make certain representations regarding their Christian faith, health practices, and in some cases personal morals, such as agreeing to a statement of Christian faith; pledging to attend regular worship; and promising to abstain from extramarital sex, abstain from tobacco use and drug abuse, and abstain from or limit alcohol consumption.

Health care sharing ministries take pains to clarify that they do not provide medical insurance, describing themselves as more akin to charities. Because they are not insurance companies, they do not guarantee that they will pay any medical bills. They have no actuarial calculations and no reserves and do not negotiate with medical providers. They are not subject to most state insurance regulations. In fact, according to the Alliance of Health Care Sharing Ministries (, health care sharing ministries have been granted statutory safe harbors from state insurance codes in more than two dozen states. Insurance commissioners in a few states have sued to stop the organizations’ activities, out of concern that they look and act like insurance without state regulatory safeguards. However, in at least two such states, Oklahoma and Washington, legislatures have responded by enacting a safe harbor.

Members are usually treated as “self-pay” patients and, as such, are expected to negotiate lower rates directly with health care providers. Additionally, members are expected to budget for their own preventive care.

Health care sharing ministries are not required to comply with the PPACA minimum standards for “core” medical services and do not cover costs that do not conform to ministry guidelines, such as abortion. Treatment for alcoholism, drug addiction, and even obesity might not be covered.

The monthly share payment is not deductible for federal income tax purposes as either a medical expense (because it is not a payment for insurance under Sec. 213(d)(1)(D)) or as a charitable deduction (because it is a payment in consideration for goods or services). However, members’ payments in excess of their required monthly minimum may be deductible as a charitable contribution. Members do not qualify for the premium tax credit of Sec. 36B, which applies only to coverage under a qualified health plan, or for federal tax subsidies for employment-related insurance under PPACA. Health reimbursement arrangements or Sec. 125 cafeteria plan deferrals cannot be used to reimburse individuals for share payments because they are not medical expenses as defined under Sec. 213; however, they can be used to pay medical expenses paid directly by the taxpayer, such as co-pays, prescriptions, and preventive care as permitted by Sec. 213. Only Missouri allows a deduction for the share amount in determining state income tax.

Religious Conscience Exemption

In addition to members of health care sharing ministries, members of recognized religious sects described in Sec. 1402(g)(1) who adhere to the sect’s established tenets or teachings can be exempt under Regs. Sec. 1.5000A-3(a) from the requirement to purchase health insurance if they have in effect a “religious conscience exemption certification” obtained through a PPACA health insurance exchange. Sec. 1402(g)(1) provides an exemption from self-employment tax for an individual who

  • Is a member of a recognized religious sect that has established beliefs or teachings, by reason of which the individual is conscientiously opposed to accepting the benefits of any private or public insurance covering death, disability, old age, retirement, or medical care, including any such insurance established by the Social Security Act; and
  • Has waived all benefits and other payments under Titles II (old age, survivors, retirement, and disability) and XVIII (Medicare) of the Social Security Act.

In addition, Sec. 1402(g)(1) provides that the sect must have

  • For a substantial period followed a practice of making reasonable living provisions for its dependent members; and
  • Been in existence since Dec. 31, 1950.

Regs. Sec. 1.5000A-3(a) lacks any reference to Sec. 1402(e), which permits ministers and Christian Science practitioners to claim exemption from self-employment tax, and therefore provides no exemption from the individual mandate for those taxpayers.

If clients wish to claim a religious exemption from the PPACA requirement to maintain minimum essential coverage, CPAs should be sure they fit the narrow descriptions of membership in these qualifying groups. CPAs’ insights may also help clients better understand the type of agreements that health care sharing ministries offer to their members.

By Dayna Roane, CPA/ABV, M. Tax ( ), partner, Perry & Roane PC, Niwot, Colo.

To comment on this article or to suggest an idea for another article, contact Paul Bonner, senior editor, at or 919-402-4434.

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