The IRS has recently proposed new changes that provide guidance on how Health Care Sharing Ministries (HCSM) like Medi-Share, Samaritan’s, Christian Healthcare Ministries, Liberty and other “Sharing Plans” operate with QSEHRA. Previously, in the absence of clear guidance, we allowed employers and employees to make decisions on how to handle sharing plans, but now we are recommending all clients update their plans to be in line with the proposed rules for the 2022 plan year.
What do the new rules say? What’s changing?
Health Care Sharing Plans can be reimbursed tax-free!
The IRS is proposing that membership in a Health Care Sharing Ministry will be considered an official medical expense under section 213(d)(1)(D). This change will allow members to be reimbursed tax-free for the monthly share they pay to belong to the sharing plans.
However, this change does not change whether Health Care Sharing Ministries are recognized as a form of insurance. Health Care Sharing Ministries will still be exempt from ACA insurance requirements, but it will still not count as MEC for the QSEHRA. This means that employees on a sharing plan can get reimbursed for their monthly share only if they also have health insurance that meets MEC.
We are already allowing sharing plans to be reimbursed on a taxable basis. What does this mean for us?
The best news is that Health Care Sharing Ministries can now be reimbursed tax-free alongside a MEC plan! However, since the sharing plan monthly cost is now considered an eligible medical expense, that means it can no longer be reimbursed alongside the QSEHRA. Instead, we’ll recommend employees on a Health Care Sharing Plan pick up a Preventative MEC plan, which start at about $70 per month
What do I need to do for 2022?
There are a few things that will need to be done to accommodate the new changes for 2022:
For employers that have employees on Health Care Sharing Ministry plans, you’ll note when you renew for 2022 that you no longer have to choose the option to allow sharing plans as a taxable reimbursement alongside the QSEHRA. As long as your employees on a sharing plan also enroll in a Preventative or Skinny MEC plan, they can automatically claim a tax-free reimbursement for their Health Care Sharing Ministry monthly cost moving forward, as well.
In order to participate in QSEHRA for 2022 you will need to have insurance that meets Minimum Essential Coverage (MEC). We know many of you already have one of these plans, so you’re already set to begin receiving tax-free reimbursements.
If you have not already purchased a MEC plan, since sharing plans are not insurance and do not meet the requirements this means you will now need to purchase a separate MEC plan to qualify.
Once you have the qualified MEC plan you can submit your Health Care Sharing Ministry plan for tax-free reimbursement through QSEHRA. Both your MEC plan and your sharing plan will qualify for reimbursement. The good news is MEC plans are relatively inexpensive and we have a couple of recommendations listed here.