PRIVATE HEALTH
COVERAGE
Information on Farm
Bureau Health Plans,
Health Care Sharing
Ministries, and Fixed
Indemnity Plans
Report to Congressional Requesters
July 2023
GAO-23-106034
United States Government Accountability Office
United States Government Accountability Office
Highlights of GAO-23-106034, a report to
c
ongressional requesters
July 2023
PRIVATE HEALTH COVERAGE
Information on Farm Bureau
Health Plans, Health
Care Sharing Ministries, and Fixed Indemnity Plans
What GAO Found
States are the primary regulators of health insurance plans, which are also
subject to certain federal standards and minimum requirements, including those
established by the Patient Protection and Affordable Care Act (PPACA). Certain
types of health coverage arrangements (referred to as alternatives to health
insurance) are generally not subject to these federal and state requirements for
health insurance. Alternatives to health insurance include:
• Farm Bureau health plans—plans sold in six states to members of Farm
Bureaus.
• Health care sharing ministry (HCSM) memberships—memberships in
organizations whose members agree to live by a statement of beliefs or
ethics and contribute monthly to pay for the medical costs of other
members.
• Fixed indemnity plans—plans that pay a fixed dollar amount on a per-
period or per-incident basis. Certain plans may resemble the design of a
health insurance plan, such as providing separate payment amounts for
a variety of medical services.
GAO found that the benefits and other features of nine selected health plans and
memberships varied, and state insurance officials stated that these plans tend to
contain few consumer protections. These plans and memberships generally are
not required to adhere to the requirements and consumer protections imposed by
PPACA on individual health insurance plans, such as the requirement to cover
the 10 essential health benefits. GAO’s analysis of documentation for these
health plans and memberships found that they all included some coverage for
hospital services and office visits for illness or injury, while coverage varied for
routine examinations, prescription drugs and other types of services. While all of
the plans and memberships reviewed disclosed that they are not health
insurance, officials from four state insurance departments reported that these
types of plans contain few, if any, of the consumer protections found in plans that
are required to comply with PPACA.
GAO also found that sellers of the selected plans and memberships used a
variety of marketing practices. These practices included focusing on factors such
as affordability, suitability, choice, and values. For example, marketing materials
associated with all nine of the reviewed plans and memberships advertised that
they offered lower premiums or monthly contributions than other health coverage
options. Further, regulators have identified misleading marketing practices
associated with some alternatives to health insurance in recent years. In August
2022, for example, the Federal Trade Commission took action against a health
care company for misleadingly selling several health coverage products,
including fixed indemnity products. The company agreed to a proposed court
order that required it to pay $100 million in consumer refunds, among other
stipulations.
GAO received technical comments on a draft of this report from the Department
of Labor and the Department of Health and Human Services and incorporated
them as appropriate.
View GAO-23-106034. For more information,
contact
John E. Dicken at (202) 512-7114 or
.
Why GAO Did This Study
Alternatives to health insurance
—
including
Farm Bureau health plans,
HCSM memberships
, and fixed
indemnity plans
—are generally not
required t
o report information to
federal regulators. Policymakers thus
lack a clear understanding of how
these plans
and memberships
operate, their role in the insura
nce
market, and the scope of their
potential
effects on individual
consumers and workforces.
GAO was asked to review plan
features, enrollment, and marketing
associated with alternatives to health
insurance. This report describes
,
among other issues,
the features of
selected
Farm Bureau health plans,
HCSM
memberships, and fixed
indemnity plans and
the marketing
practices used by sellers of the
selected
plans and memberships.
For this report, GAO reviewed
documentation for nine plans
and
memberships
selected for diversity i
n
features
and sellers. GAO also
interviewed eight of the nine sellers
of these
plans and memberships
and
23
stakeholders and stakeholder
groups. These stakeholders
included
seven state departments of
insurance
and eight national
o
rganizations, including the National
Association of Insurance
Commissioners
. GAO also reviewed
documents detailing
marketing
practices
associated with alternati
ves
to health insurance.
Page i GAO-23-106034 Private Health Coverage
Letter 1
Background 5
Benefits and Other Features of Selected Plans and Memberships
Varied and Officials Say These Product Types Generally Have
Few Consumer Protections 10
Limited Information Is Available on Enrollment in and
Characteristics of Enrollees in Alternatives to Health Insurance 20
Selected Sellers Used a Variety of Marketing Strategies and
Regulators Described Concerns about Marketing Practices of
Alternatives to Health Insurance 26
Agency Comments 34
Appendix I Ownership and Operations of Health Care Sharing Ministries
Reviewed 35
Appendix II GAO Contact and Staff Acknowledgments 39
Figures
Figure 1: Benefits and Features of Nine Selected Farm Bureau
Health Plans, Health Care Sharing Ministry (HCSM)
Memberships, and Fixed Indemnity Plans in 2022 12
Figure 2. Health Care Sharing Ministries’ Medical Cost Sharing
Processes 36
Contents
Page ii GAO-23-106034 Private Health Coverage
Abbreviations
ARPA American Rescue Plan Act of 2021
CMS Centers for Medicare & Medicaid Services
DOL Department of Labor
HCSM Health Care Sharing Ministry
NAIC National Association of Insurance Commissioners
PPACA Patient Protection and Affordable Care Act
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Page 1 GAO-23-106034 Private Health Coverage
441 G St. N.W.
Washington, DC 20548
July 26, 2023
The Honorable Robert C. “Bobby” Scott
Ranking Member
Committee on Education and the Workforce
House of Representatives
The Honorable Mark DeSaulnier
Ranking Member
Subcommittee on Health, Employment, Labor, and Pensions
Committee on Education and the Workforce
House of Representatives
Certain types of health coverage arrangements generally do not have to
adhere to federal and state requirements for health insurance, including
requirements established by the Patient Protection and Affordable Care
Act (PPACA). These coverage arrangements—which we refer to as
alternatives to health insurance—may advertise lower upfront costs and
greater flexibility to consumers than traditional health insurance options.
1
However, according to government and private industry stakeholders,
they may pose risks to consumers because they may lack the protections
imposed by PPACA requirements, such as guaranteed coverage for
maternity and mental health benefits. Because comprehensive
information is not reported to regulators about these alternatives to health
insurance, policymakers may lack a clear understanding of how they
operate, their role in the insurance market, and the full scope of their
potential effects on individual consumers and workforces.
As of 2023, there were several different types of products being sold as
alternatives to health insurance in the United States, including Farm
1
In this report, we use the term “alternatives to health insurance” to refer to alternatives to
comprehensive health insurance plans that are required to comply with PPACA and other
federal regulations for health insurance.
Letter
Page 2 GAO-23-106034 Private Health Coverage
Bureau health plans, health care sharing ministry (HCSM) memberships,
and certain fixed indemnity plans.
2
You asked us to examine plan features, enrollment, and marketing
associated with alternatives to health insurance. In this report we
describe:
1. the features and consumer protections associated with selected Farm
Bureau health plans, HCSM memberships, and fixed indemnity plans;
2. what is known about the number and characteristics of individuals and
groups who participate in Farm Bureau health plans, HCSM
memberships, and fixed indemnity plans; and
3. the marketing practices of selected sellers of Farm Bureau health
plans, HCSM memberships, and fixed indemnity plans and regulators’
views on the marketing practices of these types of products.
To describe what features and consumer protections are associated with
selected Farm Bureau health plans, HCSM memberships, and fixed
indemnity plans, we analyzed documentation for nine selected individual
plans and memberships:
• two Farm Bureau health plans,
• five HCSM memberships, and
• two fixed indemnity plans.
We selected these products to represent each of these three alternatives
to health insurance, as well as diversity in estimated enrollment size and
plan and membership features. We reviewed documentation describing
these products that we obtained from sellers’ websites or from the sellers
2
Fixed indemnity plans pay a fixed dollar amount on a per-period or per-incident basis.
While several different types of fixed indemnity plans exist, this report focuses on fixed
indemnity plans that are sold on the individual market and may resemble the design of a
health insurance plan, such as providing separate payment amounts for a variety of
medical services, provider networks, and deductibles. Other alternatives to PPACA-
compliant health insurance include short-term plans, a form of health coverage
traditionally designed to fill temporary gaps in health insurance, among others. See GAO,
Private Health Insurance: Limited Data Hinders Understanding of Short-Term Plans’ Role
and Value during the COVID-19 Pandemic, GAO-22-104683 (Washington, D.C.: May 31,
2022) for more information on short-term plans.
Page 3 GAO-23-106034 Private Health Coverage
themselves. We interviewed eight of the nine sellers about the features
and consumer protections found in their products.
3
We also interviewed officials from the Centers for Medicare & Medicaid
Services (CMS)—an agency within the Department of Health and Human
Services—and the Employee Benefits Security Administration—an
agency within the Department of Labor (DOL) about the federal oversight,
if any, of Farm Bureau health plans, HCSM memberships, and fixed
indemnity plans.
In addition to CMS, DOL, and the sellers of the selected plans and
memberships, we interviewed 23 stakeholders and stakeholder groups,
including officials from seven selected state insurance departments,
officials from two state attorneys’ offices, three individual policy
researchers and one policy research group consisting of three policy
researchers, and eight national organizations that have conducted work
relevant to this topic.
4
We selected the state insurance departments to
achieve variation in geographic region, the extent to which the three types
of alternatives to health insurance are regulated in the states, and other
unique factors such as specific reporting or disclosure requirements. We
identified other stakeholders through background research, our literature
search, and through recommendations from other stakeholders.
5
Specifically, the policy researchers we interviewed had written about or
studied alternatives to health insurance from calendar year 2018 through
2022. We identified them through the literature search described below
and other background research efforts and selected them to achieve
variation across the group with respect to expertise with each type of
alternative to health insurance, organizational affiliation, and policy
perspective. Stakeholders also included one industry expert with firsthand
3
One major seller of a fixed indemnity plan identified by a stakeholder declined to be
interviewed by us, although we obtained and analyzed a detailed plan document for this
work. We interviewed another seller of a fixed indemnity plan that did not provide us with a
detailed plan document; therefore, we did not analyze their plan for this work. Further,
after interviewing another seller of fixed indemnity plans and reviewing one of their
products, we determined their plan did not fit the type of fixed indemnity product we
examined for this work. Therefore, we did not analyze this plan’s documentation in this
report.
4
The states selected for this study are California, Colorado, Massachusetts, Nebraska,
Tennessee, Texas, and Virginia.
5
Organizations included, among others, the National Association of Insurance
Commissioners (NAIC), the American Academy of Actuaries, America’s Health Insurance
Plans, and the National Association of Benefits and Insurance Professionals.
Page 4 GAO-23-106034 Private Health Coverage
experience selling fixed indemnity plans and officials from one state-
based health insurance exchange.
We also conducted a literature search of publications on Farm Bureau
health plans, HCSM memberships, and fixed indemnity plans.
6
We
reviewed literature on these three types of alternatives to health
insurance published from 2017 through mid-2022 to learn about 1) the
number and characteristics of individuals who participate, 2) the risks and
benefits of these plans or memberships, 3) the extent to which they are
marketed to certain individuals and groups, and 4) typical features of
these plans or memberships. We used this literature search for
background information purposes, as well as to assist in identifying
stakeholders to interview.
To describe what is known about the number and characteristics of
individuals and groups who participate in Farm Bureau health plans,
HCSM memberships, and fixed indemnity plans, we reviewed any publicly
available information on the websites of sellers of Farm Bureau health
plans, HCSMs, and fixed indemnity plans pertaining to their enrollment.
Some sellers also provided us with enrollment estimates. We reviewed
background literature obtained through our literature search. We also
interviewed sellers of these three types of alternatives to health
insurance, state insurance departments, policy researchers, and other
stakeholders as outlined above about enrollment in these alternatives to
health insurance, trends in enrollment over time, and information on the
characteristics of those enrolled, including age, income, and health
status.
To describe the marketing practices of selected sellers of Farm Bureau
health plans, HCSM memberships, and fixed indemnity plans and
regulators’ views on the marketing practices of these types of products,
we reviewed marketing materials associated with the nine plans and
memberships we analyzed, such as advertisements on the sellers’
6
The search was done in several scholarly databases, including ones focused health care
and economic issues. Thirty-five citations were provided to the team, of which 10 were
used. The databases searched were: ABI/INFORM Professional Advanced, AgeLine,
BIOSIS Previews, British Library Inside Conferences, Business Continuity & Disaster
Recovery Reference Center, Business Source Corporate Plus, CINAHL Plus, EBSCOhost
eBook Collection, EconLit, Embase, EMCare, Finance Source, Google Scholar, H.W.
Wilson Index to Legal Periodicals and Books, Harvard Think Tank Search, HeinOnline,
Index to Legal Periodicals, Leadership & Management Source, MEDLINE, Newswires,
PAIS International, Risk Management Reference Center, SciSearch, Scopus, Social
SciSearch, SSRN, and Web News.
Page 5 GAO-23-106034 Private Health Coverage
websites. We also reviewed government publications detailing misleading
marketing associated with alternatives to health insurance. We
interviewed sellers of the selected products in our review about their
marketing practices. We also interviewed state insurance department
officials and other stakeholders, including the National Association of
Insurance Commissioners (NAIC), about the general marketing practices
of sellers of these alternatives to health insurance. Stakeholders included
officials from two state attorneys’ offices who had taken actions against
sellers of alternatives to health insurance for misleading marketing since
2020.
We conducted this performance audit from May 2022 to July 2023, in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
States are the primary regulators of private health insurance.
7
Health
insurance plans are also subject to certain federal standards and
minimum requirements, most notably those established in PPACA.
8
However, the alternatives to health insurance discussed in this report—
Farm Bureau health plans, HCSM memberships, and fixed indemnity
plans—are generally either exempted from PPACA’s requirements (fixed
indemnity plans that meet the requirements to qualify as an excepted
benefit) or otherwise are generally not subject to PPACA’s requirements
(Farm Bureau health plans and HCSM memberships). Instead, the
requirements applicable to these alternatives to health insurance vary
depending on the type of arrangement, state law, and federal law.
7
Among other activities, state insurance departments assess the financial solvency of
insurance companies—or the ability for a company to cover claims—and conduct market
conduct examinations, in which regulators review an insurance company’s marketing and
sales behavior to identify misleading or unfair practices. States have also established
guaranty funds, which are associations that are set up to pay claims of insurers that
become insolvent.
8
Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and
Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010).
Background
Page 6 GAO-23-106034 Private Health Coverage
• Farm Bureau health plans. These plans are only available to Farm
Bureau members, though an individual does not necessarily need to
be affiliated with the agricultural industry to become a member.
9
According to Farm Bureau officials, as of March 2023, six states have
enacted laws allowing the state’s Farm Bureau to sponsor health
benefits coverage that is not defined by the state as insurance and is
not subject to the state’s insurance laws, if specified requirements are
met: Tennessee, Iowa, Kansas, South Dakota, Texas, and Indiana.
10
These laws may impose minimum requirements for these plans,
including restrictions on waiting periods exceeding certain timeframes,
requirements for disclaimers that the plans are not insurance,
restricting sale of the plans exclusively to Farm Bureau members and
their families, and requirements for actuarial filings demonstrating the
Farm Bureau’s financial solvency.
• HCSM memberships. These memberships are offered by
organizations whose members agree to live by a statement of
religious or ethical beliefs and contribute monthly to pay for the
medical costs of other members.
11
Rather than indemnifying risk as
an insurer would, a typical HCSM oversees the voluntary sharing of
medical costs between members. According to the Commonwealth
Fund, as of 2018, thirty states specifically have exempted HCSMs
from their health insurance regulations.
12
These laws may require
HCSMs to meet certain requirements to operate in their state,
9
The American Farm Bureau Federation is a national agricultural advocacy organization
with offices in all 50 states and Puerto Rico.
10
The first state to enact such a law did so in 1993. The five other states have done so
more recently, between 2018 and 2021.
11
Traditionally, HCSMs are health sharing organizations based on adherence to a religion
or a set of religious beliefs. In recent years, HCSMs that do not require members to attest
to a statement of faith have also formed. These HCSM memberships may be structured
similarly to traditional HCSM memberships but may have members attest to a set of
ethical rather than religious beliefs. PPACA exempted members of eligible HCSMs from
the individual mandate to maintain minimum essential health coverage. For an individual
to qualify for an exemption from the individual mandate based on membership in an
HCSM, the HCSM had to meet several requirements, including being established before
1999. According to CMS officials, CMS maintained a list of HCSMs that met the PPACA
definition and were therefore approved for exemption purposes until late 2016, when the
process for obtaining an exemption as a member of an HCSM was delegated to the
Internal Revenue Service. In addition, the penalty for failing to maintain minimum essential
coverage was reduced to $0 effective in 2019.
12
See JoAnn Volk, Emily Curran, and Justin Giovanelli, Health Care Sharing Ministries:
What Are The Risks to Consumers and Insurance Markets? (New York, N.Y.:
Commonwealth Fund, 2018).
Alternatives to Health
Insurance and Applicable
Requirements
Page 7 GAO-23-106034 Private Health Coverage
including being a tax-exempt nonprofit and adding a written disclosure
that the facilitating of medical cost sharing is not insurance.
According to an HCSM trade group, there are nine HCSMs with open
membership that require members to attest to a statement of faith as
of May 2023. HCSMs currently operate or have operated in most
states.
13
(See app. I for more information on the ownership and
operations of HCSMs). Several states have taken action to obtain
more information on the HCSMs operating in their state. For example,
Colorado enacted a law in 2022 requiring HCSMs to annually submit
data on their operations in the state, including how much they collect
in payments and how much they pay out for claims.
14
• Fixed indemnity plans. These plans pay a fixed dollar amount on a
per-period or per-incident basis, regardless of the amount of
expenses incurred. Historically, they were used as a form of income
replacement during illness or hospitalization, but certain fixed
indemnity plans may resemble the design of a health insurance plan;
for example, employing provider networks, deductibles, or separate
payment amounts for a variety of medical services. Fixed indemnity
plans are permitted to be sold in the individual market as independent,
non-coordinated excepted benefits—that is, not subject to federal
health insurance requirements—when they meet certain
requirements. In the individual market, these requirements include
providing a notice prominently displayed in the application materials
informing potential policyholders that the coverage is not a substitute
for major medical coverage.
15
According to NAIC, states generally
regulate fixed indemnity plans as excepted benefits, and each state
insurance department must ensure that fixed indemnity plans sold in
its state adhere to the state’s requirements. For example, one seller of
13
In 2016, CMS reported that there were 108 HCSMs operating in the United States.
Many HCSMs are localized to small religious communities or organizations, and
memberships are exclusively offered to members of that community. Enrollment in these
HCSMs is unknown and likely low according to an HCSM trade group with which we
spoke.
14
§ 10-16-107.4, C.R.S. (2022).
15
42 U.S.C. § 300gg–91(c)(3)(B); 45 C.F.R. § 148.220(b)(4). In addition to requirements
under PPACA, excepted benefits are not subject to other federal consumer protections
and requirements that apply to health insurance coverage, including certain requirements
under the Health Insurance Portability and Accountability Act of 1996, Pub. L. No.
104-191; the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity
Act of 2008, Pub. L. No. 110-343; and division BB of the Consolidated Appropriations Act,
2021, which includes the No Surprises Act, Pub. L. No. 116-260 (2020).
Page 8 GAO-23-106034 Private Health Coverage
fixed indemnity plans we spoke with told us they have been approved
to sell these plans in 18 states as of March 2023.
Unlike the alternatives to health insurance described above, health
insurance plans sold on the individual market are generally subject to
minimum requirements and consumer protections established in PPACA.
For the purposes of this report, we refer to these plans as “PPACA-
compliant plans.”
16
For example, beginning in 2014, PPACA required the
following of such plans.
• Guaranteed issue. Plans must generally accept every applicant who
applies for health coverage, as long as the applicant agrees to the
terms and conditions of the insurance offer.
• Guaranteed renewability. Plans must generally renew coverage at
the option of the enrollee.
• Coverage of 10 essential health benefits. These benefits are
ambulatory patient services (outpatient services), emergency
services, hospitalization, maternity and newborn care, mental health
and substance use disorder services (including behavioral health
treatment), prescription drugs, rehabilitative and habilitative services
and devices, laboratory services, preventive and wellness services
and chronic disease management, and pediatric services (including
oral and vision care).
• Prohibition of lifetime or annual dollar benefit limits. Plans are
prohibited from imposing lifetime or annual dollar benefit limits on
expenses relating to the ten essential health benefits.
• Coverage of pre-existing conditions. Plans are prohibited from
excluding coverage for pre-existing conditions, or imposing waiting
periods for benefits related to these conditions.
• Rating restrictions. Plans can adjust premiums based only on
certain factors, such as geographic area, age, and tobacco use, and
amounts by which rates may vary is limited in certain circumstances.
17
16
In this report we use the phrase “PPACA-compliant plans” to mean plans that must meet
federal requirements for individual health insurance coverage. We did not evaluate the
legal compliance of any plans for purposes of this report.
17
See Pub. L. No. 111-148, § 1201, 124 Stat. 119, 154-61 (codified, as amended, at 42
U.S.C. §§ 300gg, 300gg-1, 300gg-3, 300gg-6). Rating restrictions prohibit insurers in the
individual market from adjusting an individual’s health insurance premiums based on an
individual’s health status.
PPACA-Compliant Plans
and Applicable
Requirements
Page 9 GAO-23-106034 Private Health Coverage
Additionally, beginning in 2011, PPACA-compliant plans were required to
spend at least 80 percent of their premium revenue on medical claims
and certain other non-claims costs, such as quality improvement
activities. These are known as medical loss ratio requirements.
PPACA also established health insurance marketplaces—or exchanges—
through which consumers can shop for private health insurance plans.
18
Some consumers who purchase health insurance on a PPACA exchange
may also be eligible for subsidies to help offset the cost of their
premiums. The American Rescue Plan Act of 2021 (ARPA) expanded
eligibility for subsidies to higher income individuals and increased
subsidies for lower income individuals beginning in 2021.
19
In 2022, the
Inflation Reduction Act extended these premium subsidies through
2025.
20
Individuals who do not enroll in PPACA-compliant plans, but instead
enroll in the alternatives to health insurance discussed in this report, are
not included in PPACA individual market risk pools, which comprise the
population that buys PPACA-compliant plans in each state. To the extent
that individuals purchase health insurance alternatives instead of PPACA
exchange plans, this could influence the cost of premiums set by
companies that sell PPACA-compliant plans and the amount of federal
subsidies disbursed under PPACA. For example, if relatively healthy
individuals choose alternatives to health insurance instead of PPACA-
compliant plans, leaving fewer healthy individuals purchasing PPACA-
compliant plans, it could result in higher premiums for PPACA-compliant
plans and, in turn, higher federal spending on subsidies.
18
PPACA requires plan sold on the exchanges to be generally marketed in four tiers—
Bronze, Silver, Gold, and Platinum—which allows consumers to compare the relative
benefit value of each plan.
19
Pub. L. No. 117-2, § 9661, 135 Stat. 4, 182 (codified as amended at 26 U.S.C. § 36B).
20
Pub. L. No. 117-169, § 12001, 136 Stat. 1818, 1905 (2022).
Page 10 GAO-23-106034 Private Health Coverage
Our analysis of documentation for our nine selected health plans and
memberships (two Farm Bureau health plans, five HCSM memberships,
and two fixed indemnity plans) found that these plans and memberships
varied in their features.
21
While all of these plans and memberships
included some coverage for hospital services and offices visits for illness
or injury, their coverage for routine examinations, preventative
screenings, prescription drugs and other types of services varied. For
example, both of the Farm Bureau health plans we reviewed covered
routine wellness office visits, while three of the five HCSM memberships
we reviewed did not. Both of the fixed indemnity plans we reviewed
covered these visits, although the benefits varied depending on the level
of coverage selected by the enrollee.
22
The nine plans and memberships we reviewed varied in their use of
waiting periods, as some had waiting periods to access certain benefits,
such as for wellness services or maternity benefits.
23
For example, one
21
Unlike Farm Bureau plans and fixed indemnity plans, officials from all of the HCSMs we
spoke with told us they do not use terms commonly associated with insurance—such as
coverage, premiums, plans, or plan documentation—in an effort to distinguish themselves
from health insurance products. In this report, we endeavor to use the terms HCSM may
use when describing their memberships that may generally align with these common
terms, including sharing, monthly contributions, memberships, and sharing guidelines.
22
Wellness visits are required to be included in health insurance plans under PPACA as
one of the 10 essential health benefits.
23
Waiting periods are periods of time in which enrollees are not able to access benefits or
make claims or sharing requests related to all or certain services. PPACA-compliant plans
in the individual market do not impose waiting periods, though the date on which coverage
takes effect may vary depending on when an individual enrolls in a plan.
Benefits and Other
Features of Selected
Plans and
Memberships Varied
and Officials Say
These Product Types
Generally Have Few
Consumer
Protections
Plans and Memberships
Reviewed Generally
Covered Hospital Stays
and Certain Office Visits,
but Coverage for
Preventative Screenings,
Prescription Drugs and
Other Types of Services
Varied
Page 11 GAO-23-106034 Private Health Coverage
fixed indemnity plan had a 30-day waiting period for wellness services in
most states and two HCSM memberships had 60- or 90-day waiting
periods for coverage of medical expenses other than accidents, injuries,
or acute illnesses. Additionally, one Farm Bureau and all five HCSM
memberships we reviewed had waiting periods for maternity services.
Enrollees in these plans and memberships are fully responsible for any
costs relating to these services that occur during these waiting periods,
according to plan documents and HCSM guidelines that we reviewed. For
example, one HCSM’s sharing guidelines state that if a member is
diagnosed with cancer during the waiting period, any expenses related to
the diagnosis and treatment of that cancer are ineligible for sharing. See
figure 1 for more examples of the variation in features among the plans
and memberships that we reviewed.
Page 12 GAO-23-106034 Private Health Coverage
Figure 1: Benefits and Features of Nine Selected Farm Bureau Health Plans, Health Care Sharing Ministry (HCSM)
Memberships, and Fixed Indemnity Plans in 2022
a
The health care sharing ministries (HCSM) from which we gathered information did not use
insurance terms, such as plan or premium, when describing their HCSM memberships.
b
Although one of the fixed indemnity plan sellers declined to speak with us, we obtained and analyzed
a detailed plan document for their product.
Page 13 GAO-23-106034 Private Health Coverage
c
Benefits are subject to a waiting period.
d
Not available for all plan tiers or membership levels.
e
Tests, such as colonoscopies or mammograms that screen individuals for possible health issues.
f
Incident-related prescription drugs only; maintenance drugs excluded.
g
Subject to annual benefit maximum.
h
The maximum dollar amount that a plan or membership will pay for a discrete incident, in a calendar
year, or for the covered person’s lifetime, respectively.
While some of the benefits and associated waiting periods of the plans
and memberships we reviewed varied, documentation for these plans and
memberships indicated that most denied or delayed coverage for pre-
existing medical conditions and imposed benefit limits. Specifically,
documentation we reviewed suggested that plans and memberships may
deny coverage of certain claims or medical costs that would otherwise be
covered because of restrictions on covering pre-existing conditions or
because an individual exceeded a benefit limit set by the seller.
Denials for and restrictions on pre-existing conditions.
Documentation for both Farm Bureau health plans, both fixed indemnity
plans, and one HCSM membership that we reviewed indicated that they
may deny coverage to applicants based on their health history in some
instances, leaving those with certain pre-existing conditions unable to
access coverage through these plans and memberships.
24
Further, once
an applicant is accepted, documentation for all but one of the plans and
memberships we reviewed showed that they excluded or delayed
coverage for pre-existing conditions.
25
For example:
• One HCSM membership excluded costs due to “active” pre-existing
conditions, or conditions that need treatment other than routine
medications, from being eligible to be shared by the HCSM.
24
Officials from another HCSM told us that they will deny applicants if they report tobacco
use or substance abuse in the 12 months prior to applying.
25
PPACA-compliant plans are required to cover pre-existing conditions, including
pregnancies. The one plan in our selection that does offer immediate coverage for pre-
existing conditions told us they will deny coverage to individuals with certain pre-existing
conditions.
Page 14 GAO-23-106034 Private Health Coverage
• The other HCSM memberships we reviewed contained 12- to 36-
month waiting periods before they would partially or fully share costs
associated with pre-existing conditions.
26
• One Farm Bureau had a 6- month waiting period for coverage of pre-
existing conditions, while both fixed indemnity plans we reviewed had
12- month waiting periods.
27
Under these alternatives to health insurance, individuals with pre-existing
conditions would be responsible for any costs related to those conditions
during these waiting periods.
28
Benefit limits. Of the nine plans and memberships we reviewed, eight
had dollar benefit limits of some kind. These limits were either per-
incident, annual, or lifetime limits, which represent the maximum dollar
amount a plan or membership would pay for a discrete incident, in a
calendar year, or for the covered individual’s lifetime, respectively.
29
For
example, one HCSM membership we reviewed had a per-incident limit of
$125,000. Some plans and memberships had multiple types of benefit
limits. For example, one fixed indemnity plan we reviewed had both an
annual and a lifetime benefit limit. Once these benefit limits are reached,
individuals are fully responsible for any medical costs that subsequently
occur.
The plans and memberships that we reviewed also differed in other
aspects of their features, including the use of provider networks, the
approaches they use to pay for services, the factors that influence
26
These costs would otherwise be eligible for sharing if they were not associated with a
pre-existing condition.
27
The Department of Health and Human Services estimated in 2017 that as many as 51
percent of non-elderly Americans – 133 million individuals – had a pre-existing condition
that could have resulted in a denial of coverage or elevated premium rates in the
individual health insurance market prior to the enactment of PPACA. See Department of
Health and Human Services, Office of the Assistant Secretary for Planning and
Evaluation, Health Insurance Coverage for Americans with Pre-Existing Conditions: The
Impact of the Affordable Care Act (Jan. 5, 2017). Non-elderly individuals are defined as
individuals age 0 to 64 who did not have Medicare coverage in any month.
28
Two HCSMs had processes for members to voluntarily make additional donations to
cover the medical costs of others that would otherwise be ineligible for sharing, including
for pre-existing conditions.
29
PPACA-compliant plans are prohibited from imposing lifetime or annual dollar benefit
limits on expenses relating to the 10 essential health benefits.
Page 15 GAO-23-106034 Private Health Coverage
premiums or monthly contributions, and the use of plan tiers or
membership levels.
Provider networks and discounts. The nine plans and memberships we
reviewed differed in their use of provider networks.
30
Some of the
alternatives we reviewed provided discounts for using network providers,
consistent with the use of provider networks in some PPACA-compliant
health insurance plans. For example:
• While both Farm Bureau plans we reviewed used provider networks,
one offered out-of-network benefits only for emergency services.
• One HCSM membership and one fixed indemnity plan we reviewed
had optional provider networks. In those arrangements, enrollees
using in-network providers could receive reduced or discounted
medical bills.
The other five plans and memberships did not have provider networks.
However, one HCSM’s membership guidelines stated that although they
have no required provider network, they had “HCSM friendly” providers
with whom they have “established pre-determined discount agreements.”
Four HCSMs that did not have established provider networks encouraged
individuals to compare prices and choose providers who offered services
at lower costs. For example, officials from one of these HCSMs told us
that members receive access to an online tool that allows them to
compare provider rates in their area.
Payment Systems. The plans and memberships varied in the payment
systems they used to cover medical costs. Both of the Farm Bureau
health plans we reviewed processed medical bills directly from providers,
which is how PPACA-compliant health insurance plans typically operate.
According to HCSM officials, the five HCSMs we reviewed operated by
either facilitating medical cost sharing directly from member to member,
or by collecting contributions from members and distributing them to other
members or to providers (see app. I for more information on how HCSMs
share medical costs). Both of the fixed indemnity plans we reviewed paid
a fixed amount, regardless of the actual cost of the service and whether
the service was covered by any other insurance plan or form of health
coverage.
30
A provider network is a list of the doctors, hospitals, and other health care providers
contracted to provide medical care to plan members.
Page 16 GAO-23-106034 Private Health Coverage
Factors influencing premium rates or monthly contributions. The
plans and memberships we reviewed also differed in the factors they
used to determine premium rates or monthly contributions, including their
use of health status and gender as factors.
31
Officials from both Farm
Bureaus told us they used health status, age, family size, and tobacco
use to determine premiums, with one also using gender.
32
Sharing
guidelines from three HCSMs stated that family size is used to set
monthly contribution amounts, with two of the three also using age.
Officials from the other two HCSMs we reviewed stated that they also use
age and family size, with one also using a member’s state of residence.
Additionally, although only one of the HCSMs we reviewed used tobacco
use as a factor to determine monthly contributions, the other four HCSMs
required members to abstain from using tobacco, with one excluding
health issues related to tobacco use from sharing. One fixed indemnity
plan document states that they use health status, age, gender, and family
size, while officials from the other seller of these plans that we
interviewed told us they use health status, age, and family size.
Plan tiers and membership levels. All of the plans and memberships
that we reviewed offered multiple tiered options. These tiers differ in
several ways, including by monthly premiums or contributions, benefit
levels, or deductibles.
33
For example, one fixed indemnity plan we
reviewed had twelve plan options that a consumer could choose from,
each with different levels of benefits. One HCSM membership offered
Gold, Silver, and Bronze membership levels, each with differing amounts
that enrollees must pay before the HCSM will begin sharing their medical
bills.
34
Additionally, this HCSM also restricted some services, such as
31
PPACA-compliant plans are prohibited from considering health status or gender in
setting premiums. PPACA-compliant plans may adjust premiums based only on
geographic area, age, tobacco use, and family size, but the amount by which rates may
vary based on those factors is limited.
32
Officials from one of these Farm Bureaus told us they charge a family rate regardless of
the size of the family or number of dependents.
33
All of the HCSMs we reviewed specified an amount of money that members must pay
towards their own medical costs before the HCSM will share their medical costs, similar to
the insurance concept of a deductible. Depending on the HCSM membership, this amount
is either on a per-incident or annual amount.
34
Two stakeholders we spoke with told us that some alternatives to health insurance may
resemble PPACA exchange plans in how they are structured, including in offering tiers
with terms similar to PPACA exchange plans, which are marketed in four categories:
Bronze, Silver, Gold, and Platinum. In addition, catastrophic plans may be offered in the
individual market. However, HCSM memberships are not required to follow PPACA
standards of coverage for the tier levels.
Page 17 GAO-23-106034 Private Health Coverage
maternity benefits or emergency transportation benefits, for members in
the Gold membership level.
The plan documents and HCSM membership guidelines for all nine
products we reviewed contained some form of a written disclosure that
the product was not health insurance. For example, one Farm Bureau
plan document stated that their coverage is “not required to comply with
certain federal or state market requirements for health insurance,
principally those in the Affordable Care Act [PPACA].” One HCSM’s
membership guidelines contained a disclosure stating that they do not
offer an insurance product and that neither members nor the HCSM are
under a legal obligation to pay the costs of the medical bills of other
members (see sidebar for an example of a full HCSM disclosure). A
disclosure on a fixed indemnity plan document stated that the product
provides limited benefits, that it is a supplement to health insurance, and
that it is not a substitute for minimum essential coverage as defined by
PPACA.
However, some literature we reviewed and stakeholders we interviewed
stated that written disclosures may not be an adequate means of
educating consumers about the limitations or risks of alternatives to
health insurance. Some literature we reviewed found that some
individuals believed they had purchased insurance through an HCSM,
despite the fact that the HCSM products contained a written disclosure
that the product was not insurance.
35
Further, officials from one state
insurance department told us these disclosures are not adequate to
protect consumers from the risks of alternatives to health insurance
because they may be presented in a way that lessens the impact of the
disclosure. Additionally, three stakeholders we interviewed told us they
did not think written disclosures were an adequate means of educating
consumers about this coverage because many consumers do not read
the disclosures or do not understand them because of a general lack of
knowledge about health insurance. For example, an industry expert on
fixed indemnity plans told us that these plans may have a disclosure
stating that they do not cover all 10 essential health benefits required by
PPACA, but this may not be helpful because many consumers are not
35
Relias Media, “It Is Not Insurance, It Just Looks Like It: ‘We Make Them Self-Pay’”
(Morrisville, N.C.: Relias Media, Aug. 1, 2019), accessed June 22, 2022,
https://www.reliasmedia.com/articles/144751-it-is-not-insurance-it-just-looks-like-it-we-
make-them-self-pay and JoAnn Volk, Emily Curran, and Justin Giovanelli, Health Care
Sharing Ministries: What Are the Risks to Consumers and Insurance Markets? (New York,
N.Y.: Commonwealth Fund, 2018).
Selected Plans and
Memberships All Disclose
They Are Not Health
Insurance; State Officials
Say Alternatives to Health
Insurance Generally Have
Few Consumer
Protections
Example of a Health Care Sharing Ministry
(HCSM) Membership Disclosure
“NOTICE: [HCSM] is not insurance or an
insurance policy nor is it offered through an
insurance company. Whether anyone
chooses to assist you with your medical bills
will be totally voluntary, as no other member
will be compelled by law to contribute toward
your medical bills. As such, [HCSM] should
never be considered to be insurance. Whether
you receive any payments for medical
expenses and whether or not [HCSM]
continues to operate, you are always
personally responsible for the payment of your
own medical bills. [HCSM] is not subject to the
regulatory requirements or consumer
protections of your particular State’s
Insurance Code or Statutes.”
Source: HCSM membership guidelines. | GAO-23-106034
Page 18 GAO-23-106034 Private Health Coverage
familiar with those benefits. Further, one policy research group also told
us that consumers who purchase alternatives to health insurance over the
phone may make payments without ever seeing a written disclosure.
According to four state insurance department officials we interviewed,
alternatives to health insurance generally include few, if any, consumer
protections, which are practices or regulations that safeguard the
interests of consumers. These plans and memberships are not required
to adhere to, and may lack, the types of consumer protections that apply
to PPACA-compliant, state-regulated health insurance plans. For
example:
• sellers of plans and memberships may impose limitations on coverage
for pre-existing conditions or implement annual lifetime dollar limits on
certain benefits (see fig. 1 and discussion above), and
• sellers of plans and memberships generally are not subject to the
same state oversight of financial solvency and market conduct as
health insurance companies, such as requirements that consumers
are charged fair and reasonable prices and protections against
insurers that fail to operate in ways that are legal and fair to
consumers.
36
However, although they are not required to do so, some sellers told us
they have adopted some consumer protections similar to a PPACA-
compliant, state-regulated health insurance plan. For example, officials
from one Farm Bureau told us they hold funds in reserve in order to
maintain financial solvency and avoid a situation where they cannot pay
claims associated with their health plans.
Officials from three of the seven state insurance departments we
interviewed told us that HCSM memberships do not guarantee that
medical bills for covered benefits will be paid.
37
Membership guidelines
from all of the HCSM memberships we reviewed also stated that all
member contributions are completely voluntary and that members are
ultimately responsible for any unpaid medical bills. According to some
literature we reviewed, HCSMs leave their members at risk of being
financially responsible for paying for medical care for conditions either not
36
Although state regulators can exercise oversight over fixed indemnity plans, as excepted
benefits they are not subject to the same standards as PPACA-compliant plans.
37
Since HCSMs are not regulated as health insurance, they are not subject to state
financial solvency requirements for insurers.
Page 19 GAO-23-106034 Private Health Coverage
covered, covered only up to a benefit limit, or if the HCSM has inadequate
funds to cover the benefits.
38
The absence of a guarantee that medical costs will be paid could leave
consumers with significant medical bills to pay on their own.
39
Further,
unlike companies that sell health insurance plans, HCSMs are generally
not required by states to meet financial reporting standards to ensure they
have sufficient funds to pay members’ medical costs.
40
Therefore, if an
HCSM ceases operations, it could also leave members responsible for
unpaid medical bills. For example, during bankruptcy proceedings, a court
document revealed that one HCSM likely had over $100 million in unpaid,
eligible claims.
41
Additionally, alternatives to health insurance are not required to meet
PPACA’s medical loss ratio requirements.
42
Medical loss ratio
requirements are a key consumer protection because they cap profits for
companies that sell health insurance and ensure more of the enrollees’
money is spent on medical care, according to the Commonwealth Fund.
43
38
See Kevin Lucia, Justin Giovannelli, Sabrina Corlette et al., State Regulation of
Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual
Market (New York, N.Y.: Commonwealth Fund, 2018) and Partnership to Protect
Coverage, “Under-Covered: How “Insurance-Like” Products Are Leaving Patients
Exposed” (Mar. 2021), accessed May 16, 2023, https://nami.org/NAMI/media/NAMI-
Media/Public%20Policy/Undercovered_Report_03252021.pdf.
39
Enrollees in PPACA-compliant plans may also be liable for unpaid medical bills to the
extent that they incur costs that are not covered by their plan.
40
Large- and medium-sized insurers and insurance groups are required to regularly file an
assessment with state insurance regulators of their own current and future risk that could
have an impact on an insurer’s ability to meet its policyholder obligations, including paying
insurance claims. Since state insurance regulators do not supervise HCSMs, they are
exempt from this reporting requirement.
41
In contrast, unpaid claims from a state-regulated insurance company that became
insolvent would be covered by a state guaranty fund.
42
Medical loss ratios are the percentage of premium dollars that private insurers must
spend on their enrollees’ medical care claims and activities to improve health care quality
as opposed to what they spend on administrative costs and fees, as well as profits
earned. PPACA requires individual and small group health plans to have a minimum
medical loss ratio of 80 percent and large group health plans to have a minimum loss ratio
of 85 percent.
43
Mark A. Hall and Michael J. McCue, How the ACA’s Medical Loss Ratio Rule Protects
Consumers and Insurers Against Ongoing Uncertainty (New York, NY: Commonwealth
Fund, July 2019).
Page 20 GAO-23-106034 Private Health Coverage
Information on medical loss ratios is generally not available for
alternatives to health insurance, according to two stakeholders we
interviewed. Instead, available data may include the proportion of
member contributions spent on medical bills versus that which is spent on
administrative expenses such as staff salaries and advertising, or a
simple loss ratio, which represents the ratio of expenses or losses to
premiums earned. For example, one Farm Bureau we spoke with told us
their health plans operated with a loss ratio of between 85 and 90
percent. Four HCSMs we interviewed reported a range of 57 percent to
94 percent in the proportion of member contributions spent on medical
needs versus on administrative expenses.
44
Information is limited about overall enrollment in Farm Bureau health
plans, HCSM memberships, and fixed indemnity plans. Officials from
most of the seven state insurance departments we spoke with told us
they do not collect data on alternatives to health insurance.
45
Documents
we reviewed as well as sellers and stakeholders we interviewed provided
anecdotal estimates of enrollment and trends in enrollment in these three
44
The sellers of fixed indemnity plans that we spoke to did not share any information on
their loss ratios. They told us they had no data to share, and that they were direct sellers
of the plans, which were underwritten by third party carriers. States may set loss ratio
requirements for fixed indemnity plans. For example, officials from one state insurance
department told us they require these plans to have a loss ratio of at least 55 percent.
Issuers may submit loss ratio information in NAIC’s System for Electronic Rate and Form
Filings.
45
Several states have taken action to obtain more information on the HCSMs operating in
their state. For example, Massachusetts began requiring HCSMs to file enrollment data
with the state annually in 2020. A Colorado law required HCSMs operating within the state
to file similar enrollment information beginning in 2022.
Limited Information Is
Available on
Enrollment in and
Characteristics of
Enrollees in
Alternatives to Health
Insurance
Enrollment
Page 21 GAO-23-106034 Private Health Coverage
types of alternatives to health insurance, but information availability varied
by each type.
46
• Farm Bureau health plans. According to Farm Bureau officials, total
national enrollment in Farm Bureau health plans was approximately
130,000 as of March 2023, with one state’s Farm Bureau accounting
for over 75 percent of this enrollment.
47
• HCSM memberships. According to HCSM documentation and HCSM
officials, total national enrollment in the nine open HCSMs that
required members to attest to a statement of faith was approximately
1.2 million as of March 2023.
48
The HCSM with the highest enrollment
told us they had approximately 392,000 members, and the HCSM with
the lowest enrollment told us they had fewer than 5,000 members.
Four stakeholders, including officials from two of seven state
insurance departments and one seller, also highlighted the growth of
HCSMs that do not require members to attest to a statement of faith,
the total number of which was unknown. While total national
enrollment in these HCSMs was also unknown, one reported about
40,000 individual members on its website in October 2022.
• Fixed indemnity plans. Comprehensive enrollment data on fixed
indemnity plans were not available. The two sellers of fixed indemnity
plans we interviewed told us these products were a relatively small
part of their overall product line. One seller of these plans told us they
had 6,000 enrollees across 18 states as of March 2023. Another told
us they began selling their fixed indemnity products in 2021, and said
they had sold about 1,100 of these products as of March 2023.
46
All of the sellers we spoke with told us they only enroll individuals or families and do not
work with employers to offer their product as employee health coverage, though officials
from one Farm Bureau health plan and all five HCSMs acknowledged there may be limited
instances of employers facilitating or contributing to monthly payments for this coverage.
For example, officials from one HCSM we spoke with estimated that a little over 1,000 of
their members were enrolled through employers, the majority of which were entities with
between two and ten employees. Officials from this HCSM told us they believed a small
minority of employers subsidized part of the HCSM’s membership costs.
47
Enrollment in individual state Farm Bureau health plans ranged from 832 to around
100,000 as of March 2023.
48
According to an HCSM trade group, there were nine HCSMs with membership open to
the public that required members to attest to a statement of faith in 2023. CMS reported
that there were a total of 108 HCSMs operating in the United States in 2016, the majority
of which were private, community-based HCSMs. Enrollment in these organizations is
unknown and likely low according to an HCSM trade group we spoke with.
Page 22 GAO-23-106034 Private Health Coverage
Despite a lack of comprehensive data, literature we reviewed as well as
sellers and stakeholders we interviewed indicated that enrollment in
alternatives to health insurance may have grown between the enactment
of PPACA in 2010 and 2020. Specifically, consumer interest in lower-cost
alternatives to health insurance may have been greater when premiums
were higher and there was less stability in the PPACA exchanges in the
mid-2010s, according to literature we reviewed and one seller and
stakeholder we interviewed.
49
Further, officials from one HCSM told us
that enrollment in HCSMs may have been higher during this period
because HCSM membership could exempt an individual from PPACA’s
requirement to maintain minimum essential coverage.
50
However, enrollment in alternatives to health insurance may have
declined in 2021 and 2022. Specifically, according to two sellers and two
stakeholders, expanded subsidies through ARPA may have made
PPACA-compliant plans purchased through the exchanges more
affordable for many consumers.
51
This may have decreased enrollment in
alternatives to health insurance in 2021 and 2022. For example, officials
from one Farm Bureau we spoke with told us enrollment in their health
plans has been relatively consistent since they began offering the plans in
2019, but that enrollment declined slightly in 2021 and 2022 due to
subsidy expansions. Officials from an HCSM trade group we spoke with
estimated that there has been an overall reduction of 100,000 to 150,000
enrollees in HCSMs due to these expanded subsidies. One of the sellers
of a fixed indemnity plan we spoke with also told us these expanded
subsidies likely affected their sales, but could not quantify the effect.
The lack of comprehensive enrollment data for Farm Bureau health plans,
HCSM memberships, and fixed indemnity plans makes it difficult to
assess their effect—if any—on premiums for health insurance plans,
including PPACA exchange plans. Research by the Commonwealth Fund
49
See Sabrina Corlette, Erik Wengle, Ian Hill, Olivia Hoppe, Perspective from Brokers:
The Individual Market Stabilizes While Short-Term and Other Alternative Products Pose
Risks (Washington, D.C.: Urban Institute, April 2020).
50
As previously noted, the penalty for failure to comply with this requirement was reduced
to $0 beginning in 2019.
51
ARPA expanded eligibility for subsidies to individuals with higher incomes and increased
subsidies for lower income individuals. Pub L. No. 117-2, § 9661, 135 Stat. 4, 182
(codified as amended at 26 U.S.C. § 36B). In 2022, the Inflation Reduction Act extended
these subsidies through 2025. Pub. L. No. 117-169, § 12001, 136 Stat. 1818, 1905
(2022).
Page 23 GAO-23-106034 Private Health Coverage
and Urban Institute has suggested that alternatives to health insurance
could draw healthy consumers out of state PPACA exchange plans,
which could negatively affect risk pools and potentially increase premiums
for health insurance plans sold on the PPACA exchanges.
52
Officials from
one of the seven state insurance departments we spoke with told us that
they believed HCSMs were negatively affecting their state’s PPACA risk
pool because enrollment in HCSMs was relatively high compared to
PPACA exchange enrollment, and they believed enrollees in HCSMs
were younger and healthier than the general population. Officials from
another state insurance department told us that alternatives to health
insurance did not currently affect their risk pools, but said that they were
concerned about the growth of certain HCSMs that might target young
and healthy consumers in the state.
However, officials from five state insurance departments, a seller, and a
stakeholder told us they could not estimate the effect these alternatives
had on PPACA risk pools and premiums because of a lack of data, or
stated that these alternatives likely have little to no effect. For example,
officials from one state insurance department told us that enrollment in
these alternatives is too small to affect the risk pools in their state.
Officials from the American Academy of Actuaries told us that alternatives
to health insurance do not appear to have a negative effect on risk pools.
They estimated that enrollment in HCSMs and Farm Bureau health plans
combined likely amounted to less than two percent of the overall health
coverage market. Further, officials from the Farm Bureau with the largest
health plan enrollment told us that market research they have conducted
suggests that their plans do not have an effect on their state’s PPACA
exchange or risk pool, and stated that very few of their customers leave a
PPACA exchange plan to purchase a Farm Bureau health plan. They told
us most of their customers are either uninsured or they are leaving
employers offering group health insurance to work in the agricultural
industry.
Most of the literature we reviewed as well as stakeholders and sellers we
interviewed reported that little is known about the demographic and
personal characteristics of enrollees in alternatives to health insurance,
52
A health insurance risk pool is a group of individuals whose medical costs are combined
to calculate premiums; each state has a risk pool associated with its individual exchange.
See JoAnn Volk, Emily Curran, and Justin Giovanelli, Health Care Sharing Ministries:
What Are The Risks to Consumers and Insurance Markets? (New York, N.Y.:
Commonwealth Fund, 2018) and Kevin Lucia, Sabrina Corlette, Dania Palanker, and
Olivia Hoppe, Views from the Market: Insurance Brokers’ Perspectives on Changes to
Individual Health Insurance (Washington, D.C.: Urban Institute, 2018).
Characteristics of
Enrollees
Page 24 GAO-23-106034 Private Health Coverage
such as age, income, and pre-existing condition status. However, some of
the sellers, state insurance departments, and other stakeholders we
interviewed provided anecdotal information.
• Health status. Six stakeholders stated that enrollees in alternatives to
health insurance tend to have better health status than the general
population. According to three of these stakeholders, this may be
because many of these alternatives use underwriting—the practice of
determining cost or eligibility for health coverage based on health
status. Healthier individuals may also be more likely to enroll in
coverage with less robust benefits, according to some literature we
reviewed. Officials from two HCSMs provided information on the
proportion of their enrollees with at least one pre-existing condition;
one told us that 40 to 50 percent of its applicants have at least one
pre-existing condition; the other told us 23 percent of its members
have a pre-existing condition.
53
• Employment. Two sellers and two stakeholders we interviewed said
that enrollees in alternatives to health insurance tended to be self-
employed or employed in the gig economy because these consumers
lack an offer of employer sponsored insurance.
54
Sixteen percent of
Americans have earned money from an online gig platform as of
2021, and they tended to have lower incomes than other American
adults, according to the Pew Research Institute.
55
However, eight
sellers told us they did not collect employment or income information
from their enrollees. The only seller that provided information related
to their members’ income was one HCSM. Officials from this HCSM
53
A 2017 issue brief from the Department of Health and Human Services estimated that
up to 51 percent of non-elderly Americans have a pre-existing condition. See Department
of Health and Human Services, Assistant Secretary for Planning and Evaluation, Health
Insurance Coverage for Americans with Pre-Existing Conditions: The Impact of the
Affordable Care Act (Washington, D.C.: January 2017).
54
The Bureau of Labor Statistics defines a gig as a single project or task for which a
worker is hired, often through a digital marketplace, to work on demand. Department of
Labor, Bureau of Labor Statistics, “Working in a Gig Economy,” Career Outlook
(Washington, D.C.: May 2016), accessed May 11, 2023,
https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm.
55
Monica Anderson, Colleen McClain, Michelle Faverio, and Risa Gelles-Watnick, The
State of Gig Work in 2021 (Washington, D.C.: Pew Research Center, 2021).
Page 25 GAO-23-106034 Private Health Coverage
told us they conducted a survey of their members in 2020 and found
that 42 percent had income below 200 percent of the poverty line.
56
• Coverage preference. Two sellers we spoke with stated that
consumers who select alternatives to health insurance may be those
interested in health coverage that does not have a provider network.
One policy researcher told us these consumers may want to purchase
coverage outside of the open enrollment period for PPACA exchange
plans.
57
• Personal Values. Five sellers and two stakeholders we interviewed
stated that certain consumers are drawn to alternatives to health
insurance for personal or values-based reasons. For example,
officials from both Farm Bureaus we interviewed emphasized the
importance of the Farm Bureau’s closeness to the rural and
agricultural communities of its health plan members. Further, some
literature we reviewed suggested that many HCSM members value
the faith-based community of like-minded individuals provided by their
membership, and find that this factor overcomes limitations, such as
delays in payment, associated with this form of coverage. For
example, this literature suggested that some enrollees in HCSMs
appreciate that, unlike with health insurance, their monthly
contributions will not be spent on health care costs incurred by
individuals who abuse drugs or alcohol or otherwise live an unhealthy
lifestyle because of the membership requirements of HCSMs.
58
56
Individuals or families with income above 100 percent but below 200 percent of the
poverty line would generally meet the income eligibility requirements to receive subsidies
for coverage purchased through the exchanges, or, depending on the state in which they
reside, some individuals and families below 200 percent of the poverty line may be eligible
to enroll in the Medicaid program. For 2022, the poverty line was $13,590 for individuals
and $27,750 for a family of four.
57
Consumers can enroll in health insurance coverage through PPACA exchanges during
the annual open enrollment period, the timing of which varies but generally occurs
between November and January. Outside of open enrollment, individuals may use special
enrollment periods to sign up for coverage if they experience a triggering event, such as
losing coverage from another source, like Medicaid or an employer.
58
See Schwartz, “Paying for Something Bigger: The Sentiment of Sociality and Health
Care Sharing Ministries in the United States,” Anthropological Quarterly, vol. 93, no. 4
(2020): 625-652 and Schwartz, “Freed from Insurance: Health Care Sharing Ministries and
the Moralization of Health Care,” Social Science and Medicine, vol. 268 (2021).
Page 26 GAO-23-106034 Private Health Coverage
Sellers of the selected Farm Bureau health plans, HCSM memberships,
and fixed indemnity plans we reviewed marketed these plans and
memberships using a variety of strategies, including advertising lower
premiums or monthly contributions than other health coverage options.
While officials from the seven state insurance departments did not identify
inappropriate or misleading marketing practices related to the nine plans
and memberships we reviewed, all of these officials told us they were
concerned about inappropriate marketing practices in the market for
alternatives to health insurance, especially related to misleading
marketing online.
Sellers of the selected Farm Bureau health plans, HCSM memberships,
and fixed indemnity plans we reviewed used a variety of strategies to
market their products, according to marketing materials we reviewed.
These practices included focusing on factors such as affordability,
suitability, choice, and values, among other things.
Price and affordability. Marketing materials associated with all nine of
the Farm Bureau health plans, HCSM memberships, and fixed indemnity
plans we reviewed advertised that these plans and memberships offered
lower premiums or monthly payments than other health coverage options,
such as PPACA-compliant plans. For example, one Farm Bureau
advertised on its website that consumers could save 50 percent on their
health coverage with one of their health plans, and one HCSM’s website
referred to the membership as a “faith-based healthcare cost solution for
Christians.”
Suitability for the self-employed. Marketing materials associated with
three of these plans focused specifically on consumers without an offer of
employer-sponsored insurance, such as the self-employed or those
employed in the gig economy. For example, officials from both Farm
Bureaus told us that these plans are well suited for individuals who are
leaving a job with employer-sponsored insurance to farm full-time.
Additionally, sellers of one fixed indemnity plan advertised it through their
website as a “flexible insurance plan” that was affordable for
“entrepreneurs, freelancers, and the self-employed” as of March 2023.
Greater provider choice. Marketing materials associated with these
plans and memberships also frequently advertised that they give
Selected Sellers
Used a Variety of
Marketing Strategies
and Regulators
Described Concerns
about Marketing
Practices of
Alternatives to Health
Insurance
Selected Sellers Marketed
Their Plans and
Memberships as Lower-
Cost Health Coverage, in
Addition to Other
Strategies
Page 27 GAO-23-106034 Private Health Coverage
consumers greater freedom over their choice of health care provider than
PPACA-compliant plans. For example:
• Four plans and memberships advertised that members could see the
provider of their choice, unlike PPACA-compliant plans that may
require members to see a provider within a network.
59
• One seller of a fixed indemnity plan we interviewed told us that
networks offered by some insurers are a source of frustration for
consumers, especially those seeking coverage for mental health
services.
• One Farm Bureau advertised in their marketing materials that
enrollees in their health plans would have coverage at all hospitals in
the state and could stay with their preferred doctor.
• One HCSM advertised its membership as “health care set free” from
insurance and that, as a member, you “have the freedom to choose
the health care provider that works best for you.”
HCSMs’ values-based community. Documentation for four of the
HCSM memberships we reviewed shows that the HCSMs emphasized
the faith-based community aspect of their memberships in their
marketing. Two specifically advertised the HCSM as a community of like-
minded individuals, rather than simply a form of health coverage.
Marketing materials from four of the HCSMs also referred to providing
health coverage that adhered to religious values, and one advertised that
members should join in order to be better stewards of their healthcare
dollars. Further, an HCSM trade group we spoke with told us that many
HCSM members prefer this coverage because they perceive that the
money they would have spent on PPACA-compliant plans would be used
for services that do not align with their values.
Solutions for employers. Marketing materials we reviewed from three
HCSMs specifically targeted employers.
60
For example, one HCSM’s
59
According to three sellers and one stakeholder, this is often because the individual
enrolled in the plan or membership is considered a self-pay patient. GAO has previously
reported that providers may offer discounts to self-pay patients. See GAO, Health Care
Price Transparency: Meaningful Price Information Is Difficult for Consumers to Obtain
Prior to Receiving Care GAO-11-791 (Washington, D.C. Sept. 23, 2011).
60
A 2023 report by the Colorado Division of Insurance stated that five of the 16 HCSMs
that submitted data to the state reported employer groups participating, and at least three
additional HCSMs had marketing materials encouraging employers to offer the HCSM’s
products to their employees.
Page 28 GAO-23-106034 Private Health Coverage
website referred to their product as a “health care solution for employers”
and noted that a college used this HCSM’s memberships to cover its 168
employees. Further, DOL officials and three of the stakeholders we
interviewed told us that some HCSMs targeted employers in their
marketing.
61
One HCSM told us that as healthcare costs continue to rise
for businesses and employees, many small and mid-sized businesses
have found that facilitating employees’ membership in their HCSM allows
the employees to save money have more options for their healthcare.
62
However, according to officials from this HCSM, although employee
membership contributions are facilitated through the employer,
employees sign up for an individual membership with the HCSM.
The selected sellers marketed their products both online and through
other advertising outlets. All nine sellers we spoke with advertised their
plans or memberships on their websites. Eight of nine sellers we spoke
with told us they also conducted some sort of digital advertising, which
included paid advertisements on web search engines or social media
websites. Other marketing strategies included the following:
• Traditional media outlets. Officials from two of the HCSMs we spoke
with told us they market through secular outlets, with one conducting
television advertisements.
63
One of these HCSMs told us they also
marketed through Christian outlets, such as Christian radio stations.
Officials from two other HCSMs we spoke with marketed only through
Christian outlets, such as Christian magazines, but officials from one
of these HCSMs told us they were considering expanding soon to
61
According to DOL officials, DOL does not have enforcement jurisdiction over the
alternatives to health insurance when they are sold as individual coverage, which is the
focus of this report. However, officials told us DOL does have jurisdiction to enforce
certain requirements if the alternatives are sold as private, employment-based health
plans. Specifically, DOL officials told us if entities selling these alternatives are acting in a
fiduciary capacity, for example, by setting their own compensation from plan assets, DOL
can enforce the fiduciary provisions of the Employee Retirement Income Security Act.
62
They told us that in order to a facilitate this option for employer groups, they use a list
billing arrangement, which is a process that allows an insurer or HCSM to sell individual
coverage through payroll deduction, by sending employers a bill listing the specific
premiums or monthly contributions for employees who have enrolled.
63
Officials from one Farm Bureau told us they have used television advertisements to
market their health plan on limited occasions. Officials from the other Farm Bureau and
the two sellers of fixed indemnity plans we spoke with told us they did not advertise the
product we reviewed for this work through television.
Page 29 GAO-23-106034 Private Health Coverage
secular national media. Officials from four of the HCSMs we spoke
with told us they conducted radio advertisements.
• Online lead-generating entities. Only one seller of a fixed indemnity
plan told us they used online lead generators as a part of their
marketing efforts for their plan.
64
Officials from one HCSM said they
had recently stopped using lead generators because they were not
satisfied with the quality of leads they received.
Alternatives to health insurance may be marketed and sold by internal
sales representatives (who work for the seller of the plan or
membership) or external sales representatives (who work
independently from the seller and may sell products from a variety of
companies).
65
Sellers we spoke with varied in their use of external
sales representatives.
• Farm Bureaus. Officials from one of the two Farm Bureaus we spoke
with told us they used both internal and external sales representatives
to sell their health plans, and officials from the other Farm Bureau told
us they used exclusively internal sales representatives.
• HCSMs. Officials from one of the five HCSMs that provided
information stated that they used internal and external sales
representatives to sell their memberships.
66
On their website, one
HCSM we reviewed advertised opportunities for health insurance
brokers to add the HCSM membership to their list of product offerings
as of March 2023. Three HCSMs did not use external sales
representatives to sell their products, but officials from one of these
HCSMs told us they recently stopped using external sales
representatives in March 2022.
64
Lead generators collect “leads,” or the contact information of potential customers for a
product, often via a website. Lead generators may then share these leads with sales
representatives who then contact the individual with solicitations of health insurance and
alternatives to health insurance. However, according to NAIC, the company that issues
the plan is ultimately responsible for the marketing associated with their product.
65
Some of the sellers we spoke with told us that they provided training to their sales
representatives about how to accurately explain their products when interacting with
customers. For example, officials from three HCSMs told us that their sales
representatives must go through a rigorous training program on how to explain how their
HCSM membership differs from health insurance before they are able to sell their
memberships.
66
Officials from the HCSM told us they require these individuals to be licensed to sell
health insurance because they believe it would better qualify that individual to explain the
differences between an HCSM membership and a PPACA-compliant plan to a consumer.
Page 30 GAO-23-106034 Private Health Coverage
• Fixed indemnity plans. Both of the sellers of fixed indemnity plans
that we spoke with said that, while consumers could enroll in their
plans directly through their websites, they also used external sales
representatives to sell these plans.
Some literature we reviewed as well as two sellers and two stakeholders
we interviewed raised concerns about external sales representatives
selling HCSM memberships alongside PPACA-compliant health
insurance. Specifically, officials from two of five HCSMs we spoke with
told us they were opposed to HCSMs using external sales
representatives to sell HCSM memberships alongside health insurance
because it made it difficult for consumers to understand that HCSM
memberships are not insurance and are not an equivalent health
coverage option.
67
Further, external sales representatives selling multiple types of coverage
may have incentives to sell alternatives to health insurance instead of a
PPACA-compliant plan. When external sales representatives sell a health
plan or HCSM membership to a consumer, they are typically paid a
percentage of the plan’s premium or membership’s monthly contribution
as a commission. According to some literature we reviewed as well as a
state insurance department and seller we spoke with, sales
representatives may receive a higher percentage of the plan’s premium
as a commission for selling alternatives to health insurance than for
selling PPACA exchange insurance.
68
In 2019, California’s PPACA state
exchange, Covered California, reported that HCSMs paid sales
representatives substantially higher commissions for sales of HCSM
memberships (15 to 20 percent of the monthly payment) compared to
those paid by PPACA exchange insurers (2.6 percent of the monthly
premium).
69
According to two brokers surveyed by Covered California in
2019, the higher commissions for HCSM memberships may provide an
incentive for brokers to sell these products over a PPACA-compliant
67
Officials from one state insurance department and one state attorney general told us
that at least one HCSM offered its members cash payments or discounted memberships
for enrolling new members.
68
The commission a sales representative receives for the sale of a health plan is often a
percentage of the plan’s premium (e.g., 15 percent of the plan’s premium). Therefore, for
alternatives to health insurance with low premiums or monthly payments, the higher
commission rate may not result in higher total compensation for the sale.
69
See Covered California, “Covered California Policy and Action Items” (Mar. 2019),
accessed March 9, 2023, https://board.coveredca.com/meetings/2019/03-
14%20Meeting/PPT.Policy%20and%20Action.March%202019.3-14%20at%201150.pdf.
Page 31 GAO-23-106034 Private Health Coverage
plan.
70
However, since the amount a broker is paid is a percentage of the
cost of the plan’s premium, lower cost alternatives to health insurance—
such as HCSM memberships—may not result in higher total
compensation.
Federal and state regulators have described concerns about and
identified misleading marketing practices associated with alternatives to
health insurance. All seven of the state insurance departments we spoke
with told us they were concerned with misleading marketing of
alternatives to health insurance, with three specifically discussing
misleading marketing online. For example, officials from two state
insurance departments told us they were concerned about the
involvement of HCSMs operating in their state with online lead generators
that may be providing misleading information to consumers.
71
Officials
from one of these state insurance departments told us they continue to
get complaints from consumers saying that they were led to believe
through these types of websites that HCSM memberships are the same
as, or offer the same coverage as, health insurance. These officials told
us they would like to monitor these websites for inappropriate sales
practices regularly, but do not have enough resources. Further, officials
from another state insurance department told us they frequently receive
consumer complaints about misleading marketing associated with lead
generators. They told us that in one complaint they received, a consumer
asked the lead generator specifically for a PPACA-compliant plan and
found out later the lead generator had signed them up for an HCSM
membership.
According to officials from one of the state insurance departments we
interviewed, an NAIC committee found that online lead generators were
involved in misleading marketing related to the sale of health coverage
products. (NAIC is a regulatory support organization for insurance
regulators). We spoke with the state insurance officials who chaired
70
See Covered California, “Evaluating Agent Commissions” (Mar. 2019), accessed
November 29, 2022, https://hbex.coveredca.com/toolkit/webinars-
briefings/downloads/Commissions_Questions&Comments.pdf.
71
None of the state insurance departments we spoke with described specific concerns
about the marketing associated with the nine plans and memberships we reviewed for this
work.
Regulators Described
Concerns About and
Identified Potentially
Misleading Marketing
Practices
Page 32 GAO-23-106034 Private Health Coverage
NAIC’s Improper Marketing of Health Insurance Working Group.
72
As a
part of this effort, the working group collected information from insurance
officials from multiple states, several of whom described cases of
consumers in their state who thought they had purchased a PPACA
exchange health insurance plan, but who had actually been sold a short-
term plan or a fixed indemnity plan.
73
According to the state insurance officials who chaired the working group,
the working group found that many of these cases stemmed from the use
of lead generators that advertise on social media platforms or pay to get
their websites listed at the top of web search engine results. They told us
that these lead generators sometimes had names similar to the name of
the federal PPACA exchange website, which may mislead consumers
into thinking they are selling PPACA exchange health insurance plans.
The officials told us that the working group found that in some cases,
these online lead generators solicited and sold personal information from
consumers looking for health insurance. After entering their information in
the lead generator, these consumers were contacted repeatedly by sales
representatives working through call centers trying to sell health coverage
products. According to these state insurance officials, some sales
representatives who purchased leads attempted to mislead consumers
about these products over the phone. For example, sales representatives
have falsely claimed that the product they were selling covered maternity
or mental health benefits.
Federal agencies and state attorneys general have also identified and
taken steps to address misleading marketing practices associated with
alternatives to health insurance in recent years, including the following
examples.
• In August 2022, the Federal Trade Commission took action against a
health care company and its subsidiaries for misleadingly selling
several health coverage products, including fixed indemnity products.
72
The state insurance officials who chaired this committee told us the committee consisted
of state insurance officials from two NAIC committees. They told us they also involved
federal agencies who may have investigated these practices, including the Federal Trade
Commission, CMS, and DOL.
73
Short-term plans are a form of health coverage traditionally designed to fill temporary
gaps in health insurance. They are exempt from individual health insurance regulations.
For more information, see GAO, Private Health Insurance: Limited Data Hinders
Understanding of Short-Term Plans’ Role and Value during the COVID-19 Pandemic,
GAO-22-104683 (Washington, D.C.: May 31, 2022).
Page 33 GAO-23-106034 Private Health Coverage
For example, the Federal Trade Commission alleged that written
sales scripts used by the entity’s sales representatives contained false
or misleading statements, including that the plans “don’t discriminate
against any…pre-existing conditions,” despite the fact that many plans
either did not cover pre-existing conditions or incorporated waiting
periods to access these benefits. The company agreed to a proposed
court order that required it to pay $100 million to provide consumer
refunds and prohibited the company from lying about its products or
charging illegal junk fees.
74
• In April 2022, a state court determined that three companies had
engaged in unfair and deceptive practices related to the sale of health
coverage products in that state, including HCSM memberships.
75
Specifically, the court found that the companies’ sales representatives
inappropriately presented the HCSM memberships as equivalent to
health insurance, including using the term “insurance” and
“premiums,” which are typically associated with health insurance.
According to the state insurance officials who chaired NAIC’s Improper
Marketing of Health Insurance Working Group, the working group is
revising NAIC’s Unfair Trade Practices Act model to clarify what actions
regulators can take when they become aware of misleading or
inappropriate marketing of health coverage products.
76
Specifically, NAIC
officials told us that NAIC members formed the working group in order to
1) coordinate with state and federal regulators to provide assistance in
monitoring improper marketing of health coverage products and
coordinate appropriate enforcement actions, as well as 2) review existing
NAIC models and guidelines relevant to marketing of health coverage
products to ensure they are updated to address current issues in the
market.
74
Complaint, Fed. Trade Comm’n v. Benefytt Tech., et al., 8:22-cv-01794 (M.D. Fla. filed
Aug. 8, 2022).
75
Decision and Order, Massachusetts v. Mega Life and Health Ins. Co., No.
0684CV04411-BLS1 (Suffolk Super. Ct. filed April 28, 2022).
76
According to NAIC, states may adopt their model laws in order to provide uniformity
while balancing the needs of insurers operating in multiple jurisdictions with state judicial,
legislative and regulatory frameworks. According to NAIC, the purpose of the Unfair Trade
Practices Act model is to regulate trade practices in the business of insurance by defining
all such practices in the state that constitute unfair methods of competition or deceptive
acts or practices.
Page 34 GAO-23-106034 Private Health Coverage
As of May 2023, NAIC officials told us the working group is focusing on
revisions to NAIC’s Unfair Trade Practices Act (NAIC model number 880).
Specifically, officials told us they are revising the model to
• define a health insurance lead generator,
• define marketing-related activities of health insurance lead generators
that constitute unfair trade practices, and
• prohibit health insurance lead generators from engagement in these
unfair trade practices.
NAIC officials told us the working group reviewed stakeholder comments
on the draft of the updated Unfair Trade Practices Act model in March
2023. They told us that as of May 2023, the working group plans to
circulate an updated draft for public comment in summer 2023 and to
conclude its work on the model act by the end of 2023.
We provided a draft of this report to the Department of Health and Human
Services and DOL. Both agencies provided technical comments, which
we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the Secretaries of Health
and Human Services and Labor, and other interested parties. In addition,
the report will be available at no charge on the GAO website at
https://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-7114 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made key contributions to this report
are listed in appendix II.
John E. Dicken
Director, Health Care
Agency Comments
Appendix I: Ownership and Operations of
Health Care Sharing Ministries Reviewed
Page 35 GAO-23-106034 Private Health Coverage
The ownership and operating structure of health care sharing ministries
(HCSM) are unique in key ways. Regulators have raised concerns about
the business practices of certain HCSMs. An HCSM trade organization
has taken steps to develop standards to help curb inappropriate
practices.
Four of the HCSMs we reviewed were 501(c)(3) nonprofit organizations.
1
Officials from the fifth HCSM we reviewed told us they had applied for but
not yet received that designation from the Internal Revenue Service as of
May 2023. As nonprofit organizations, these entities are not owned by
individuals or groups but are run by a board of directors. Four of the five
HCSMs we reviewed had conflict of interest policies in place regarding
who may serve on the board or what activities a board member with a
conflict of interest may participate in. For example, one conflict of interest
policy for an HCSM we reviewed stated that any person in a position of
influence who has a financial interest in an entity (such as a bill
processing company) that the HCSM is pursuing a transaction with may
not vote on whether the transaction goes forward.
Types of Cost-sharing. The HCSM memberships we reviewed differed
in how they facilitated medical cost sharing among their members,
specifically using either direct sharing or centralized sharing. (see fig. 2)
• Direct sharing. Officials from two of the five HCSM memberships we
reviewed told us their HCSM facilitated payments directly from
member to member. Officials from one of the HCSMs we reviewed
that used this method told us that members either write a check or
send funds electronically to other members, but that they leave it up to
their members to determine how to provide the money to the other
member. The other HCSM set up individual bank accounts for each
member family, then instructs the bank to transfer funds from one
account to another. To cover administrative expenses, one HCSM
required members to send one month’s contributions per year directly
to the HCSM, while the other HCSM assessed a monthly
administrative fee. Because contributions are facilitated from member
to member, neither of the HCSMs that used this method paid medical
1
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization
must be organized and operated exclusively for exempt purposes set forth in section
501(c)(3), and none of its earnings may inure to any private shareholder or individual.
According to the Internal Revenue Service, these organizations are commonly referred to
as charitable organizations.
Appendix I: Ownership and Operations of
Health Care Sharing Ministries Reviewed
Ownership
Operations
Appendix I: Ownership and Operations of
Health Care Sharing Ministries Reviewed
Page 36 GAO-23-106034 Private Health Coverage
providers directly. Rather, members are told to act as self-pay clients
for medical services.
• Centralized sharing. Officials from the other three HCSM
memberships we examined told us their HCSMs collected all member
contributions before distributing funds to issue either reimbursements
to members or payments to providers. For example, officials from one
HCSM told us that they gather member contributions into an
independently audited central trust fund.
2
These HCSMs typically take
a portion of the contributions to cover administrative expenses. For
example, officials from one HCSM told us that contributions are
divided into dedicated sharing accounts and administrative accounts.
The same HCSM’s sharing guidelines stated that up to 40 percent of
membership contributions may be used for administrative costs.
Figure 2. Health Care Sharing Ministries’ Medical Cost Sharing Processes
a
HCSMs may take a portion of member contributions for administrative expenses.
2
Officials from this HCSM told us that they choose to operate this way because they
believe it promotes transparency to the HCSM’s members about the spending of
members’ contributions.
Appendix I: Ownership and Operations of
Health Care Sharing Ministries Reviewed
Page 37 GAO-23-106034 Private Health Coverage
Process for establishing monthly contributions. Officials from four of
the five HCSM memberships we reviewed told us the monthly contribution
amounts requested of HCSM members are set by the board of directors
or other senior staff. Officials from the fifth HCSM told us that proposed
increases in the monthly contribution amount are voted on by the
membership of the HCSM after being proposed by the board. Officials
from three of the five HCSMs we reviewed said that they do not currently
use actuaries to set monthly contributions levels but rather will wait until it
becomes apparent that the current contributions are not enough to meet
the medical needs being shared before moving to raise the contribution
amount. If there are insufficient funds to meet all shared needs, four of
the five HCSMs we reviewed will prorate the amount each member
receives for their shared needs until funds become available or the
monthly contribution amount is raised.
Dispute Process. Four of the five of the HCSM memberships we
reviewed had established dispute resolution processes in the case of a
dispute between a member and the HCSM over the sharing eligibility of a
medical need. For example, documentation we reviewed from one HCSM
stated that they randomly choose a panel of seven to 13 members to help
adjudicate the dispute. Another HCSM’s documentation stated that they
also used a member panel to resolve disputes, but only if the dispute is
not resolved after two levels of internal review done by claims nurses
employed by the HCSM. This HCSM also allows for mediation and legally
binding arbitration if the member disagrees with the decision of the
member panel.
3
Regulators have raised concerns about the business practices of some
HCSMs, which has contributed to efforts to develop accreditation
standards for HCSMs.
4
Officials from an HCSM told us that in the wake of
the increased public scrutiny of HCSMs after lawsuits surrounding a
particular HCSM, there have been efforts to standardize HCSM business
3
Additionally, the guidelines of four of the five HCSMs we reviewed state that members
must agree to not sue either the HCSM or other members over any disputes.
4
For example, in March 2021, Liberty HealthShare entered into a settlement agreement
with the Ohio Attorney General after an investigation led the Attorney General to believe
that Liberty executives may have violated state law regarding the conduct of charitable
organizations. Liberty denied any wrongdoing. Under the settlement, Liberty agreed to pay
a civil fine, remove certain individuals from leadership positions, and refrain from
contracting with certain third party vendors. Those vendors entered into a separate
settlement agreement with the Ohio Attorney General in December 2021.
Efforts to Develop
Accreditation Standards
Appendix I: Ownership and Operations of
Health Care Sharing Ministries Reviewed
Page 38 GAO-23-106034 Private Health Coverage
practices by developing an HCSM accreditation process.
5
Specifically, an
HCSM trade group told us they helped to create an independent
organization dedicated to accredit HCSMs called the Health Care Sharing
Accreditation Board. The board was established in 2020 and, as of May
2023, had accredited two HCSMs. The board’s website states that it was
created to “verify that HCSMs meet high standards of quality and ethical
business practices.” A consultant for the board provided GAO with a
summarized list of the standards that it uses to assess the HCSMs
seeking accreditation. The standards include requirements to undergo an
annual external audit and make the results available to the public upon
request, to have an independent board of directors, and to communicate
clearly to members that there is no assumption of risk or promise to pay
medical costs.
However, a policy research group and an official from one HCSM told us
that there may be limitations associated with the accreditation process of
the Health Care Sharing Accreditation Board, and the HCSM described
an alternate accreditation process. For example, the policy research
group said that because the HCSMs seeking accreditation were involved
with establishing the accreditation board and its standards, the process
may not be sufficiently independent. The policy research group also told
us that, for this reason, the accreditation process may not ensure
accountability and transparency of HCSMs. An HCSM official added that
there was a lack of transparency around the accreditation process
because the standards were not made publicly available. This official told
us that the HCSM they represent recently received a different
accreditation called a “Faith-Based Sharing Review.” This accreditation
was issued by an independent, third-party entity that has no affiliation with
HCSMs and evaluates the financial stability of insurance companies as its
core business. The standards for this accreditation have been made
publicly available.
5
Aliera, a for-profit corporation, founded Sharity Ministries (formerly Trinity Healthshare), a
nonprofit corporation that purported to be a HCSM. Numerous lawsuits have alleged that
Aliera sold unauthorized health plans and insurance through Sharity, which entered
bankruptcy in 2021.
Appendix II: GAO Contact and Staff
Acknowledgments
Page 39 GAO-23-106034 Private Health Coverage
In addition to the contact named above, Kristi Peterson (Assistant
Director), Helen Sauer Young (Analyst-in-Charge), Thomas Friend, and
Anna Lindholm made key contributions to this report. Also contributing
were Laurie Pachter and Emily Wilson Schwark.
Appendix II: GAO Contact and Staff
Acknowledgments
GAO Contact
Staff
Acknowledgments
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