Tithing for healthcare
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Jan. 31, 2016 marked the end of the third enrollment period for health coverage under the Affordable Care Act (ACA). In late January, the Congressional Budget Office (CBO) updated its 2016 enrollment prediction to include 13 million Americans purchasing insurance through the state and federal marketplaces, with the vast majority (11 million) receiving a federal subsidy to help pay for the insurance. If the CBO is correct in its estimate, there will be a net increase of 4 million enrollees from last year and 7 million more from the year before. Even so, the current CBO estimate is 40 percent lower than the one it made at the law's inception four years ago. At that time, the CBO forecasted an enrollment of 21 million through 2016, a 40 percent difference from last month's update.

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Why do enrollment numbers matter? Well, the primary tenet of any kind of insurance is to spread the risk and cost of coverage across a large number of persons, most of whom will rarely use the service but who nevertheless desire the protection against an unforeseen expensive event. Although health insurance distorts the classic definition of insurance somewhat because people use health coverage to maintain health as well as pay for medical catastrophes, the guiding principle remains: Too few enrollees may jeopardize the formation of a stable insurance pool and insurance will become unaffordable if a majority of those who purchase the coverage use too much of it. This phenomenon is called adverse selection and can plague any insurance product.

Although many political pundits and ObamaCare observers have written about the reasons for the lackluster enrollment so far and how adverse selection in the ACA marketplace may be contributing to the rise in insurance premiums and deductibles, there may be yet another contributing factor that is less well discussed: the faith-based alternative to ObamaCare.

When the ACA was passed in March 2010, it included a religious exemption that allowed an individual to fulfill the law's health coverage mandate by proving membership in a qualifying "healthcare sharing ministry." At the time, the ACA architects designed the carve-out to satisfy ideologically conservative groups who invoked religious freedom as a legitimate reason for nonparticipation in the ACA. What the Obama administration may have overlooked was the unintended consequence of supporting a shadow system that encouraged adverse selection in ACA insurance pools by allowing church-affiliated disaffected Americans to opt out.

Healthcare sharing ministries are not insurance. They are financial "tithing" arrangements within religious organizations where monthly "sharing payments" are collected from members who attend church and attest to abide by Christian principles. In exchange, the ministries pay for members' medical bills. They typically do not pay for contraception, abortion or injuries arising from non-Christian behaviors like drunken driving. The cost to consumers — typically about $100 per person — is less than conventional insurance regulated under the ACA. Although these types of faith-based nonprofits operated before ObamaCare, enrollment has doubled since passage of the law, and to date serve a half a million people through an estimated 50 religious associations.

Because the "sharing payments" that underwrite the payment of medical services do not constitute true insurance, they operate outside of government regulation. State insurance commissioners cannot oversee the administration of the health ministries or require fiduciary standards such as financial solvency and consumer protections. As a result, state officials fear that these unregulated associations could put unsuspecting parishioners at risk, especially since most faith-based organizations do not allow members to sue for nonpayment.

There have been problems with these types of health ministries in the past: In 2004, former officials of an Ohio ministry were ordered by a jury to pay more than $14 million for embezzling member funds collected for medical expenses but were instead used to pay for real estate, vehicles and the living expenses of an exotic dancer. Other states have also reported similar infractions, most of which were settled outside of the legal system.

As enrollment climbs in the healthcare sharing ministries, state officials are increasingly concerned that healthier consumers will opt for this less expensive and unregulated medical payment system empowered under the ACA's religious exemption clause. If this happens, it could disrupt and destabilize commercial insurance markets by sending older, sicker individuals to licensed insurers who are bound by the ACA to accept all comers and offer an array of costly benefits and consumer protections. Insurance commissioners in Kentucky, Oklahoma and Washington state have tried to shut down the operations of health ministries in their states in order to avoid this type of adverse selection, but conservative lawmakers have so far blocked all efforts. And the public seems to agree: Demand for health coverage in faith-based groups is growing, despite the fact that consumers may be turning away federal subsidies to purchase health insurance through the ACA marketplaces. Perhaps cheaper rates, anti-ObamaCare sentiment, and religious fervor have combined in such a way as to overshadow the risk of deception and financial default. Whatever the reason, the rise of healthcare sharing ministries splinters the path ahead for the ACA.

Engelhard is the director of the Health Policy Program at the University of Virginia School of Medicine's Department of Public Health Sciences.