HRAs and healthcare ministry sharing programs

Health reimbursement arrangements (HRAs) are a popular way for organizations to offer flexible and affordable health benefits to their employees. Organizations like churches and values-based nonprofits also may consider a healthcare sharing ministry program as a way to cover their employees’ medical expenses.

However, if you’re thinking about offering both benefits to your employees, things can get a little tricky. Let’s go over how both HRAs and healthcare sharing ministries work as well as what guidelines are in place for using them together.

What is a health reimbursement arrangement (HRA)?

An HRA is a formal, employer-funded health benefit used to reimburse employees for out-of-pocket medical expenses and health insurance premiums.

With an HRA, employers choose a healthcare allowance that employees can spend on qualifying medical expenses, including individual health insurance premiums.

Employees can purchase a plan that fits their health needs and employers have complete cost predictability without minimum or maximum participation requirements.

Watch our webinar to learn more about how HRAs work for employers

What is a healthcare sharing ministry program?

Healthcare sharing ministries are cost-sharing programs or private healthcare systems (PHCS) that are set up as a faith-based, not-for-profit organization. Members share religious beliefs and values and use these as a cornerstone for their medical expense distributions.

According to the federal definition outlined by the Affordable Care Act, a healthcare sharing ministry needs to meet the following requirements:

• It must be a 501(c)(3) organization
• It must have members who share common ethical or religious beliefs
• It must not discriminate membership based on state of residence or employment
• It can’t discontinue membership due to development of a medical condition
• It must have existed and been in practice continually since December 31, 1999 (a grandfather clause)
• It must be subject to an annual audit by an independent CPA which must be publicly available upon request

Members of healthcare sharing ministries contribute a fixed dollar amount each month to their own savings account. When a member of the community is ill and needs help paying their medical expenses, the person submits a request for the amount needed to cover the bill.

If the expense is approved (either by a person appointed to the position or by committee vote), the request is paid directly to the healthcare provider by using funds from other members’ savings accounts.

As with traditional health insurance policies, there’s usually a set amount that each family (or individual) has to pay before submitting requests to the program for assistance. This amount can range from about $500 to $10,000.

Members are part of a preferred provider organization (PPO), which means they receive pre-negotiated rates when they use providers in that network. If a member uses a non-PPO physician or facility, they may have to pay out-of-network prices or even shoulder the entire bill.

Some of the larger healthcare sharing ministries are:

• Christian Healthcare Ministries
• Medi-Share, Samaritan Ministries
• Liberty HealthShare
• United Refuah HealthShare
• MCS Medical Cost Sharing
• Altrua HealthShare
• Freedom HealthShare
• Trinity HealthShare

Learn more about the pros and cons of healthcare sharing ministries

Can an HRA reimburse healthcare sharing ministry membership donations?

Unfortunately, employees can’t get their membership fees or donations to a healthcare sharing ministry program reimbursed through their HRA.

IRC Section 213 governs which types of expenses and health insurance premiums can be reimbursed through an HRA. Healthcare sharing ministry programs aren’t offered by an insurance company, which means the benefit isn’t legally considered insurance. Because of this, the membership fees or donations aren’t reimbursable according to IRS guidelines.

Can I still offer an HRA and a healthcare sharing ministry program together?

While your employees aren’t able to get their membership fees covered through their HRA, they are still eligible to receive reimbursements on a number of qualifying medical expenses, depending on the type of HRA you offer.

For example, if you offer a qualified small employer HRA (QSEHRA), your employees don’t need to have a certain insurance status in order to participate. They can use their HRA dollars to pay for out-of-pocket medical expenses, including prescription and nonprescription drugs, doctor’s visits, bandages, cold medicine, and so much more.

However, because healthcare sharing ministries don't qualify as minimum essential coverage, employees participating in both the QSEHRA and the healthcare sharing ministry program must pay taxes on their reimbursements.

Conclusion

Both HRAs and healthcare ministry sharing programs offer a unique and flexible alternative to traditional group health insurance that make them attractive to nonprofit organizations. However, offering the two benefits together does come with certain restrictions you’ll need to stay on top of in order to offer a compliant benefit that works for your organization.

This article was originally published on June 25, 2013. It was last updated April 28, 2021.