For small and midsize business owners, offering affordable health coverage is often a balancing act between budget and compliance. Many employers want to provide their teams with meaningful benefits, but the rising cost of traditional group health insurance makes it hard to sustain. One increasingly discussed solution is faith-based health coverage, plans that are often ACA-exempt yet still provide essential care.
Faith-based health programs, sometimes referred to as health sharing ministries, offer a way for business owners to provide healthcare options without the same regulatory burdens of ACA-compliant plans. These programs operate outside the Affordable Care Act requirements, giving employers more flexibility in costs, eligibility, and coverage structure.
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Understanding Faith-Based Insurance and ACA Exemptions
Faith-based healthcare options are typically offered through religious healthcare sharing ministries. These organizations are not insurance companies, but rather nonprofit groups where members share medical expenses according to shared beliefs. Members contribute monthly, and funds are used to pay eligible medical expenses for other members.
Because these programs are structured as sharing ministries, they do not fall under the same rules as ACA-compliant insurance plans. For example, they are not required to cover the ACA’s essential health benefits like birth control or maternity care, which can make the plans more customizable and often less expensive.
The ACA recognizes this exemption. According to federal guidelines, a health sharing ministry must:
- Be a 501(c)(3) nonprofit
- Have been in existence since at least December 31, 1999
- Share common religious beliefs
- Do not discriminate based on state of residence or employment
- Have members share medical expenses
As long as these requirements are met, members of these organizations are exempt from ACA mandates, including the individual mandate (though that mandate no longer includes a penalty as of 2019).
Why Business Owners Consider Faith-Based Group Plans
There are a few reasons why business owners might explore faith-based health plans for their teams:
1. Lower Premiums
Faith-based plans often cost significantly less than traditional group health insurance. According to the Alliance of Health Care Sharing Ministries, average monthly costs for an individual range from $100 to $300, while family coverage can be less than $600/month, sometimes half the price of ACA plans.
2. Simplified Plan Structures
Without the regulatory burden of the ACA, these programs can be more flexible. Business owners may choose plans that cover hospitalization, surgery, wellness visits, or catastrophic events without needing to include benefits they don’t want or need.
3. Cultural Alignment
Some businesses value working with programs that align with specific religious or moral beliefs. Faith-based plans often appeal to companies with faith-centered leadership or missions.
4. Exemption from Employer Mandate (for Small Businesses)
The ACA requires businesses with 50 or more full-time employees to offer health insurance or face penalties. However, businesses with fewer than 50 employees are not subject to the employer mandate, making faith-based group sharing programs a viable alternative without triggering compliance issues.
How Group Plans Work Within Faith-Based Models
Faith-based plans are commonly associated with individuals and families, but some organizations also provide group solutions for employers. These plans can mirror the function of group insurance but are structured around membership rather than policyholders.
Here are a few ways group-based health sharing works:
- The employer signs up eligible employees as members of the faith-based program.
- Employees agree to the program’s guidelines, including lifestyle choices and belief statements.
- Contributions (like premiums) are collected monthly and are tax-deductible to the employer.
- Medical bills are submitted and shared through the organization, with cost-sharing requirements such as annual unshared amounts (similar to deductibles).
Unlike traditional group insurance, there are no co-pays or provider networks. Most programs allow employees to see any provider and submit eligible bills for reimbursement.
Things Employers Need to Consider
Before switching to a faith-based model, employers need to understand the risks and differences. While these plans can be cost-effective, they are not regulated like insurance. That means:
- No guaranteed payment: Since they are not legal insurance policies, there is no guarantee that a medical bill will be paid.
- Pre-existing condition limitations: Many faith-based programs have restrictions on how they handle chronic or pre-existing conditions.
- No federal subsidy eligibility: Employees cannot use premium tax credits or subsidies.
- Religious requirements: Most organizations require members to adhere to lifestyle commitments, such as no tobacco use or attending religious services regularly.
Employers should also consult a licensed insurance broker or legal expert when setting up a faith-based health program to ensure all disclosures and alternatives are explained to employees.
Tax Considerations and Compliance
Employers providing ACA-exempt faith-based coverage should keep in mind that these plans do not meet the definition of “minimum essential coverage” under the ACA. That can affect tax documentation and benefits administration.
However, because there is no longer a federal penalty for individuals lacking ACA-compliant coverage, many employers feel comfortable offering faith-based alternatives, especially when cost is a significant concern.
Employers should:
- Document that the plan is a health sharing ministry
- Ensure employees are voluntarily joining
- Avoid misrepresenting the plan as traditional insurance
In some cases, pairing a faith-based plan with supplemental accident or critical illness coverage can help bridge gaps in care while still saving on overall premium costs.
Real-Life Application for Small Businesses
A small construction company in Fort Worth with 12 full-time employees had been paying over $8,000/month for traditional group coverage. The owner switched to a faith-based group sharing plan, reducing their monthly outlay to $3,600 while still providing hospitalization, emergency care, and annual checkups for employees.
The employees were briefed on how the program worked, including reimbursement procedures and limitations. Most were satisfied with the shift, especially after comparing the cost of individual ACA plans they would have had to purchase on their own if no coverage was offered.
Is This Right for Every Business?
Faith-based group health plans aren’t for every employer. Businesses with diverse or secular teams may struggle to implement. Some employees may not feel comfortable with the religious component or limitations in coverage. For example, treatments like Transcranial Magnetic Stimulation (TMS) therapy, which is used to address depression and other mental health conditions, may not be covered under certain faith-based plans due to differing views on mental health treatment options.
Still, for many small business owners in search of affordable group health solutions without complex regulation, faith-based models present a workable and often appreciated benefit. Employers who take the time to educate their teams, clarify the program structure, and offer transparency about the differences tend to see higher satisfaction.
While these plans won’t replace traditional insurance for every company, they are a growing part of the health benefits conversation, especially in regions where values-based living and cost-consciousness intersect. Business owners interested in exploring these models should research vetted health sharing ministries, compare plans, and determine how well they align with their workforce. With the right preparation, faith-based group plans can be a powerful alternative to ACA group health insurance.