We’ve previously written about “health sharing ministries.” These are nominally religious organizations that sell health coverage and became popular following the passage of the Affordable Care Act through promises of helping folks procure cheaper coverage than they might get on the exchange.
At least some regulators view them as problematic. They’re marketed and sold like health insurance. But they’re typically not issued by an insurance company. They often provide there is no enforceable right to payment of claims. And they can lack the consumer protections people associate with insurance.
That was the view of the Washington Office of the Insurance Commissioner when it issued a cease-and-desist order to Zion HealthShare. Zion operated a health sharing ministry. Like many such entities, Zion’s members paid the company monthly premiums, but received no promise that Zion would ever pay claims. Instead, the Zion contract stated that it could not “guarantee payment of medical expenses.”
The OIC found Zion was essentially selling insurance and ordered it to comply with Washington insurance regulations. Zion sued to overturn that finding.
The Washington Court of Appeals agreed with the OIC that Zion was selling what amounted to insurance and thus needed to comply with Washington’s consumer protection regulations for insurance.
The court first agreed that Zion was an “insurer” under Washington law. Zion claimed that it was not an insurer because, the company said, it had no contract with its members, pointing to language disclaiming any enforceable right for members to receive any benefits.
But the court found that the objective facts would lead a reasonable person to believe that Zion was selling insurance. Zion had all the hallmarks of insurance. It had a process for resolving disputes over coverage for medical expenses. Members paid monthly fees that resembled premiums. They had cost-sharing that looked like a deductible.
Most importantly, the court recognized that accepting Zion’s position would mean that its customers paid money for, quite literally, nothing.
By asserting its customers had no right to payment of benefits, the court reasoned, Zion would render its contracts with its members “illusory.” A basic legal rule is that courts will avoid interpreting contracts as illusory (i.e., taking money and giving nothing in return). This makes sense given that an arrangement where one pays monthly premiums in exchange for no contractual rights whatsoever looks more like charity (or a scam) than a bona fide commercial transaction.
The ruling is a win for Washington consumers, who reasonably expect that paying monthly premiums for a health plan will get them actual coverage rather than unenforceable promises.
