Washington regulators fine supposed faith-based health coverage companies $1.1M for ‘sham’ insurance

Washington state’s insurance regulator has leveled a $1.1 million fine against a pair of beleaguered companies advertising faith-based health coverage that have prompted numerous consumer complaints nationwide.

Insurance Commissioner Mike Kreidler announced the fines against Aliera Healthcare and Trinity HealthShare on Thursday, 81 days after issuing cease-and-desist orders to both companies that prevents them from selling coverage options in Washington.

Kreidler’s office alleges Trinity is falsely presenting itself as what’s known as a “heath sharing ministry,” a faith-based organization that can engage in health care sharing costs outside of federal and state insurance regulations if it meets certain requirements, and that Aliera is marketing and administering policies with dubious claims of lower costs and coverage that mimics insurance.

“It’s the largest fine that I can recall where we’ve gone after an unlicensed entity like this,” Kreidler said in an interview Thursday. “If it doesn’t get their attention, we’ve got to get a bigger baseball bat at that point.”

The companies have fought similar allegations in Texas, where a lawsuit was filed earlier this month attempting to prevent additional policies from being sold. Customer complaints there are being collected by the FBI, according to a report earlier this month from the Houston Chronicle.

Aliera has argued, in courts and in past public statements, that it does not market its plans as insurance and that it meets the federal requirements for a ministry. In a statement Thursday, the company continued to fight back against claims it was operating outside the law.

“On behalf of the health care sharing ministries marketing by Aliera, more than ten thousand share requests from Washington consumers have been received, totaling more than $2 million in health care medical payments shared,” the statement read. “Notwithstanding the Commissioner’s long history of hostility towards health care sharing ministries and his latest hyperbolic claims, we remain committed to serving healthcare sharing members in Washington and elsewhere, working with regulators to provide the health care sharing solutions these members need.”

The statement appears to be a reference to action Kreidler’s office took in 2011 against a company called Samaritan Ministries. The Washington Legislature passed a law shortly thereafter preventing the state from regulating such companies as insurers, adopting a federal legal definition of a ministry that Kreidler maintains Aliera doesn’t meet.

Health sharing ministries, under federal law, must be a tax-exempt organization that requires its members to follow shared ethical or religious principles, and must have been formed prior to Dec. 31, 1999. Qualifying members were able to avoid the individual mandate tax penalty that was a requirement of the federal health care law until this year.

According to industry groups, roughly 1 million Americans have bought memberships into such ministries.

Washington investigators allege Trinity did not meet this legal definition, having formed well after the 1999 cutoff and not requiring its members to attest to a shared set of religious or ethical beliefs. Trinity and Aliera have responded by saying they’re tied to the Baptist tradition of assisting other church members that dates to the Protestant faith’s 16th century formation.

Policies sold by Aliera are attractive to those looking for lower premiums and the assurance they’ll have the same coverage as they would under traditional insurance, Kreidler said. But consumers have reported trouble trying to get their costs of prescriptions and procedures covered under plans sold by Aliera, including coverage for pre-existing conditions.An investigation by Kreidler’s office alleges just 16% of the fees collected by the companies are placed into a reserve account to cover members’ medical expenses.

Kreidler said his office has continued to receive complaints about the companies, including one Thursday morning before a news release announcing the fine was issued. He said just this week Aliera and Trinity provided figures showing 3,058 policies had been sold in Washington totaling $3.8 million in premiums, but has yet to formally appeal the cease-and-desist order filed in May.

Under state law, the office is authorized to seek federal penalties totaling $25,000 for each alleged offense. That would place the potential maximum price tag of the alleged violations at more than $76 million, but Kreidler said he hopes the companies would work with those who had filed complaints and settle their accounts rather than his office seek more legal action.

“We want to get their attention enough so that they come in holding their hat in their hand, recognizing that they made a big mistake trying to do business in the state of Washington,” Kreidler said.

Kreidler noted that it’s not just Washington targeting the companies. In addition to the lawsuit in Texas, insurance regulators in New Hampshire and Massachusetts have issued warnings to consumers that the firm might be operating in violation of their laws.

Aliera and Trinity have until Oct. 30 to appeal the fine. The company’s statement indicated it would fight the fines and cease-and-desist letter.