Health care sharing payments qualify for self employment health insurance?

[ramledray]

A client who is the sole shareholder of their S-Corp is planning to enroll in a not-for-profit health care sharing plan that is well known and has been operating well over a decade.  Will my client's payment qualify for Self Employed Health Insurance payments?  I have found multiple answers.

[qbteachmt]

Always look for recent info by checking the date of any article you read.

Try this:

https://bradyware.com/health-care-sharing-ministry-payments/

[ramledray · Accepted solution]

Thanks for the reference.  I found it before I entered this question because I could not trace any authoritative sources. 

I just got off the phone with a representative from the health care sharing organization in question that I called to find out if they had any authoritative information that would be helpful.  Their representative basically rebutted the answer I was hoping to hear by stating that the position of their organization is that the monthly payments are "gifts to other participants" and therefore are not medical payments, nor are they deductible.

[qbteachmt]

As that article shows, there was a Presidential directive to issue proposed regulations. Nothing has happened, otherwise. The coverage has been deemed to meet the ACA's essential care requirement. The coverage is a payment cooperative. It isn't health care costs (not incurred for a medical expense) and it isn't insurance coverage.

https://www.healthcare.gov/quick-guide/dates-and-deadlines/

[qbteachmt]

Oops, wrong link. Here's the Federal Register:

https://www.federalregister.gov/documents/2020/06/10/2020-12213/certain-medical-care-arrangements

[TaxGuyBill]

As far as I know, it is still a "Proposed" Regulation.  That means you can use it, but use-at-your-own-risk because if the IRS wants to argue against it, you don't have much to stand on.

Also, even if it is considered as medical insurance for purposes of §213 (medical deductions), it wouldn't necessarily mean it would be considered as medical insurance for purposes of §162(l) (the Self Employed Health Insurance deduction).  It PROBABLY would be, but nothing definite.

With that being said, I would take the Self Employed Health Insurance deduction, but warn the taxpayer that it could possibly be argued against.

[qbteachmt]

I can't imagine this is more affordable than having the S Corp obtain coverage and run that through the "more than 2% shareholder" process.