October 20, 2006
In God's Name
Ministry’s Medical Program Is Not Regulated
By DIANA B. HENRIQUES, NY TIMES

It looks like a business and, in many ways, acts like one. But it is beyond the reach of most of the rules and government oversight that apply to businesses — because it is a church mission.

This is the “medical bill sharing ministry” known as Christian Care Ministry, based in Melbourne, Fla., the largest of a handful of similar ministries around the country.

E. John Reinhold, who once worked with the Campus Crusade for Christ and is now the ministry’s chairman, explains the concept simply: “You add up all the medical bills and divide by the number of sharing households. Everybody kicks in and you pay the bills.”

Every month, in roughly 19,000 households across the country, ministry members — who must be observant Christians with recommendations from their pastors — write a check to Christian Care Ministry. The amount depends on their family’s size and how much of their medical bills they are willing to pay out of their own pocket.

And each month, the ministry writes checks to health care providers — totaling more than $240 million since it was founded — to cover the medical bills submitted by its members. Roughly $57 million moved through the ministry in its latest fiscal year.

Mr. Reinhold, who formed Christian Care in 1993, says it is an efficient way for Christians to fulfill the admonition of Galatians 6:2, which tells them to “carry each other’s burdens, and in this way you will fulfill the law of Christ.”

But over the years, some state officials have looked at ministries like Christian Care and seen what they would call unregulated health insurance. Their concern is that confused consumers looking for low-cost coverage will rely on these groups as if they were insurance companies, even though the groups may lack the resources to pay claims.

Next week it will be Mr. Reinhold’s turn to defend his organization, before a state judge in Kentucky.

Kentucky was one of a half-dozen states that passed laws in the early 1990’s exempting religious bill-sharing ministries from state insurance laws. But regulators there say that Mr. Reinhold’s organization goes beyond what that exemption allows — a claim the Florida ministry says is misguided, because its practices actually improve on the state’s requirements.

The exemption being tested in Kentucky this month is just one of a host of special arrangements for religious ministries that are not available to similar secular organizations — exemptions rooted in the First Amendment’s ban on any Congressional action that would restrict the free exercise of religion or establish an officially sponsored religion.

Special breaks like these have been accumulating at a time when religious organizations of all faiths are expanding into a range of new activities that may compete directly with businesses and other nonprofit organizations that are not eligible for the same exemptions.

The Internal Revenue Service has a number of special rules for religious nonprofit groups. Under those rules, as a ministry of the American Evangelistic Association, which ordains clergy and supports various educational and humanitarian missions, Christian Care Ministry is not required to file public financial statements with the I.R.S., as secular nonprofit organizations are.

The I.R.S. makes this exemption available to all churches — including synagogues, temples, mosques and other congregational forms in different faiths — as well as church associations, auxiliaries and retirement plans; religious elementary and secondary schools; foreign mission societies; and the “exclusively religious” activities of any religious order.

As part of a church association, Christian Care is also protected by special limits Congress has put on the I.R.S.’s ability to audit religious congregations.

These restrictions, which do not apply to other nonprofit groups or for-profit entities, require a top-level I.R.S. official’s approval before any audit can begin. The religious group must get advance notice and the opportunity for a personal conference before the audit can proceed. The audit must be finished in two years. Finally, if the inquiry does not turn up deficiencies, the I.R.S. cannot return to audit that issue again for five years.

How does a bill-sharing ministry become eligible for I.R.S. exemptions that apply to churches? Although the tax agency decides case by case what qualifies as a church, it lists more than a dozen criteria it weighs in reaching its decisions. These include having established times and places of worship, a recognized creed and liturgy, a distinct history and form of ecclesiastical government and spiritual leaders who are ordained in some way after a course of study.

Christian Care says the I.R.S. has determined that the American Evangelistic Association, the ministry’s parent organization, meets the test. And the association’s exemption extends to the ministry, Mr. Reinhold explained, because it is not considered an unrelated business — whose revenue would be taxable — but part of the association’s religious mission.

But bill-sharing ministries make some regulators nervous. Indeed, the first such ministry that most regulators encountered, the Christian Brotherhood Newsletter ministry in Barberton, Ohio, faced questions, and sometimes lawsuits, from regulators in about three dozen states for more than a decade after it was founded in 1982.

The warning currently printed in Christian Brotherhood’s monthly newsletter summarizes the arguments these ministries make when regulators accuse them of being health insurers: “Whether anyone chooses to pay your medical bills will be totally voluntary,” members are told. “As such, this publication should never be considered as a substitute for an insurance policy.”

Four years ago, a group of independent directors successfully sued Christian Brotherhood’s founder and several members of his family, accusing them of diverting millions of dollars for their personal use. The attorney general’s office in Ohio, which regulates charities, joined the case as co-plaintiff. By the time the founder and his relatives were removed from management, the pile of unpaid bills was as high as $27 million, a backlog the ministry expects to eliminate by next summer, according to the Rev. Howard S. Russell, who helped initiate the earlier litigation and who leads the ministry today.

Mr. Russell said the ministry had tightened its managerial controls and improved its communication with its members since the lawsuit. It makes its financial records available to the public both through an annual statement called a Form 990, filed with the I.R.S., and through responses to requests made by phone or on its Web site, he said.

Another large bill-sharing ministry, Samaritan Ministries International, based in Peoria, Ill., also files a Form 990 with the I.R.S. each year.

But Mr. Reinhold noted that churches had long been exempt from filing with the I.R.S. “I’ve been in Christian work since 1972 and I’ve never heard of a church filing a Form 990,” he said in an e-mail message.

Christian Care Ministry did provide The Times with the independent audits for the parent association and affiliates for the fiscal years that ended last June and June 2005. The new draft audit substantially restated the 2005 results, to change the accounting treatment of the members’ money.

Robert Baldwin, the ministry’s president, said the change underscored the fact that these pending medical payments were not actually legal liabilities of the ministry — as previous accounting suggested.

The ministry reports that that member receipts in fiscal 2006 grew 11 percent over the previous year, after adjusting for the accounting change. The monthly sharing requirement was raised in March and raised again in July. The association spends about 17 percent of every member’s monthly check to pay administrative costs. For years, the ministry also paid premiums for “stop loss” insurance that kicked in to cover the bills for catastrophic medical incidents.

The insurance policy had been purchased through an affiliated trust in the British Virgin Islands, which receives member contributions and sends out the medical payments.

Glenn Jennings, who until July was executive director of the Kentucky Office of Insurance, says it was the offshore insurance policy that prompted him to take a hard look at the ministry; such a policy would seem to go beyond voluntary bill sharing to the kind of formal safety net an insurance company provides.

“When I learned about that, I said to them, ‘You’re really starting to quack a lot like a duck,’ ” Mr. Jennings said.

Mr. Jennings filed suit, arguing that Christian Care does not qualify for the state’s religious ministry exemption. His successor, Julie Mix McPeak, is pursuing the case, which is set for a final hearing in state court next week. .

In its defense, the ministry has argued that to deny it the safe haven of the state exemption would violate its First Amendment rights of religious freedom.

Nevertheless, the ministry eliminated one point of dispute with Kentucky regulators on Oct. 2 when it canceled its insurance, effective at the end of last month.

Mr. Baldwin, the ministry’s president, said the ministry made the move, not because of the lawsuit, but because the benefits did not justify the expense.

But another difficulty remains. Kentucky requires that each sharing household send its check directly to the family whose bills it is helping to pay, not to some central office as Christian Care members do. But Mr. Reinhold said his practice leaves a clearer audit trail.

He seemed unconcerned about the Kentucky litigation. “We went through this eight years ago,” he said. “Then, you have a regime change and another set of bushy-tails comes into command and it starts up all over again.”