Transcript of OA497: Christian Health Sharing Is a Scam

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[Show Intro]

Thomas:         Hello and welcome to Opening Arguments, this is episode 497.  I’m Thomas, that’s Andrew, how’re you doing, sir?

Andrew:         I am fantastic, Thomas, how are you?

Thomas:         Are you just fantastic because I am going to play a line from Casino, one of your favorite movies?

Andrew:         Uh, yes.  Yes.

Thomas:         Is that mainly why?  [Laughs]

Andrew:         [Laughs] That is 97% of my joy and happiness.

Thomas:         Yeah, we’ve got a very – very important story to talk about today.  Basically, health insurance, scam health insurance that we don’t want people to get taken in by, so if you think anyone needs to hear this, please share it with them because maybe you have some family members, maybe you know some people, this is a real deal but I’m told this line from Casino is very apropos, so I’m gonna go ahead and hit play on that.  [Laughs]

Christian Health Sharing Is a Scam

[2:02.4] [Segment Intro]

Thomas:         Okay, okay.  I’ve heard it, Andrew.  That paints a dismal picture of what’s going on here so why don’t you tell us about Christian Healthcare Sharing Ministries.

Andrew:         Yeah, let me begin with how widespread this is and what encouraged me to do this topic on today’s episode.  I have a whole bunch of Google alerts set up and I check Google news multiple times a day to sort of see, alright, what legal stories are out there percolating into the mainstream.  One of the things that is frequently linked on Google news is a site called MarketWatch.  There was a little box down below and it said “I’m in my 40s, my kids are about to go to college, am I saving enough?”  Well, that’s pretty good clickbait.

Thomas:         Yeah.

Andrew:         [Laughs] For a dude in his 40s who has an 18-year-old son, so I clicked on it.  Now first let me say, the level of disconnect, this was written by Ali Malito, and I have called her out on Twitter, I’ve called out MarketWatch on Twitter for the truly egregious part of this, but just at the outset, I click on it and it’s ridicul- from the get go the guy describing his need to inquire is like “so college for my kids is fully funded in a 529 plan, I make $300,000 a year.”

Thomas:         [Scoffs] Yeah.

Andrew:         “We max out all of our retirement vehicles.”

Thomas:         [Laughs]

Andrew:         “We have zero debt aside from our primary residence.”  Oh no wait, wait wait.  “We have eight rental income residential properties.”

Thomas:         Oh – oh my god.  Alright.

Andrew:         “That net us $6,000 a month after mortgages and expenses.  Combined we have $1.7 million in IRA and 401k assets.”

Thomas:         Why… what.

Andrew:         “$500,000 in cash and after-tax savings-

Thomas:         Is this a joke?  This is a joke.

Andrew:         -and we’ve averaged a 12% return on investment.”  Yeah.  Right.  Instead of the answer to the question being like “Yeah.  Dude.”

Thomas:         Shut up, you’re fine.  Yeah.

Andrew:         [Laughs] Way to humble brag.

Thomas:         This is like the thing when the absolute valedictorian teacher’s pet would ask a fake question to indicate that they know everything already.

Andrew:         Right.

Thomas:         You’re showing off at this point.  You’ve got money.  You beat money.  You won.  You’re good.

Andrew:         Right.  Nevertheless, Ali Malito decides that she’s going to interview a couple different financial advisors-

Thomas:         [Laughs]

Andrew:         -to give additional advice here.

Thomas:         Get them on the case, yeah!  [Laughs]

Andrew:         One of them she quotes wrote this sentence, and I’m now reading directly from the MarketWatch article:  “Since you are healthy, you may also want to look into a Christian Health Sharing company-

Thomas:         Ohh.

Andrew:         -which is a faith-based health savings approach where members help cover the costs of others in need.”  By the way, nothing in the original question indicated that this guy was a Christian-

Thomas:         Yeah.

Andrew:         -a person of faith, anything.

Thomas:         Kinda shoehorned in there.

Andrew:         Right.  This is a financial advisor out there evangelizing for, again, what is a Christian healthcare cost sharing ministry.

Thomas:         Wow.

Andrew:         We’re gonna talk about that, that’s written into the two laws that I’m gonna specifically talk about.  Before I get there, I want to make this very, very clear.  Even if you are a religious person, even if you are an evangelical Christian: This. Is. A. Scam.  You should not buy into it if you are healthy; you should not buy into it if you are sick; you should not buy into it if you are capable of drawing breath.  It is not insurance and its sort of advertised and they’re like “We’re not an insurance, we would never employ sleazy insurance brokers.”

Thomas:         Yeah.

Andrew:         It’s not a replacement for insurance, okay?  Here’s why.  Insurance is a contract.  But it is a super heavily regulated contract.

Thomas:         Hmm.

Andrew:         Because if it wasn’t a super heavily regulated contract, we could just run this scam like, hey Thomas, why don’t you pay me a thousand dollars a month-

Thomas:         Okay!

Andrew:         -for life insurance and then when you die I’ll pay you $100 million.

Thomas:         Cool!

Andrew:         That seems awesome, right?  You pay me the $1000 a month, I create a-

Thomas:         What a profit I’m making!

Andrew:         -company and then when it comes time for you to cash in, I declare bankruptcy for the company and you get nothing.

Thomas:         Ooh.

Andrew:         That would be real bad, right?

Thomas:         Can I pause you right here and say I really hope this isn’t like gonna be a love letter to the insurance industry?  [Laughs]

Andrew:         No no no no no.

Thomas:         No, I just want to flag this.  Obviously, the insurance industry is riddled with problems, but this is even worse, right?

Andrew:         This is way worse because this is the same kind of contract minus the regulations. 

Thomas:         [Laughs]

Andrew:         Look, all of the things – and I’m 100% serious about this because people are drawn to these Healthcare Sharing Ministries, HCSM is gonna be the abbreviation that is used in the law and that I’m going to use in this episode.  People are drawn to these because they’re fed up with the profit motive in insurance companies.  Let’s describe very quickly how that works.  That means the insurance company maintains actuarial tables of the likelihood of certain events and then using that, they then, again, not unlike Casino, place bets that they’re going to take more in premiums from you than they’re going to have to pay out over the lifetime of the policy based on those actuarial tables of events.  You’re betting that you can beat the dealer-

Thomas:         Mm-hmm.

Andrew:         -they’re betting that you’re a sucker.  Again, that’s the best thing you can have happen to you.  [Laughs]

Thomas:         [Laughs]

Andrew:         What the Affordable Care Act did was merge the pools of people who are very, very high risk with people who are very, very low risk.  That is the only way as a society to make insurance work.

Thomas:         Yeah.

Andrew:         To make private insurance work.  You can have a public model but we decided we weren’t gonna do that.

Thomas:         Yeah.  What would fix this is to merge everybody.  That is what would fix this.

Andrew:         It certainly would.

Thomas:         Cost less for everybody, we should do it yesterday, but anyway.

Andrew:         Yeah.  Key to this approach was the ACA’s mandate.

Thomas:         Mm-hmm.

Andrew:         You had to buy health insurance even if you were 27 and healthy because that’s the way in which you make the system work.  If the only people who pay in are people who are already sick then there’s absolutely no way.

Thomas:         Yeah.  Who’s gonna cover them and if they did figure out some calculation to do it the premiums would be so high-

Andrew:         Right.

Thomas:         -that those people wouldn’t be able to even afford it.  It would be impossible.

Andrew:         Exactly right.  Insurers are heavily, heavily regulated and one of the big things they have to have is they have to have reserves to show that they can pay out the kinds of claims that they say they’re insuring.

Thomas:         Mm-hmm.

Andrew:         Otherwise, you just do the thing that I said.  [Laughing] I’m gonna take in all the premiums-

Thomas:         Yeah, yeah.

Andrew:         -and never pay out.  And we know all of the incentives that insurance companies have to not pay on claims.

Thomas:         Yup.

Andrew:         That’s something for which everybody, particularly people who are attracted to HCSM’s can recite chapter and verse of, you know, they wouldn’t pay my radiologist to run X screening or Y screening.

Thomas:         Yup.  I’ve mentioned it a million times, I worked in a medical office and they would do all of these shenanigans constantly.  The form changed.  Oh, this box went over there, this one went over there, and this is to pay the doctors, to pay for the actual service, and they would find every excuse to be like “ope, new form, it’s slightly different and you didn’t fill it out the way you were supposed to, not paying back the claim.”  It’s nonstop.

Andrew:         And so State, local, and federal regulations and laws are trying to stay one step ahead and provide for some kind of social relief against the worst of those abuses by regulating – heavily regulating – the insurance industry.  Now, an HCSM is a worse version of that contract with none of the regulation.

Thomas:         [Laughs] Yeah.  Wow.

Andrew:         If you hate health insurance companies-

Thomas:         And you should.

Andrew:         And you should.  You should feel comparatively much more antipathy towards these Healthcare Sharing Ministries.  Now I’m gonna break this down.  First, what they promise to do is really, really, really, really stupid and terrible and awful.  That’s what they promise to do, okay?  Point number two, because they’re unregulated there are tons of loopholes so they don’t even have to do what they promise to do.  Point number three, because they are exceptionally well qualified at lobbying, they’ve gotten two amazing legal benefits that have massively allowed them to proliferate.  One from Democrats during the passage of the Affordable Care Act and one from Republicans during the Trump administration, we’re gonna talk about both of those. 

Healthcare Sharing Ministries were a tiny, tiny, minority almost entirely among the Amish and Mennonite communities in churches with less than 100 people prior to the implementation of the Affordable Care Act.  In other words, they were a blip on the radar screen.  But they had two powerful lobbying groups:  The Alliance of Healthcare Sharing Ministries and the National Coalition of Healthcare Sharing Ministries that managed to lobby for a particular provision in the Affordable Care Act that we’re gonna talk about and they exploded from under 100,000 people using them to half a million by 2016 and over a million by 2020 and continuing to grow at an incredibly large rate.  

It’s a real danger, we’re gonna get back into what made that possible.  But first, what do they promise to do?  What they promise to do is to take your money.

Thomas:         [Laughs]

Andrew:         They charge, on average, $500 a month.

Thomas:         Wow.

Andrew:         Which is way less unsubsidized than real health insurance.  It looks like a premium, it’s cheaper than good health insurance because it’s not insurance.  Their websites will have things that look-

Thomas:         Right.

Andrew:         -like an insurance.  It will say “the gold program,” “the silver program.”

Thomas:         Oh, I bet you they give you cards that look an awful lot like insurance cards.

Andrew:         100% they give you an ID card.  They have in-network and out of network (quote) “coverage.” 

Thomas:         I was just thinking of, like, God’s network.  Ah, if you go to far over that way the prayers can’t reach you so that’s out of network.  [Laughs]

Andrew:         [Laughs] I would love to be able to cite to a specific contract, but there are five major players in this field that are multi-State huge corporations.  These are organized as nonprofit corporations, because of course they are.  The five major players, there are three evangelical Christian organizations.  The largest one, I think, is Medi-Share.  It’s based out of Florida; it was formerly the Christian Care Ministry.  There’s also Christian Healthcare Ministries, it’s based out of Ohio; and Samaritan Ministries based out of Illinois.  In addition to that there is a Catholic organization called Solidarity HealthShare which was founded in 2015 – put a pin in that; and one of the traditional Mennonite ones which is Liberty HealthShare from Ohio.  Those five are essentially the field right now.  On none of them can I get a copy of the actual contract that you sign when you sign up with these entities.

Thomas:         That’s not a good sign.

Andrew:         Yeah.  They don’t have it on the website, you have to apply and, like, I love you people but I am not applying and giving my release for private information to one of these scams for that.

Thomas:         Oh, yeah.

Andrew:         I have been on listservs where people have talked about their complaints with these organizations and no one will post their contracts.

Thomas:         Wow.

Andrew:         Again, as a lawyer, what that tells me is that I presume – again, this is 100% supposition, so could be wrong – I presume that they have a very robust nondisclosure provision.

Thomas:         Mm-hmm.

Andrew:         And I think I have good reason, which I’m gonna cite in a minute, to believe that their contracts force you into arbitration.

Thomas:         Ahh.

Andrew:         And that those arbitration clauses probably have huge mandatory minimums.  They might be in Geneva, which often requires you to put forth a six-figure deposit.  It’s not hard to make an arbitration provision that is essentially punitive, we’ve talked about this before.  It’s not hard to make one that isn’t, but it’s not hard to make one that is.  It probably also has attorney fee shifting.  All of that’s supposition, but that’s supposition based on the fact I can find some pretty onerous contracts on the internet and I cannot find any of these contracts.

Thomas:         Not a good sign.

Andrew:         Not a great sign.  I’m now going from their websites.  Here’s what they promise to do:  They promise you and everybody else, pay your premium, and that goes into an Escrow account.  You can then go to an in network – they issue you your little ID card that, definitely not health insurance but, you know, you get this thing that looks like an insurance card.  You can go to an in-network provider for a covered medical event or you can go to an out of network provider.  If you go to an in-network provider, they will directly send your bill to the HCSM.  If you go to an out of network provider, they send it to you and you have to submit it.

However, that bill gets submitted, you pay your deductible, which they call the “unshared amount,” then they either try to negotiate a discount on the bill with the medical provider if it’s an in network, or they force you to (quote) “plead.”  That language of “plead” is directly from Samaritan’s website.  That’s their word, not mine.  “Plead” with the medical provider to reduce the charges.  After the begging, they then will say okay, you begged the bill down to X dollars, your responsible for Y deductible and then we’ll take the balance and coordinate withdrawing sums out of the escrow account to then pay the medical provider directly up to your cap lifetime benefits, which by the way is usually $125,000.  That’s how this is pitched as working to you.  That’s their description of their services.

I want to do a slight sidebar which I can hear you pulling your hair out at the roots already.  At $500 a month if you put it into a standard investment portfolio that’s returning 8%, you’ll make a million dollars in 30 years; you’ll make a quarter of a million dollars in 15 years.  Yeah.  You start paying into this thing you will get way over $125,000 just by handing it over to a financial advisor period.

Thomas:         Wow.  So, they’re saying you have a lifetime cap of $125,000. 

Andrew:         Yeah.

Thomas:         But you’re putting in $500 a month forever.  [Laughs]

Andrew:         Right.  Your laughing there is entirely appropriate.  I ran one of those, like, retirement calculators?

Thomas:         Yeah.

Andrew:         And in any normal investment portfolio, not even counting the tax advantage, which by the way, this is not.

Thomas:         Yeah.

Andrew:         Getting to $125,000, not hard when you’re essentially taking $6,000 a year.  Mind you, this is what they promise to do!  [Laughs] We’re gonna get to how they back out of those promises in a minute, but notice – and this is not a thing that they will tell you – from a social health management perspective, this does not do the two things that you want healthcare programs to do!  It does not encourage preventative measures when you’re young.

Thomas:         Hmm.

Andrew:         And it does not cover catastrophic care when you’re old! 

Thomas:         I was gonna say, $125,000, I mean, one visit could wipe that out if it’s bad enough.

Andrew:         One catastrophic visit will absolutely wipe that out.  But let me go quickly to the first part of that.  Even skinny plans under the ACA will cover preventative care, you know, your yearly well visit.  This does not.  You’re 27, why am I gonna go pay the doctor to tell me I’m fine?  Well, you know, because a good relationship will be able to flag, oh hey, you’re pre-diabetic as opposed to oh, you discover that when all of a sudden you have lost feeling in your foot.  We know from a social perspective that encouraging preventive care is the single most important thing you can do to build a healthier population with a higher standard of living, with lower long-term medical – it’s just, it’s the most important thing to do and this doesn’t do that.

This doesn’t cover maintenance meds.  Again, let’s stick with you’re pre-diabetic, you’re in a warning category for long term potential, because of family history.  Let’s say you have a family history of heart disease.  Well, they put you on maintenance meds in your 30s that will ward that off.

Thomas:         Mm-hmm.

Andrew:         That, again, are super beneficial.  None of that; this covers events.  I have a heart attack and go to the hospital and then they’ll share that out.  It doesn’t cover anything preventatively and it’s bad.

Thomas:         Well, but that’s weird because wouldn’t these crooks running this scam even be incentivized to try to like keep future costs low just for their own self-interest?

Andrew:         If there was some relationship between the product being provided – let’s use that loosely – and the healthcare pool that it comes from.  But these scams rely on people opting in when they’re young and dropping out when they hit their cap. 

Thomas:         Oh, and they realize it’s a scam?  [Laughs]

Andrew:         Yeah, it’s a churn!  It’s 100% a churn because they tell you, oh you’ve hit your cap, you can continue to donate to us.

Thomas:         Wow.

Andrew:         But that’s it.  They know you’re opting out when you’re 50 so they’re trying to get you in when you’re younger and the only way to make that work is to have a constant churn on your pool.  That’s the thing they promise to do.  You might say alright, here’s how I’m going to beat their system, I’m only gonna sign up when I’m old!  Yeah, okay, I only get the $125,000, I’ll sign up for the gold program and I’ll get $250k and I’ll pay ‘em a couple hundred bucks a month and then come in and have them at least pay for my triple bypass.  Wrong!  The HCSM just won’t take you.  Or they can explicitly exclude all of your preexisting conditions because they’re not health coverage!

Thomas:         Wow.

Andrew:         They’re not insurance.  They’re not covered by the provisions of the Affordable Care Act that require them not to discriminate.  They don’t cover anything so they’re not forced to cover your preexisting conditions.  They just agree to maybe share out your bill and we’re gonna get into that.

In fact, let’s get into that now.  What are the loopholes?  The first and the biggest loophole we’ve already talked about, they’re a nonprofit ministry so they’re not regulated by any of the healthcare bodies; they are not subject to any of the statewide insurance programs that agree to step in in catastrophic circumstances if your employer-

Thomas:         Hmm.

Andrew:         -if your regular healthcare coverage fails to cover certain events, because again, not healthcare.  What that means is you have to sue them, which oh, by the way, your contract almost certainly prevents you from suing them so you’re gonna have to go to arbitration and convince an arbitrator to hand down a ruling against a nonprofit religious organization, which is super high burden to have to meet.  If they just decide not to do the stuff they promised, and by the way they haven’t promised to do that much. 

What are some of the other ways that they get around in their contracts?  Again, can’t find the contract but Samaritan Ministries publishes their requirements, I’ll include that link in the show notes.  These are the things they say on their website.  These are reduced to legalese in their contract, but who knows how much more there is?  This is what they tell you before you sign up you have to do as condition precedent.  If you don’t do any of these they can say okay, well we don’t have to pay.

Thomas:         Hmm.

Andrew:         We don’t have to share out any of your medical bills no matter how long you’ve been paying.  And by the way, you’re not paying, you’re donating to a ministry.

Thomas:         Yeah, yeah.

Andrew:         Right, right, yeah.

Thomas:         I was gonna say, if already in regular insurance this sucks, I can’t imagine how bad it is in a scam that’s just dressed up like insurance but isn’t actually regulated.  Must be terrible.  [Laughs]

Andrew:         Take a gander at “Attend a Christian church regularly (at least three out of four weeks per month that your health or weather permits).  If it is not possible for you to regularly attend a Christian church, please submit a letter giving the details.”  By the way, this is word for word from the Samaritan Ministries website: “Fellowships, churches, temples, wards, and denominations that fall outside of Biblical, Christian faith—such as the Church of Scientology, Unitarian, Jehovah’s Witnesses, and The Church of Jesus Christ of Latter-day Saints—do not qualify for the church attendance requirement.”  If at any point you’ve not been able – again, they require that you attend church three weeks out of four every month.

Thomas:         Do they take attendance at church?  It’s been a while since I’ve been.

Andrew:         [Laughs]

Thomas:         How would they figure this out?  Do they have to just ask? 

Andrew:         I will tell you that in a minute, you will be shocked.

Thomas:         Oh, okay.

Andrew:         Oh yeah.  You agree to not use “any legal or prescribed substance” – “not abuse any legal or prescribed substance,” so you get addicted to painkillers?  They can just refuse to do anything.  To “abstain totally from illegal drugs and recreational use of marijuana,” to “abstain from tobacco use.”  To “limit consumption of alcohol to moderate amounts and never drink to drunkenness, or cause another brother or sister in Christ to stumble.” 

Parse through all of that, major healthcare issues with involuntary opiate addiction in this country because of precisely this system.  You get overprescribed meds by the doctor for your back pain and now all of a sudden you’re hooked on Oxycontin.  They can say oh, yeah, you didn’t abide by the Christian standards in our contract, we’re not paying for anything.  We’re not paying for your back surgery – again, they don’t ever pay, they just share it out from the escrow, but they can say to you we won’t even do that for your back pain because you haven’t complied with the biblical standards.

Next, “abstain from any sexual activity outside of traditional Biblical marriage as designed by God between one man and one woman.”

Thomas:         [Laughs] As described by God!  Where did they pick up that quote?  [Laughs]

Andrew:         [Laughs]

Thomas:         Oh my god.

[25:40.4] [Commercial]


Andrew:         So, you know, obviously they’re not paying for an abortion.

Thomas:         Yeah.

Andrew:         You probably knew they weren’t paying for birth control, but particularly among the young people to whom this is targeted, they’re not paying for any STD you might happen to catch.  These are really, really significant things that, again, by their own promises they don’t even have to do the minimum that they are saying that they’ll do. 

You must “agree to practice good health measures in accordance with the principle that your body is the temple of the Holy Spirit.”

Thomas:         [Laughs]

Andrew:         You must “agree that when you have a dispute” this is in their membership requirements.  “Agree that when you have a dispute with a fellow Christian, and your fellow Christian is willing to submit that dispute to fellow believers for resolution, you are not to sue each other in the civil courts or other government agencies.”

Thomas:         What?

Andrew:         Uh, yeah!

Thomas:         Is that like their religious dressed up arbitration clause, kinda?

Andrew:         It is indeed.

Thomas:         Oh, wow.

Andrew:         There is not doubt in my mind that in the contract that is 100% an absolute waiver of your right to sue the Christian Healthcare Cost Sharing Ministry.  Who knows what fake arbitration entity they’ve set up to handle these claims?  I wish I knew, but nobody will give me a copy of the contract. 

You must “sign and send in your Membership Continuation Form each year, confirming that you are still meeting the above requirements.  Have your pastor or Christian church leader-

Thomas:         There it is.

Andrew:         – sign a statement confirming that you meet the above requirements.  You will be required to agree to these requirements when you apply for membership and provide background information including your date of birth.”  And “reconfirm that you still meet these requirements annually.”  There is more, but I think you’ve gotten the-

Thomas:         Honestly that’s so gross.  This is really disturbing.

Andrew:         Yeah.  If they don’t do the things they promise to do, your remedy is to go to arbitration, but what they have promised to do is almost nothing.  Why do these exist?  Why are they getting more popular?  I’ve alluded to that throughout this segment.  These are the two law talking things.

The first comes from the Affordable Care Act.  The Affordable Care Act contained the individual mandate, that’s the key to making it work, it’s why one of the first substantive things that the Trump administration did was reduce the mandate to zero.  The idea was if you are over the age of 26 you are required to maintain minimum essential coverage or you then paid the penalty, again which was reduced to zero.  Plausible that will be increased again in the Biden administration, we don’t know.  And CHSM lobbied for, and got, an exemption to the minimum essential coverage requirement even though by the definition, again I’m gonna read to you the provision of the Affordable Care Act, they do not provide minimum essential coverage because they’re not insurance.

This was § 1501(d)(2)(B), which says “Members of a group which share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the State in which a member resides or is employed are exempt from the minimum essential coverage maintenance requirement.”  The bit that was put in was that those CHSMs had to have been operating since 1999, which was 11 years at the time that it was passed, and that was designed to assuage folks like me who said “wait, what’s to stop them from doing the Nicki Santora trick and just taking the money and declaring bankruptcy?”

Thomas:         Yeah.

Andrew:         The idea is yeah, you know, you’ve been around for a decade you’re probably not gonna do that.  Except that, as we told you to put a pin in, Solidarity HealthShare, founded in 2015, what they did was bought out one of those tiny Mennonite churches that I talked about.

Thomas:         Ahh.

Andrew:         That has been in business since 1999.

Thomas:         Keep the old name, essentially?

Andrew:         Well, no, they changed the name.

Thomas:         Oh, just get credit for having been around since then?

Andrew:         They can show continuous operation since 1999.

Thomas:         Right.

Andrew:         All of a sudden you told a bunch of people who were in their 20s, “you have to pay to buy insurance,” and then all of a sudden this thing pops up that is funded by a ton of advertising to back it.  All of a sudden what pops up is hey, do you want this super expensive Obamacare evil government-run healthcare plan?  Or do you want a Christian alternative which happens to be much cheaper?  Essentially the enrollees in this quadrupled during the passage of the Affordable Care Act and have doubled since then. 

That’s the bad Democratic aspect of the law that has allowed these to proliferate.  There’s also a bad Trump era IRS rule that just went permanent yesterday, so this might be a great thing to talk to your elected representatives about.  This is something that can be undone with proposed rulemaking and hasn’t by the Biden administration because it’s sort of the, you know, third rail of a religious charity.  You know, a scam dressed up as a religious charity. 

Let me explain what that rule is.  Under 26 U.S.C. § 213(d)(1) there’s an allowable deduction on your taxes under certain conditions that I’m not gonna get through here for healthcare insurance, that is defined as “medical care” for the amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease,” and for insurance for those things.  You can deduct your actual medical costs and your healthcare insurance costs.  The question was asked of the IRS in 2016, hey if this section allows us to deduct our insurance, does it protect stupid scam noninsurance?  And the IRS was like no, it protects insurance.

Thomas:         [Laughs]

Andrew:         Stupid scam noninsurance comes under that section of the IRS code that doesn’t exist.  That 2106 ruling didn’t really affect individuals at all, but it affected individuals who worked at certain employers with deeply held religious beliefs-

Thomas:         Ahh.

Andrew:         -that were providing subsidies to their employees to join these scam organizations.

Thomas:         Oh man.

Andrew:         Which again, may cover some of our listeners.  The rule was, until very recently, if you were a member of an HCSM and your employer subsidized in whole or in part your membership in that HCSM, that was taxable income.  It was not tax deductible under 213(d), because it’s not healthcare, and it’s not health insurance.  So, the IRS said members of an HCSM are exempt from the requirement 5000A of the Internal Revenue Code as implemented by the Affordable Care Act to keep minimum essential coverage, so you don’t have to do that, however – this is more of the IRS letter – “coverage by [the] HCSM is not minimum essential coverage.”

Thomas:         Oh.

Andrew:         “The law does not consider membership … as health insurance and payments for participating … are not deductible medical care.  Because participation … is not employer-provided coverage … the law does not exclude employer payment for the cost of employee participation from the employee’s gross income.  Instead, the law considers it as taxable income and wages to the employee.”  Now, that has almost no relevance to you as an individual taxpayer, but it was a disincentive to certain corporations with sincerely held religious beliefs against subsidizing HCSMs-

Thomas:         Right, because they can’t deduct it.

Andrew:         They might as well just pay you in more wages.

Thomas:         Yeah.

Andrew:         If it’s gonna be treated as wages anyway.

Thomas:         But you say it has no effect, but isn’t it a bad sign if the thing that you think you have that’s health insurance the IRS is like “um, no.  Not really.”

Andrew:         Definitely not, yeah.  Should be warning sign, but who knows how this is folded into the grand conspiracy against-

Thomas:         Yeah.

Andrew:         So, as a result of Trump’s Executive Order 13877, which by the way, does not say healthcare ministries, does not mention ministry at all, it just says that we want to promote (quote) “shoppable services,” (end quote) among healthcare.  The IRS made a Notice of Proposed Rulemaking in June of 2020, that notice and comment period was open until August of 2020 and the final rule went into effect on Tuesday, June 1st of this year, 2021.  It now says that we will classify your dumb stupid noninsurance as insurance, so yes, it is tax deductible-

Thomas:         [Sighs] Ah.

Andrew:         -if your employer provides it to you.  We have not yet seen the knock-on effects of this, I am 100% positive the employers who want to do this are aware of the significance of this IRS proposed rule and the likelihood that your employer is incentivized to offer “as a special bonus to you” hey, if you want to join an HCSM we will pay those sums in whole or in part.  In whole, it just means that they’re taking what should be your wages and giving them to a Christian ministry.  In part it means they are incentivizing you to join that Christian ministry.  Again, don’t take legal advice from a podcast.  You need to get active if your employer is thinking about this, considering, debating.  This is like having a tax deduction to encourage you to invest your money with Bernie Madoff. 

Thomas:         Yeah, wow.

Andrew:         These are – I mean that directly.  These are a Ponzi scheme.  They cannot work if the do what you think they are going to do.  The only way they can work, the only way that that pool refreshes itself, is by capping, refusing to pay, and churning through people. 

It began, I read you how it began, I looked at it and I thought “man, we shouldn’t be- MarketWatch should be ashamed of itself,” and it should be.

Thomas:         No kidding, yeah!

Andrew:         Call these people out.

Thomas:         I forgot about all that.  Why the heck are they publishing something like this?  By the way, unbidden. 

Andrew:         Yeah.

Thomas:         It wasn’t even anything in that weird article that would suggest they need this.

Andrew:         No, this was not Christian advice.  This is really what is insidious about this.  It is piggy-backing on the generic Christian belief that is expressed by, you know, 70-plus-percent of the population, to say oh yeah, this is a positive thing, it’s got good will in the public.  This is a scam. 

By the way, MediShare, you’re totally welcome: sue me.  Sue – well, it wouldn’t be me personally, it would be Opening Arguments Media, LLC, [Laughs] a Maryland Limited Liability Company based in Towson, Maryland.  Sue us if you want, we will kick your ass in court because you are a scam, and we believe that our listeners need to know that.

Thomas:         It is heartbreaking, because you know there are tons of people who just think this is insurance, you know?

Andrew:         Yeah.

Thomas:         They don’t have time or expertise to know the difference, they haven’t heard this fine episode of Opening Arguments and they think they have insurance and then all of a sudden, they don’t.

Andrew:         Particularly older family members who aren’t even going to get the bare minimum of promises.  Based solely on what they themselves have described, and I would say if you want more on this, Reed Abelson, the New York Times.  They have done some amazing reporting, I’m gonna link to one of their articles in the show notes.  There are multiple pending lawsuits, State investigations, all sorts of things.

Again, the reason I’ve done this breakdown is because when that comes out that’s gonna be – think of the overlap between this and the fake news community, and it’s gonna be “proof of hostility to religious beliefs.”  I haven’t done anything on this show that isn’t either directly quoting from their websites-

Thomas:         Yeah.

Andrew:         Or directly quoting from the law.  This is bad, people, and if you have somebody who’s involved or could be involved do everything you can to try and help them out.

Thomas:         Yeah, this is a set all disagreements aside; we don’t want innocent people to be scammed by corrupt Casino-type.  [Laughs]

Andrew:         Yeah.

Thomas:         Basically, pyramid schemes as you said, this is gross stuff.  But why – the Biden administration could put an end to this, couldn’t they?

Andrew:         Absolutely.

Thomas:         Okay.  Well, I know there’s a lot to do.

Andrew:         [Laughs] There is a lot to do.

Thomas:         It’d be nice if they got on that.

Andrew:         Just getting rid of the preferential treatment would go a long way towards the market correcting for this.  But no, this is a situation where you can understand the pitch.  The pitch is “hey, don’t have government bureaucrats get involved; don’t throw away your money on evil insurance companies that pay their executives millions of dollars, let’s have a Christian Healthcare Ministry where everybody involved, we’re all on the same team, we’re all pulling together.”  That pitch is really, really seductive. 

In the event, I am sure, that the Biden administration wants to restore the individual mandate, and when that happens – if that happens – you will see that argument come to the fore.  “No, you don’t want super expensive health insurance, you want something that’s better than insurance.”  It’s an unregulated promise that does … less than what insurance says it will do.  It’s bad, people.

Andrew Was Right: Florida De-Platforming Law

[42:59.0] [Segment Intro]

Thomas:         Alright, well, a little bit of time here for an Andrew Was Right.

Andrew:         [Laughs] My favorite segment on the show!

Thomas:         Yeah, a little victory lap.

Andrew:         I mean, I like the Andrew Was Wrong segments, and I love that our listeners hold us accountable.  The stuff I learned about Sea Girt in Australia was fantastic.  Okay, we told you in episode 494 that the Florida de-platforming law was not going to survive, that it would be immediately sued in court and enjoined.  By the way, that lawsuit has now been filed.  It is NetChoice v. Moody.  I’ve uploaded it, after downloading a copy, I’ve uploaded it to our website, we’ll include that link in the show notes.

If you’re wondering who’s NetChoice, LLC?  NetChoice, LLC is an advocacy group formed and including AirBNB, Alibaba, Amazon, AOL, Dow Jones, DRN (I don’t know who that is), eBay, Etsy, Expedia, Facebook, Fluid Truck, Google, HomeAway,, Lime, Nextdoor, Lyft, Oath, OfferUp, Orbitz, PayPal, Pinterest-

Thomas:         Wow.  Just the internet.

Andrew:         -StubHub, TikTok-

Thomas:         It’s just the internet.

Andrew:         [Laughs] Travelocity, TravelTech, Trivago, Turo, Twitter, Verisign, VRBO, Vigilant Solutions, VSBLTY, Waymo, Wing, and Yahoo!.  Yeah, the internet.  It has five counts seeking declaratory and injunctive relief that this law is never going into effect.  Most of it is the stuff that we predicted.  Count one, violates the 1st Amendment.  Count two, that the election stuff is unconstitutionally vague and therefore violates due process.  Count three I thought was fun because I didn’t quite peg this even though we made fun of the Disney exception, but that violates the equal protection clause.

Thomas:         Oh yeah.

Andrew:         Yeah.  This is on page 60, paragraph 117 of this complaint, it says it seems [Laughing] it basically says (this is a paraphrase) but it says “seems kinda weird that this law would not apply to one of us (quote) “if we bought a zoo.” (End of quote).

Thomas:         [Laughs]

Andrew:         And that’s true!  Then it goes on to say, “Nor is there any reason to believe that the State’s purported interest in protecting against ‘unfair’ conduct from social media platforms is furthered by protecting theme park operators [and zoo owners]” [parenthesis] “(specifically including Disney and Universal Studios).” (End of quote). 

The argument that I didn’t flag that I was glad to see here and deserves its own deep dive at some point is a dormant commerce clause argument.  I don’t have the time to explain all of that, we need to do a deep dive on it, but basically it says because Congress has the right to regulate interstate commerce-

Thomas:         Ohh.

Andrew:         there is a corresponding negative implication that says that states can’t discriminate against or excessively burden interstate commerce. 

Thomas:         Right.

Andrew:         The idea that there is a dormant commerce clause that prohibits states from certain actions exactly like this one should have been really high on my radar and wasn’t, and so we’ll talk about that.

Then count five was the section 230 stuff that we covered in some depth.  We promised you this would get enjoined and before we could record the very next episode that lawsuit got filed and probably by the time you’re listening to this a preliminary injunction will be on the way.  The law is scheduled by its own terms not to go into effect until July 1, 2021, so on or before June 30th this law will be enjoined and it will never go into effect, just like we told you.

Thomas:         What a waste of time. 

Andrew:         Yeah!

Thomas:         You know, conservatives, don’t you hate when the government wastes your time and money?  Then maybe, uh, vote against people, vote people out who write waste of time and obviously unconstitutional laws.  [Laughs]

Andrew:         Excellent pitch.

[47:03.8] [Commercial]

[48:52.1] [Patron Shout Outs]

T3BE Answer

[1:01:25.1] [Segment Intro]

Thomas:         And now it’s time for T3BE answer time.  Oh man, I am not looking forward to this.  Okay.  [Laughs]

Andrew:         [Laughs]

Thomas:         How’d I do?

Andrew:         This was a company contracted with a builder to construct a new corporate headquarters at a fixed price of $100 million.  At the time the structural steel was widely available, was included in the contract as a $6 million line item.  Before work began there was a catastrophe, tornado shut down the largest structural steel supplier in the country, and as a result the price of structural steel increased by 20%.  The builder told the company and said hey, hey there was this increase ins steel so we’re gonna have to charge you an extra $1 million.  There was an oral agreement between the parties to increase the project price to $101 million.  They built the project, then the company paid the $100 but refused to pay the $1. What happens if the builder sues the company for $1 million?  You deliberated between all the answers-

Thomas:         [Laughing] Yeah.

Andrew:         -before narrowing it down to (B) No, because there was no consideration for the modification of the contract; or (C) Yes, because the company’s promise was supported by consideration.  Then you and the coin both picked C.  Thomas, I have to tell you, for the first time in a long time, even Thomas’ Second Chance Law Firm got this one wrong.

Thomas:         Yeah.  The obvious answers were like A and D.  I really zagged on this one instead of zigging.  I dunno.

Andrew:         Yeah.

Thomas:         This is – okay.  What happened here?

Andrew:         What happened here is this is a modification to a contract.

Thomas:         Yup.

Andrew:         Modifications to contracts are specifically exempted from the rule of consideration.

Thomas:         Yeah.

Andrew:         Consideration requires that both parties get something.

Thomas:         Makes sense.

Andrew:         The idea is look, in the main contract both parties were getting something.

Thomas:         Yeah.

Andrew:         So, we don’t want to have to go through the rigmarole of saying-

Thomas:         Yeah, which I thought.

Andrew:         Yup.

Thomas:         But I just didn’t like the other answers!

Andrew:         I get it.

Thomas:         Dammit, I had that.

Andrew:         It’s covered by section 89 of the Restatement of Contracts, which says the modification of an executory contract – now executory contract just means a contract where there’s still part of it left to perform.  It says, “A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or-

Thomas:         Okay.

Andrew:         – (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.”  Here, you have a classic modification, the parties agree to it, it’s oral, which is fine.  Contract does not have to be in writing.  You can specify, you can say in a contract “any modifications hereto must be in writing.”

Thomas:         Ohh.  Yeah, yeah yeah.  Gotcha.

Andrew:         But the question doesn’t say that.  It is not required by the statute of frauds to be in writing.  Statute of frauds applies in six circumstances, I can’t name them all off the top of my head, but-

Thomas:         And I can never remember them.

Andrew:         [Laughs] The big thing to remember is if it’s for the sale of goods exceeding $500, if it is for real estate-

Thomas:         Yeah.

Andrew:         -or if it is for a contract that cannot be performed within one year.

Thomas:         Ah!

Andrew:         By the way, “cannot” is read philosophically at the, you know, at the existential level.

Thomas:         Yeah.

Andrew:         In other words, the contract says “we will provide this to you every month for the next 13 months.”

Thomas:         Mm-hmm.

Andrew:         That’s a contract that can’t be performed in a year, but even if it says like “we will repave all of downtown Detroit and it will take 35 years, we estimate that it will take at least 35 years,” a court will be like “well, they estimated that it could, but who knows?”

Thomas:         Oh, okay.

Andrew:         They could’ve been really, really efficient.

Thomas:         Yeah.

Andrew:         So long as it’s possible to do the contract in less than a year, it is not covered by the statute of frauds.

Thomas:         Okay.

Andrew:         Like I said, there are three more.  I remember memorizing six conditions for the bar exam, but the bar exam was [Mutters] years ago and I cannot remember-

Thomas:         Yeah.

Andrew:         -those others right now.  I would just look them up right now.  [Laughs]

Thomas:         Yeah.  As would I have.

Andrew:         Not subject to statute of frauds, doesn’t have to be in writing.  Because the modification is fair and equitable and because the parties agree to it and because there were circumstances not anticipated by the parties when the contract was made the modification is binding, you’ve gotta pay the whole $101 million.  That’s also why – you did correctly pick a “yes” answer.

Thomas:         Yeah.

Andrew:         But you said yes, the company’s promise was supported by consideration.  Yeah, no it wasn’t.  Here, the company just said we’re gonna do the thing that we originally promised to do, so that’s not additional consideration for the modification.

Thomas:         Well, the company is the one getting the job done – or, like, having it done for them though.

Andrew:         Oh, yeah, yeah.  You’re right.  Leave that in there.

Thomas:         Mm-hmm.

Andrew:         Because I misread it.

Thomas:         I actually looked that over a couple times to make sure.  Look, this was a question – so, the answer was D is what you’re saying, right?

Andrew:         Mm-hmm.

Thomas:         Yeah.  I just didn’t think that that was the thing that was going – but I guess based on – you know, I almost had it because the logic of the question would be such that D is the only thing left to question, you know?

Andrew:         Yeah.

Thomas:         It doesn’t – all the other stuff is kinda unsaid and that’s the trick of the bar.  It’s like once you’ve gone through the fact that this doesn’t have to be in writing and these other things, the only thing leftover is well, is it fair and equitable?  And I guess that’s why it’s D?

Andrew:         Yeah.  That’s right.

Thomas:         Yeah.

Andrew:         And let me say, since I misread the answer in dismissing it; I don’t know of any requirement in contract law, and our eagle-eared listeners I’m sure will flood us with emails if I’m wrong on this, that requires consideration for one party but not, you know, by and between both parties.  Now, you want to talk about intended third party beneficiaries, yeah, no. 

Thomas:         Well, not that it matters, but what I was actually thinking here was I just didn’t like any of the answers.

Andrew:         Hmm.

Thomas:         And so, C was one that I could see, I dunno how to describe it, but sometimes it’s like well that’s the answer that’s just kinda like “yeah.  It’s already covered.”  That’s why you don’t need more consideration.  I was kinda going for that kind of thing?  I didn’t love the answer, I just thought that that might be, you know, process of elimination one of those the best answer that just says, essentially, yeah, it’s fine.

Andrew:         Right.

Thomas:         [Laughs] I wanted a yes answer, I just should have picked D.

Andrew:         Here’s why C is never going to be a good answer.  Because the requirement of consideration, philosophically, is designed to say that the law is concerned with commercial transactions and not promises between friends or family members.

Thomas:         Right.

Andrew:         The classic example of a contract that is void for want of consideration is I tell you; we hang up this, and I tell you Thomas, notwithstanding whatever our agreement says, I promise you – and this is a real case – I promise you I’ll take care of you for the rest of your life.

Thomas:         Hmm.

Andrew:         I love you like a brother, which is all true, I’ll never let anything bad happen to you and I’ll take care of you financially for the rest of your life.  Now, that is obviously consideration to you. 

Thomas:         Yeah.

Andrew:         But that’s no consideration to me.

Thomas:         Undying love isn’t consideration?

Andrew:         If I decide to screw you over-

Thomas:         Is that what the cold-hearted law says?!

Andrew:         Yup.  That is what the cold-hearted law says.

Thomas:         Wow.

Andrew:         If I decide to screw you over ten years or ten minutes from now, you can’t go to court and sue me.

Thomas:         I know all this. 

Andrew:         Yeah.

Thomas:         I wasn’t sure if-

Andrew:         [Laughs]

Thomas:         -a modification needed consideration.  That’s the key question.

Andrew:         Yeah.

Thomas:         Again, I didn’t like any of the answers, I was just like well, maybe-

Andrew:         [Laughs]

Thomas:         Maybe a modification does require some sort of consideration?  Or my thinking-

Andrew:         But only on one side?  That’s a fair hypothesis.  Yeah, I’m just saying-

Thomas:         Well, I didn’t think it was only on one side.  Why is it only on one side?  I think the other consideration is already assumed, isn’t it?  I mean…

Andrew:         Well, that’s the thing.  As you were correcting me, it is the company’s promise, right, was supported by consideration.  That is, they agreed to pay the additional million dollars.  That’s the additional consideration.  But the supplier’s promise here in the modification was not supported by consideration.

Thomas:         You mean because the consideration is already there?

Andrew:         Because the consideration is already “build the building.” 

Thomas:         So, yeah.  Okay.  Yeah, I should’ve just gone with D.

Andrew:         [Laughs]

Thomas:         Fair and equitable in view of [Sighs] it just seemed weird that the only consideration for this modification of the contract is whether or not it’s fair and equitable.  But I guess now that I look at it this way, since all the other boxes are ticked, if it weren’t fair and equitable, if they’re like “well, we orally agree that you’re gonna pay me $20 million more dollars,” essentially, even if they both orally agreed, the company could refuse to pay that $20 million, then the same question happens and then the builder doesn’t prevail because that $20 million is not fair and equitable?

Andrew:         That is an excellent dive into the question, and here’s why that fair and equitable clause is in there.  It is to prevent the one party to the contract from using adverse circumstances to extort the other part.

Thomas:         Ohh.

Andrew:         You’ve started – let’s modify this a little, you started to build the building, then you go and you’re like hey, steel’s way more expensive, and the original party is like yeah, I agree with that that it’s way more expensive, we’ll pay your steel costs; and the company’s like “no no no no, the steel we have on hand, you’re gonna pay twice as much.”

Thomas:         Yeah, yeah.

Andrew:         We’re gonna hold you over the barrel.  What you can do as the company is you can agree, and then have them finish and then say yeah, you know what?  We agreed when you had us over the barrel, but you’re gonna have to sue us-

Thomas:         Oh, okay.

Andrew:         -for anything that’s above and beyond a fair and reasonable increase.  And in fact, I’ve litigated cases like that.

Thomas:         I’ll say this, I feel good that I eliminated A.  I wasn’t fooled by A. 

Andrew:         Excellent.

Thomas:         After that, everything else was downhill.  [Laughs] It’s all [Laughs] it went downhill from there.  That was the only good thing that I did.

Andrew:         [Laughs]

Thomas:         And I got in my head too much about D, I should’ve been between C and D, honestly, or just – obviously once you know the answer it’s like well, I should’ve been between D and D.

Andrew:         [Laughs]

Thomas:         Since I’m not a lawyer, the possibilities – I thought there was a possibility C would be this kinda default yes answer that just sort of restated – because that happens sometimes.  Sometimes the answer just kinda restates the facts in a way, and that’s what I thought it was doing but I was wrong about what C was doing.  So, D, correct answer.  Not only did I fail, the coin failed, and the second chance failed.  But I can’t count this one against the coin because I didn’t give it the possible answer in the second choice, so the coin is off the hook for this one.  It’s in the bylaws, Andrew.  The coin doesn’t have to-

Andrew:         Then we will exempt the coin from-

Thomas:         Thank you very much.

Andrew:         -having to take the hit.  [Laughs]

Thomas:         From the coin’s family.

Andrew:         The coin appreciates your generosity here.

Thomas:         The coin’s got kids to feed.  Alright, let’s find out who wasn’t fooled by this question like I was.  [Laughs] Who’s our big winner?

Andrew:         Alright, Thomas, this week’s winner is William Patterson on Twitter who writes: “I think Thomas overthought the language of D and skipped over it, D feels the most right to me so I’m going to go with that.”

Well, that is exactly what I think happened, so congratulations to William Patterson on going with your gut, getting it exactly right.  Everybody give him a follow, that is @wpatterson on Twitter, and congratulations William on being this week’s winner.

Thomas:         Thanks so much for listening everybody.  Andrew, thanks for the deep dive as always, and like we said, this is a time to set aside disagreements and try to help anyone who might be taken in by what is absolutely a scam.  Regardless of who’s pulling it off, the healthcare sharing ministries is a scam, please make everyone aware, and thanks for that breakdown, Andrew.

We’ll see you next time!

[Show Outro]

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