This bill amends the Internal Revenue Code to allow individuals to treat membership costs in a health care sharing ministry (HCSM) as a deductible medical expense, explicitly including both the sharing of medical costs and administrative fees. It does so by adding a new subparagraph to section 213(d)(1) and by inserting a new section 7702C that states HCSMs are not to be treated as health plans or insurance for purposes of the tax code.
The change matters because it creates a tax preference for payments to HCSMs while simultaneously insulating those arrangements from being classified as insurance for federal tax purposes. That raises practical questions for tax compliance, revenue estimates, and how individuals and tax advisers substantiate and claim these deductions under existing itemized-deduction rules.
At a Glance
What It Does
The bill expands section 213(d)(1) to include membership in a health care sharing ministry as a medical expense, covering both shared medical payments and administrative fees, and adds section 7702C to state that HCSMs are not health plans or insurance for purposes of the Internal Revenue Code.
Who It Affects
Individual taxpayers who belong to health care sharing ministries and the tax advisers who prepare their returns are directly affected; the IRS will face new verification and audit tasks. Secondary effects may touch insurers and employers because the tax treatment may influence household choices between HCSMs and traditional insurance.
Why It Matters
By making HCSM payments tax-deductible, the bill effectively subsidizes participation in arrangements that operate outside standard insurance regulation. That creates a distinct tax-policy lever with implications for federal revenue, administration, and consumer protection oversight that professionals in tax, benefits, and compliance need to watch.
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What This Bill Actually Does
The bill does two things in the tax code. First, it amends the medical-expense deduction rules to let taxpayers treat payments to a health care sharing ministry as qualified medical expenses.
That includes both the amounts that go toward shared medical bills and the administrative fees charged by the ministry. The change is implemented by inserting a new subparagraph into section 213(d)(1) of the Internal Revenue Code.
Second, the bill inserts a new section (7702C) in chapter 79 to make explicit that, for purposes of the Internal Revenue Code, a health care sharing ministry is not a health plan or insurance. The text anchors the definition to the cross-reference used in section 5000A(d)(2)(B)(ii) but says to ignore subclause (IV) of that definition, which narrows or modifies the statutory definition as it previously stood.The bill applies to taxable years beginning after December 31, 2025.
Practically, taxpayers who itemize and who otherwise qualify to deduct medical expenses (subject to the existing floor—currently a percentage of adjusted gross income) could add HCSM payments to the pool of deductible medical expenses. The IRS will need guidance on what documentation suffices and how to distinguish deductible HCSM payments from non-deductible payments or contributions.
Because the statute also clarifies that HCSMs are not insurance for tax purposes, the change is narrowly framed within the Internal Revenue Code and does not on its face alter other federal or state regulatory regimes, although it may affect behavior that has regulatory consequences.
The Five Things You Need to Know
The bill amends section 213(d)(1) to add membership in a health care sharing ministry as a deductible medical expense, including both shared medical payments and administrative fees.
It creates a new Internal Revenue Code section 7702C declaring that, for purposes of the tax code, a health care sharing ministry is not a health plan or insurance.
The bill defines “health care sharing ministry” by reference to section 5000A(d)(2)(B)(ii) but explicitly excludes consideration of subclause (IV) of that definition.
The statutory changes apply to taxable years beginning after December 31, 2025.
The bill does not amend state insurance law or other federal statutes; its non-insurance statement is limited to ‘‘for purposes of this title’’ (the Internal Revenue Code).
Section-by-Section Breakdown
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Add HCSM membership to medical-expense deduction
This subsection inserts a new subparagraph into section 213(d)(1) so that membership in a health care sharing ministry is treated as a medical expense. It expressly lists two components as deductible: payments that represent the sharing of medical expenses and administrative fees charged by the ministry. Compliance implications: taxpayers must still satisfy the general rules for deducting medical expenses (itemization and the applicable AGI floor), but they can now include HCSM payments in their deductible total.
New section 7702C — tax-code non-insurance carveout
This creates section 7702C in chapter 79, stating that a health care sharing ministry ‘‘shall not be treated as a health plan or as insurance’’ for purposes of the Internal Revenue Code. The provision references the statutory definition used elsewhere (section 5000A(d)(2)(B)(ii)) but instructs to ignore subclause (IV) of that definition, which functionally alters which organizations qualify. Practically, the provision prevents tax-code classification of HCSMs as insurance, limiting downstream tax consequences that rely on an insurance label.
Clerical amendment to chapter table of sections
A technical change adds the new section 7702C to the chapter 79 table of sections. This is administrative housekeeping so the code reflects the inserted provision and is standard for codification.
Effective date
The bill applies to taxable years beginning after December 31, 2025. That means returns filed for 2026 (and later taxable years) will be subject to the new deduction rules, triggering planning and potential filing changes for taxpayers and preparers in the 2026 tax year.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Members of health care sharing ministries — They can include HCSM contributions and administrative fees in their pool of deductible medical expenses, potentially lowering taxable income if they itemize and exceed the AGI floor.
- Health care sharing ministries and their administrators — Tax deductibility increases the after-tax value of membership and could make ministries more attractive to prospective members, supporting enrollment and revenue streams.
- Tax preparers and advisers who serve HCSM members — New planning opportunities and tax positions arise that produce advisory and compliance work, including guidance on substantiation and timing of deductions.
Who Bears the Cost
- The U.S. Treasury/IRS — Expanded deductibility likely reduces federal income tax receipts and imposes additional administrative burden on the IRS to issue guidance and audit claims for HCSM payments.
- Taxpayers who do not itemize — The benefit accrues only to taxpayers who itemize and exceed the medical-expense floor, so those who take the standard deduction receive no advantage while public revenue bears the cost.
- Regulated insurers and employers offering qualified health plans — Though not directly altered by the bill, insurers and employer-plan sponsors may face competitive pressure as HCSMs become relatively more attractive due to tax deductibility, potentially affecting risk pools and insurance-market dynamics.
Key Issues
The Core Tension
The bill resolves one policy problem—tax parity by allowing HCSM payments to count as medical expenses—by creating another: it subsidizes participation in arrangements that are not regulated like insurance. The central dilemma is whether achieving tax relief for HCSM members justifies expanding a favorable tax treatment for entities that operate with limited consumer protections and different risk-pooling structures than regulated insurers.
Two implementation and policy questions stand out. First, the bill relies on a cross-reference to an existing statutory definition but tells readers to ignore subclause (IV) of that definition; the practical result is a broader and less-contested set of organizations qualifying as health care sharing ministries for tax deduction purposes.
That raises questions about how the IRS will determine which entities qualify, what documentation taxpayers must produce, and whether the agency will issue a binding standard or rely on case-by-case audits.
Second, the bill creates a tax preference for arrangements that generally sit outside insurance regulation. Because HCSMs are not subject to the same solvency, network, or consumer-protection rules as insurers, making payments to them tax-deductible trades revenue and parity in favor of models with limited regulatory oversight.
The IRS will face enforcement costs and potential difficulties distinguishing deductible sharing payments from other transfers, and states may see changes in enrollment patterns that affect regulated insurance markets. Finally, the provision’s limitation ‘‘for purposes of this title’’ narrows its legal effect, but it does not resolve interagency or state-federal regulatory questions that could arise if behavior shifts materially toward HCSMs.
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