Is health sharing legal?

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In short, health share organizations are legal at the federal level and in all 50 states. There are state level nuances, however, as to which health share organizations can do business in the state and whether there are any tax penalties for not having qualifying health insurance coverage.

Federal Law

Federal law defines a Health Care Sharing Ministry (HCSM) for purposes of the Affordable Care Act’s individual-mandate exemption. Under 26 U.S.C. § 5000A(d)(2)(B), an organization generally must:

• Be a tax-exempt 501(c)(3) organization.
• Have members who share a common set of ethical or religious beliefs and share medical expenses in accordance with those beliefs.
• Allow members to retain membership after developing a medical condition.
• Have existed continuously, with uninterrupted sharing of medical expenses, since December 31, 1999.
• Obtain an independent annual audit under generally accepted accounting principles and make it available to the public on request.

Newer health share organizations such as those leveraged by MPB Health - Zion Healthshare, Sedera, and EverTrust - do not qualify as HCSMs since they were founded after 1999.

That said, it’s a bit of a moot point as to whether a health share organization is exempt or not given the federal individual mandate penalty was struck down starting in 2019.

How States Regulate Health Shares

State law is separate from federal and is more nuanced. No state outright prohibits health shares but some have gone after specific health share organizations, commonly for deceptive marketing practices - leading customers to believe they are licensed health insurance providers. Further, some states have an individual mandate for health insurance (separate from the federal mandate) with tax penalties for not adhering.

State Level Regulation of Health Share Organizations

States can decide whether to regulate health share organizations as insurance. As of 2026, none have decided to do so but some states have clarified their position by explicitly stating that HCSMs cannot be regulated as health insurance. According to the National Association of Insurance Commissioners (NAIC), 30 states have done so: Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming.

Since newer health shares don’t meet the definition of an HCSM, they are not covered by the HCSM exemption. In practice, the best advice is simply to ensure the health share organization you are thinking of joining is allowed to provide service in your state. Most will publish this information up front but an internet search for any ongoing litigation will help keep you from signing up with an organization that may or may not be able to provide service in your state in the near future.

Individual Health Insurance Mandates

Unlike at the federal level, some states, as well as Washington D.C., have an individual health insurance mandate and will levy tax penalties if you do not have qualifying health insurance. Of these states, some provide an exemption for HCSMs. In others, you can meet the individual mandate by adding a Minimum Essential Coverage (MEC) plan to your health share plan. The MEC plan meets the individual mandate by providing preventive services at the same level as ACA (Obamacare) plans. The health share plan then protects you from unexpected medical costs.

Table 1 - HCSM and MEC Requirements per State

State	HCSM	MEC plan	Comments
California	HCSM membership provides an exemption from the individual mandate	A separate policy that meets federal MEC requirements satisfies the mandate	A tax penalty may apply if neither qualifying coverage nor an exemption applies. See California Franchise Tax Board.
Massachusetts	HCSM members may qualify for the HCSM exception under state rules	The MEC policy must meet Massachusetts’ separate MCC standard; federal MEC status alone is not conclusive.	An individual deemed able to afford qualifying coverage may owe a state tax penalty. See Massachusetts coverage guidance and 2026 penalty guidance.
New Jersey	The state lists qualifying HCSM membership as an exemption	A separate policy that meets federal MEC requirements satisfies the mandate	A state tax penalty may apply if the resident lacks qualifying coverage and no exemption applies. See New Jersey mandate exemptions.
Rhode Island	HCSM membership provides an exemption from the individual mandate	A separate policy that meets federal MEC requirements satisfies the mandate	A shared-responsibility penalty may apply unless qualifying coverage or another exemption applies. See Rhode Island regulations.
District of Columbia	HCSM members may qualify for the HCSM exception under district rules	A separate policy that meets federal MEC requirements satisfies the mandate, as does the D.C. Immigrant Children’s Program (ICP)	Check current DC tax guidance for the applicable year and exact arrangement

All MPB Health plans that include MEC preventive services meet the federal definition of MEC. The plan selection and comparison tool will automatically filter out plans not available in your state and will further allow you to filter based on MEC inclusion. If you are interested in signing up with a non-MPB health share, you can still purchase MPB’s HSA Essentials plan which provides both HSA eligibility and federally compliant MEC services as an add-on to your preferred health share plan.

What Legal Status Does and Does Not Mean

Even if a health share organization may legally operate in a state, that does not make it health insurance or give members the same protections as an insurance policy:

• No automatic ACA protections. Sharing arrangements generally do not have to follow the ACA rules that apply to comprehensive health insurance, such as guaranteed coverage of essential health benefits or limits on annual out-of-pocket costs.
• No guaranteed payment. A sharing program may decide that a medical expense is not eligible under its guidelines. Membership alone does not necessarily create an enforceable promise to pay every bill. See Is Health Sharing Insurance?.
• Different oversight. A qualifying exemption generally places the organization outside ordinary state insurance regulation, although state disclosure or reporting requirements may still apply.

How to check a specific arrangement

Before enrolling, ask the organization and verify the answers independently:

1. Ask how the arrangement is classified in your state. Request the specific statute or regulator guidance it relies on, especially if it describes itself as secular or a non-HCSM.
2. Confirm whether it meets the relevant HCSM definition. Nonprofit status alone is not enough; the applicable federal and state definitions may include religious or ethical-belief, operating-history, audit, and disclosure requirements.
3. Check your state tax mandate. If you live in California, Massachusetts, New Jersey, Rhode Island, or DC, confirm whether the sharing arrangement qualifies for an exemption or whether a separate MEC policy meets that state’s coverage standard. In Massachusetts, specifically verify MCC rather than relying only on a policy’s federal MEC label.
4. Read the membership guidelines and contract. Look for exclusions, limits, pre-existing-condition rules, waiting periods, and language stating whether sharing is discretionary or guaranteed.
5. Ask for financial transparency. For an organization claiming to meet the federal HCSM definition, request its independent annual audit. For other arrangements, ask for comparable financial and operational disclosures.

Bottom line

Traditional HCSMs have a defined place in federal law and explicit state insurance-law exemptions in many states, but those rules are conditional and often depend on religious or ethical-belief criteria. Non-HCSM health share arrangements may operate under a different legal analysis and should not be assumed to receive HCSM exemptions—particularly from state individual mandate penalties. The federal individual mandate penalty is currently $0, but state penalties can still apply. Pairing a health share with a separate qualifying MEC policy may address a state coverage mandate, provided the policy meets that state’s specific rules; it does not convert the health share into an HCSM or comprehensive insurance. Confirm the policy’s status and the tax treatment of both arrangements in your state before enrolling.

This article is general educational information, not legal or tax advice. State statutes and agency guidance can change; consult the relevant state regulator or a qualified tax professional about your circumstances.