MORGANTOWN – A bill to allow state residents to deduct medical expenses from their sate income taxes left senators who voted for it wondering how much it might cost the state.
Those senators also approved a bill to permit Health Care Sharing Ministries – a faith-based health insurance alternative – to operate in the state.
The income tax bill is SB 209, approved by the Senate Banking and Insurance Committee on Monday afternoon.
Starting Jan. 1, 2024, the bill would allow taxpayers to deduct from their adjusted gross income medical expenses not reimbursed by insurance.
Committee counsel explained that the original draft of the bill didn’t define medical expenses, so she prepared a committee substitute that draws on federal code, which says: “Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.”
Those expenses include insurance premiums. But the IRS says you may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. Committee counsel, in answer to a question, said this bill contains no such provision, so there’s no minimum.
State Tax Commissioner Matthew Irby told the senators that while the bill is more expansive than IRS code, not everyone itemizes – which makes it near impossible to predict the cost to the state. “We have no idea how much the unreimbursed medical costs might be.”
The Tax Department fiscal note expands on that point. As of 2020, it says, there were 734,235 households in West Virginia. Yearly household out-of-pocket medical costs were about $1,222. “We cannot reasonably provide an accurate estimate of how many taxpayers would take this deduction and the amount of the deductions. However, the revenue decrease from this bill would be significant.”
The department estimates the administrative costs would be $103,000 in Fiscal Year 2025 (starting July 1, 2024) and $95,000 in subsequent years.
Sen. Charles Clements was among those hesitant about the bill, saying, “It’s going to be very, very, very expensive to our revenue side.” He suggested imposing a threshold comparable to IRS code. But committee chair Mike Azinger, R-Wood, said the bill goes next to Finance and they could deal with that aspect. Clements agreed to that.
Sen. Mike Maroney, R-Marshall, also was concerned about the cost and posed a successful amendment to exclude insurance premiums from the deductible amount.
Irby pointed out one technical detail: IRS code deals with deductions; in West Virginia they’re called “modifications.”
The bill passed in voice vote. While there were no votes against it, it was clear that not everyone voted for it.
Sharing ministries bill
SB 292 creates the Health Care Sharing Ministries Freedom to Share Act and exempts sharing ministries from the state’s insurance laws.
The bill explains that a sharing ministry serves as a facilitator among ministry members, who agree to assist other members with medical expenses through contributions.
The bill emphasizes that sharing ministries are not medical insurance. But it provides that a public higher education institution that requires health insurance must recognize a student’s membership in a sharing ministry in lieu of insurance.
Katy Talento, executive director of the Alliance of Health Care Sharing Ministries, said more than 3,000 West Virginians already participate in sharing ministries and explained how they work.
They are nonprofit, she said. Ministry members share a common set of religious or ethical beliefs. Out of 107 federally recognized in 2013, all but nine are closed – set up in Amish and Mennonite communities. Of the remaining nine, the Alliance represents five.
A member who seeks care sends the bills to the ministry, she said. The ministry verifies the eligibility of the expense and then notifies all members to ask them to share in the bill.
The ministry facilitates the transfer of funds, she said, along with prayers and sometimes notes of encouragement. Funds go to the member or directly to the provider.
The bill passed in a voice vote without audible objection and goes to Finance. Finance chair Eric Tarr, R-Putnam, is a member of this committee and was present on Monday, He took part in the discussion on the tax bill.
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