| Publication 557 |
2001 Tax Year |
501(c)(26) -- State-Sponsored
High-Risk Health Coverage Organizations
A state-sponsored organization established to provide medical care
to high-risk individuals should apply by letter for recognition of
exemption from federal income tax under section 501(c)(26).
To qualify for exemption, the organization must be a membership
organization established by a state exclusively to provide coverage
for medical care on a nonprofit basis to high-risk individuals who are
state residents. It may provide coverage either by issuing insurance
itself or by entering into an arrangement with a health maintenance
organization (HMO).
The state must determine the composition of membership in the
organization. No part of the net earnings of the organization can
benefit any private shareholder or individual.
High-risk individuals.
These are individuals, their spouses and qualifying children, who,
because of a pre-existing medical condition:
- Cannot get medical care coverage for that condition through
insurance or an HMO, or
- Can get coverage for that condition only at a rate that is
substantially higher than the rate for the same coverage from the
state-sponsored organization.
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