Can health care law save conferences money?
Come fall, the Rev. John Cross won’t be able to enroll in a conference health insurance plan. Instead, he must shop for coverage through the Illinois insurance marketplace, part of the Affordable Care Act.
He may pay more, the United Methodist pastor said, but it beats the alternative.
“My opinion was we didn’t have a lot of options,” said Cross, pastor of Eldorado (Illinois) First United Methodist Church. Costs were rising so much, he said, that many congregations — especially smaller churches — no longer could afford to contribute the required amount to their pastor’s insurance.
This summer, Cross and other members of the Illinois Great Rivers Annual (regional) Conference approved a plan to end the conference insurance program on Dec. 31. The decision means about 415 clergy and their dependents must turn elsewhere for coverage. Among those possibilities is Get Covered Illinois, the state marketplace that’s part of the law commonly called Obamacare.
What does church law say?
In The United Methodist Church, conferences historically have had the primary responsibility for sponsoring or participating in a group health plan that covers full-time clergy in the United States.
In 2012, General Conference amended the Book of Discipline to take the Affordable Care Act into account. Church law now allows conferences to end their group health plans if, regardless of their health status, employees can find affordable coverage through health insurance exchanges or another mechanism.
The Book of Discipline, the denomination’s law book, does not require conferences to cover lay employees at local churches and other extension ministries.
The Illinois Great Rivers Conference is not alone in looking to the new marketplaces to relieve mounting health care costs. At least three other conferences are sending some workers to the marketplaces or considering doing so by 2016.
The problem many conferences face, say benefits officers, is providing health care to an aging and often ailing risk pool.
As of this year, the median age of elders is 56, that of deacons is 55 and that of local pastors is 57, reports the United Methodist-related Lewis Center for Church Leadership. Surveys also repeatedly have found United Methodist pastors in the United States have a higher incidence of health problems than their peers, mostly due to stress.
Some conferences include lay local church employees in their group health plan; some do not. In any case, clergy comprise the bulk of conference insurance participants.
The Affordable Care Act is “a game-changer” for clergy and cash-strapped conferences, said the Rev. Richard A. Van Giesen, Illinois Great Rivers Conference treasurer and benefits officer.
“Clergy now have a viable alternative,” he said. “They cannot be denied access to a qualified health plan because of a pre-existing medical condition. Because so many of our clergy have multiple chronic conditions, we knew that before the ACA they would not be able to obtain insurance anywhere else.”
Large employers and local churches
Last year, a big question for the denomination was: Who counts as the employer of United Methodist clergy — the ministry where they are appointed or the clergy member’s conference?
If the Internal Revenue Service deemed conferences to be the employer, then conferences likely would be required to continue providing insurance benefits under the Affordable Care Act's large-employer rules or pay a penalty.
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In February, the IRS released its final rule regarding employers’ responsibility. Essentially, that rule instructed churches to use a “reasonable, good faith interpretation” standard in identifying employers in their organizations, explained Andrew Q. Hendren, associate general counsel at the United Methodist Board of Pension and Health Benefits. He is the church agency's expert on the health care law.
Saying local churches are the employer for purposes of the Affordable Care Act is likely a reasonable interpretation, Hendren said.
Still, he urges conferences to proceed with caution. Participants can see their tax burden and out-of-pocket costs go up if they shift to the new marketplaces. Some legal uncertainty also exists about whether individuals will be able to qualify for federal subsidies in some states. Also, without the equalizing effect of the same health plan for all local church appointments, new friction may emerge over clergy appointments, Hendren said.
Some conferences, though, see a need to act now. Here is an overview of how they are using the law.
Illinois Great Rivers Conference
In the largely rural Illinois Great Rivers Conference, the current conference insurance plan is self-funded, which means the conference assumes the responsibility for paying clergy medical claims. The conference’s health care costs last year exceeded health care payments from local churches by $1.5 million, reported the conference’s Board of Pensions and Health Benefits.
How expensive are the plans?
The Health Research Institute at PricewaterhouseCooper has compiled data from 33 states and the District of Columbia. The institute found average rate increase for premiums of 7 percent, while the average monthly premium (without subsidies) is around $379.
To qualify for subsidies, people generally must have a household income between 100 percent and 400 percent of the federal poverty level and not have access to another source of affordable health insurance coverage. In 2014, that translates to annual income between $11,670 and $46,680 for an individual or between $23,850 and $95,400 for a family of four.
Under Affordable Care Act rules, the Internal Revenue Service looks at the cost of coverage only for an individual employee, not for a family. That means if a person can get insurance through an employer that costs less than 9.5 percent of his or her income, then federal subsidies would not be available.
Earlier this summer, the U.S. Court of Appeals for the D.C. Circuit ruled that the Affordable Care Act does not authorize subsidies for those who purchase insurance on federally established marketplaces. On the same day, the U.S. Court of Appeals for the Fourth Circuit held the opposite.
On Sept. 4, the circuit court announced it had granted the Obama Administration’s request for an en banc rehearing, meaning a review by all the judges on the court. Democratic nominees now hold a 7-4 majority. Oral argument is scheduled for Dec. 17. By granting further review, the court wipes out the three-judge panel’s previous ruling on the matter.
Challengers to the Fourth Circuit ruling have appealed to the U.S. Supreme Court to take the case.
It is unclear what impact the D.C. Circuit Court’s decision to rehear the case will have on the Supreme Court, writes Lyle Denniston of Scotusblog. If there is no conflict between appeals courts, the high court is unlikely to step in. If conflict remains, the U.S. Supreme Court ultimately may have to settle the issue. For now, subsidies continue.
The proposed open enrollment period for 2015 starts Nov. 15 and will end Feb. 15 next year.
Van Giesen said there were two main drivers of the deficit. First, local churches were unwilling or unable to accept a premium increase. Second, the conference was seeing increasing claims from a generally unhealthy population.
The conference plan for 2015 calls on each local congregation to increase full-time pastors’ annual salaries by $12,000 to help them buy health insurance. Because of the salary increase, local churches also will have to pay a corresponding higher pension payment. Local congregations are now on the hook for $17,520 annually to cover the employers’ share of insurance.
For pastors, the concern is that their new “health care allowance” will be taxable, unlike current health benefits. But Van Giesen noted it’s not all bad news for pastors. Depending on their income, some may qualify for subsidies — that is, tax credits — on their monthly premiums.
The big beneficiaries are local churches. Some, he wrote, will be able “to retain a full-time pastor because of the savings they will experience — and because of a big premium increase they will not experience” in the conference’s group health plan.
The vote to end the conference’s current plan was 735 to 106.
Northern Illinois Conference
The neighboring Northern Illinois Conference is taking a slower approach. Starting this year, the conference has a one-year pilot project that will send some clergy to Get Covered Illinois.
The project is only open to appointments where clergy can get similar health coverage through the marketplace at a lower cost. Participation requires approval of the clergy’s family, the church’s staff-parish relations committee, the district superintendent and the Conference Board of Pensions.
Lonnie Chafin, the conference’s treasurer, said the impetus for Northern Illinois was that some clergy thought they could save their churches money and still get affordable coverage. The conference calculated that a clergy family appointed to a low-salary church might have monthly premiums of $250, while the same family at a high-salary church might have expenses of $1,350.
“Our policy, colloquially stated, is ‘Let’s see where it works,’” Chafin said.
The conference expects 35 clergy, about 10 percent, will participate.
The Arkansas Conference is in the early stages of seeing whether it should also end its current self-funded group health plan and send employees to its state marketplace, Arkansas Health Connector. Such a move would happen in 2016, at the earliest.
Like Illinois Great Rivers, the conference sees its current plan, which covers both clergy and full-time lay employees, as unsustainable. At present, the conference is spending close to $7 million a year on health care, said Mona Williams, conference benefits officer.
“With the increasing cost of medical care, churches may be spending more money to provide health care than they are on making disciples,” Williams said.
The Florida Conference
The Florida Conference was a pioneer in using the new insurance marketplace.
Since the beginning of this year, the conference has no longer provided health insurance for lay employees at its local churches and extension ministries, such as campus ministries.
The Conference Board of Pension and Health Benefits announced this August that it was also considering a marketplace-based approach to providing health benefits for clergy. Changes to the clergy plan, however, will not take place at least until 2016. The conference added that local churches always will be required to help clergy pay for health insurance.
Wendy McCoy, the conference’s director of human resources and benefits, said some lay employees have found better coverage in the insurance marketplace, while others found it more expensive.
“So it’s not any different from the environment we had before,” she said. “We had people who could not participate (in the group plan) because their church didn’t meet the enrollment requirements. … Just like before, there are those who were satisfied with the status quo and those who were not — its’ just different folks who are pleased with the change and others who are not.”
Robert Jackson, choir director at First United Methodist Church in Gainesville, was among those who ended up paying more.
He already made too much to qualify for subsidies. His church also formerly paid his monthly premiums of $661 on the conference plan. To help defray the costs of the new insurance plan, First United Methodist gave its lay employees a salary increase.
But that increase is taxable and doesn’t cover the full amount of the new premiums. Jackson said he is paying about $280 more out-of-pocket for insurance. The pay increase also puts him in a higher tax bracket.
“I have insurance, and I think it’s a fairly decent plan. But it’s not what I’ve been used to for 20 years with The United Methodist Church,” he said. “I hear positive stories from people who never had insurance before and are able to get it, and so that’s where the plan works really well.”
Cross, the pastor in the Illinois Great Rivers Conference, said he too expects to pay more for his insurance in 2015.
“It’s possible that a lot of our pastors will come out and qualify for the government subsidy,” he said. “They fall into a place where it will be very reasonable for them. But the thing is others will not. … But again, the reality was we had to do something. Not many of the pastors I know said, ‘Hey, this is a great thing we’re doing.’ But they all said we have to do it.”
Hahn is a multimedia news reporter for United Methodist News Service. Contact her at (615) 742-5470 or email@example.com.