PHILADELPHIA, Pa. – The outcomes of the Board of Pensions meeting are relevant to two distinct but related groups: Pension plan members and medical plan members. Pension plan members can be confident that the $7.476 billion in assets will more than adequately cover the $5.9 billion in liabilities of the plan. After five years of receiving no experience apportionments, pension plan members will be happy to hear that the board approved a 1 percent experience apportionment for 2012. The medical plan news is a different story.
Due to the significant and growing gap between medical plan expenses (medical claims by covered participants) and revenue (dues paid by churches), some kind of dues increase is coming in 2014 and 2015. Several scenarios are under discussion, and emphasis was placed on the need to listen and respond to constituent concerns. The challenge is to craft a solution that is both financially viable and does not violate the values and feelings of all involved.
Although the big decision about dues restructuring will not be made until the June meeting, some decisions were made by the board in relationship to the medical plan. The board approved
- an increase in the co-pay for generic prescription drugs from $8 to $10 for monthly prescriptions filled at retail pharmacies and from $20 to $25 for three-month supplies received through mail order. This will increase revenues to the medical plan by about $500,000/year.
- an increase in the minimum effective salary from $42,000 to $44,000, and
- the initiation of a health accountability model for medical plan beneficiaries.
Several scenarios are under discussion to close the funding gap between medical expenses and current revenues. But before exploring those options, it’s important to understand why some measure to increase revenues is necessary.
The Board of Pensions Medical Plan is a self-insured, employer-provided church plan. “Self-insured” means that the plan must take in dues and other revenues equivalent to the medical claims of covered participants. “Employer-provided” means that those receiving the benefits are not the ones paying for it.
John Hamm, chairman of the board’s Healthcare Committee, reported that “34,000 people are getting healthcare benefits provided by the BOP. They are not paying for those benefits, churches are.” The board sends bills to 6,700 churches and other employing organizations. Since 1988, those employers have been responsible for 100 percent of the cost of healthcare for plan members, their covered partners and all dependents.
The problem, Hamm said, “is that since 1988 when the plan was designed, healthcare costs have increased dramatically.” He continued, saying that “the claims covered in 1988 were $48 million, today it’s $200 million per year. We have 20 percent fewer members than we did then, which means that the cost per member has increased over 500 percent. In the past 25 years there is nothing that has gone up by that measure.”
Hamm noted that “the only comparable increase is the increase in Federal spending. And they have a printing press to finance it — our churches do not;” leading Hamm to the conclusion that “the imposition on churches is unbearable. In terms of real dollars it’s a 400 percent increase for them.”
Reviewing the history for the board, Hamm reported that “at the outset (in 1988), churches were paying 8 percent of effective salary for coverage. Now they are paying 21 percent, and that’s not enough to cover rising costs. Under the current dues structure, the projected deficit for 2014 will be $14 million. That number was revised down from the $28 million shortfall projected in October 2012. And in 2015 expenses are expected to outpace dues by $40 million. Reserves are insufficient to make up the difference.”
Asking the question that comes at the intersection of the math and the values, Hamm asked, “Have we reached a tipping point where the mandated 100 percent/0 percent cost allocation is having aberrant behavior patterns?” He was referring to the growing reality that churches are replacing called pastors with non-mandated clergy and lay people. Hamm regrettably acknowledged that for some churches, mandatory participation in the BOP medical plan is so cost prohibitive that they are foregoing calling ordained clergy.
Hamm suggested that “maybe it’s time we breach that 100 percent to 0 percent allocation, with limitations.”
In seeking to design a solution, Hamm said there are two primary objectives:
- to maintain the long-term viability of a pay-as-you-go healthcare plan. This involves cash flow between BOP and churches or employing organizations.
- to provide churches with limited medical dues flexibility (a euphemism for “relief”). This involves the potential for cash flow between churches and medical plan members.
Hamm noted, “We are not backing off of the church having to pay 100 percent of the member benefit, but we think it’s time to consider allowing churches the flexibility of discussing with their pastors how to approach dependent coverage. When we made the recommendation called Dues Plus, we did not direct that they be charged, we simply recommended that the session have the discretion to work out what was best for their local church situation. ”
In reference to the visceral response the proposed Dues Plus recommendation generated from across a broad spectrum of the church, Hamm quipped, “Everyone did not stand up and applaud.”
Hamm said that the concerns shared ranged from charges that Dues Plus would:
- erode the community nature of the plan,
- further compromise neutrality of call,
- impose particular economic burden on members with families,
- favor older church workers over younger workers, to
- favor larger, more financially stable churches with higher-paid pastors over smaller, less financially stable churches with lower-paid pastors.
The board acknowledged that the church needed to be heard and also needed an opportunity to more fully understand the reality that under the current dues structure the medical plan is not viable for the long-term.
It is the BOP’s intention to design alternatives that will take the concerns raised into consideration. In the spirit of “show us your work,” the board placed many scenarios into consideration, including:
- eliminate the committee’s objective to provide churches limited relief and simply raise dues to 25 percent to be paid 100 percent by churches.
- offer a modified version of the proposed Dues Plus Model (a+b+ either c or d):
- raise base dues at 21 percent in 2014 and
- raise base dues at 22 percent in 2015 and
- with dollar denominated PLUS for partner and dependent coverage but at amounts that would be less burdensome than first proposed.
- or, instead of c, the PLUS amounts could be based on a percentage of salary and could cover a family regardless of size. That might look something like:
i. PLUS is 2 percent of salary in 2014 (for any number of dependents)
ii. PLUS is 3 percent of salary in 2015 (for any number of dependents)
Hamm stressed, “We have not made a decision and we are not making a recommendation today. We intend to listen at the RBC’s (Regional Benefit Consultations) and return to you with a refined pricing model in June.”
It is expected that a comparative view of alternatives will be available on the Board of Pensions website, www.pensions.org, for comment.
In addition to alternative plans designed to raise sufficient revenue to cover the rising cost of higher medical claims, the Healthcare committee of the BOP also considered many expense cutting alternatives. Those were ruled out for two reasons. Pat Haines said, “They don’t come close to raising enough money, and they shift the expenses to the sick.”
Whatever is ultimately decided, the board stressed its goals twofold: to maintain the long-term viability of healthcare coverage in an environment where dues do not currently cover expenses and live up to the unique principles of a faith-based healthcare plan that is the standard of all such plans.
A tension exists as the board wants to “take economic impacts out of the call process” to maintain the principle of call neutrality but at the same time is challenged to uphold the plan community nature which Hamm described as “churches with the where-with-all to do so will be expected to cover more than their cost so that others who cannot afford it can be subsidized.” The problem is that there are not nearly enough people at the “high” end of the spectrum to subsidize all the people who participate at the Plan’s “low” end of the salary scale.
A decision on the 2014 and 2015 restructuring of dues for the medical plan is expected in June.
Why isn’t one of the possible scenarios getting out of the medical plan business, and moving to a nationwide Blue Cross/Blue Shield insurance as many secular corporations have. These medical plans have much the same coverage (if not better coverage) for the insured, at much the current rates we see today in the BoP.
An excellent and accurate summary of the issues. (PS: Our claims costs are negotiated through the “Blues”). Rob
I agree with the previous commentator. Lets just join Blue Cross/Blue Shield or some other insurance group as a group for medical insurance. Each church should be required to participate. It would put us in a larger pool and our coverage might be a little better. For retirement, might we allow some other denominations to participate with us? Serious change is needed at this moment, not just more increases in dues.
Greg, the PCUSA BOP plan is a Blue Cross/Blue Shield plan and its actually the gold standard. There’s not a “better” plan out there in terms of covered benefits. And churches are already mandated to cover certain positions, but not all. Right now the “pinch point” is that since 1988 the Plan has not only covered the member but the spouse and all dependents with no additional charge. That’s simply no longer tenable. If you ask your members, no one has that kind of “employer provided” plan. And with changes related to the HHS mandate the prices for all health insurance are rising. One of the things I didn’t include in the article is that the BOP is going to have to pay the U.S. Government a “tax” of $63 per covered life in the BOP plan to “subsidize” Obamacare. Another question that federal healthcare reform raises for churches is this: if you currently cover only the pastor, will you be required to provide that same coverage to all employees? Are churches preparing to answer that question at the beginning of 2014?
Carmen, great article! Your facts are right on and Churches are not alone in making these decsions. The “secular” society has certainly forced decisions upon us that will challenge our faith and financial well-being.