Active clergy benefits proposal: opt-out choice for dependents in 2014, new setup by 2016

By Amy Forbus Editor For years, the health plan provided by the Arkansas Conference to active clergy, full-time lay staff and their dependents has drawn complaints from local churches and covered individuals alike. High cost and the inability for dependents with other coverage options to opt out of the plan have resulted in a benefit that most agree does not work well. Finding a new direction for ARUMC health benefitsAfter reviewing the recommendations of consultants from Stephens, Inc., which affirmed the current plan is unsustainable, the Conference Board of Pension and Health Benefits has decided to recommend a sweeping change. The 2014 Annual Conference will vote on two health benefits-related proposals coming from the board. The proposals share the same goal: easing the financial burden on local churches while providing reliable coverage with more flexibility for active clergy and their families. Choosing available coverage Currently, a local church must pay Conference insurance premiums for the clergyperson appointed to serve there, as well as all dependents of that pastor—even if the dependents have less expensive coverage available from another source. “Because the plan is self-insured, we have needed diversity and numbers in order to maintain premium costs,” said Mona Williams, benefits officer for the Arkansas Conference. “And we wanted to be certain that churches were caring for their pastors’ whole families as they moved to and from appointments.” But the once-practical reasoning behind that requirement began to create other problems. For example, health insurance costs sometimes can have a bearing on where a pastor might be asked to serve, which can affect the ability to make the best possible match for a congregation and mission field. “It’s hard to make mission-field appointments when a church can’t afford to cover the whole family,” said Bishop Gary Mueller. “Letting dependents take available coverage from other sources will help that.” If the Annual Conference approves a recommended change to the rules stating who must participate in the Conference health insurance plan, it would mean that clergy spouses and dependents with coverage available under another health insurance plan would be free to choose that option. That change would go into effect July 1. Family members who do not have employer coverage available would remain in the Conference plan provided by the local church or other ministry setting where they are appointed. Health insurance exchange Bigger changes that would take effect in 2016 are part of another proposal the Annual Conference will consider: discontinuing the Conference’s self-insured medical plan at the end of 2015. “A big reason we have a self-insured plan was to avoid the problem of clergy families with pre-existing conditions having to find new insurance when they move to a new appointment,” said the Rev. Dennis Spence, chair of the Conference Board of Pension and Health Benefits. “The Affordable Care Act prohibits denying someone health insurance because of a pre-existing condition, so that isn’t a problem anymore.” In addition, the board’s research has found comparable plans at lower prices through the state’s new health insurance exchange (www.arhealthconnector.org). For example, covering a clergyperson, spouse and dependents under the Arkansas Conference’s current plan costs approximately $21,000 per year. A similar plan priced through arhealthconnector.org would range from $6,000 to $17,000 per year depending on age, county of residence and coverage options. Large employers who cancel coverage for their full-time employees face penalties in future years from the federal government, but the United Methodist Church in Arkansas is not considered a single employer for this rule, called the employer shared responsibility rule or employer mandate. “While clergy are treated as self-employed for payroll tax purposes, they are considered ‘employees’ for income tax and benefits purposes,” Williams said. In its employer mandate rules, the IRS allows churches, conventions and associations of churches (like the Arkansas Annual Conference) to rely on a good faith view of the rules to determine who is a large employer. “We believe that it is a reasonable good faith interpretation of the IRS rules to treat each local church separately as a small employer of their clergy and lay employees under the Affordable Care Act,” she said. “Each church has its own tax ID number, so the consensus is that they fall under the small employer rules and will not be mandated to offer employer-provided health coverage. As a Conference, for many years we have been acting analogously to an association plan (for the many small church employers), or a union plan of sorts for covered clergy, in providing benefits at the Conference level.” Stephens, Inc. is not recommending an immediate move to the health insurance exchange because there isn’t enough data on the performance of the new program, so the board plans to wait another year and watch its performance. The proposal being presented to the 2014 Annual Conference keeps the existing insurance plan in place until Dec. 31, 2015. Funding the switch If the proposal to end the Conference health benefits plan passes, churches will need to make financial adjustments. Instead of paying health insurance premiums of up to $21,700 to the Conference, churches instead will be asked to increase the pastor’s salary by approximately $12,000 (an amount subject to change depending on insurance marketplace rates). Clergy would then purchase their own health insurance using the additional funds in their paychecks. Todd Burris, director of the Center for Finance and Administration for the Arkansas Conference, acknowledged that under the health insurance exchange, an individual cannot pay premiums pre-tax. He expects that the lack of a tax break in that area will likely be balanced by an increase in pension and Social Security benefits because the pastor’s reported salary will be higher. “We don’t want this to be a hidden pay cut for the pastors,” he said. If the proposal passes, provisions for a recommended compensation adjustment will come before the 2015 Annual Conference for approval, as will a comprehensive process to discontinue the self-insured health benefits plan and a clarification of how the Conference benefits office will support clergy, dependents and Conference staff in navigating the transition. The Board of Pension and Health Benefits expects to have the proposal available for review by May 10 at www.arumc.org/ac2014. If approved by the Annual Conference, the transition would not begin any sooner than Jan. 1, 2016.