[Episcopal News Service] Concerned about the financial realities of implementing a denomination-wide health insurance plan, at least four Episcopal Church dioceses are formally asking the 77th meeting of General Convention this July to change the terms of the program that is to be implemented less than six months after convention adjourns.
The Diocese of Central New York has filed a resolution with the General Convention office that would have the convention defer the Jan. 1, 2013, participation deadline for three years. The resolution would also allow those entities required by canon to participate to purchase health insurance from other providers besides the Episcopal Medical Trust, the Church Pension Fund affiliate that is designated to administer the program.
The Diocese of North Carolina wants the General Convention to require a study of “the impact of full compliance with Resolution 2009-A177.” And, the resolution would have the convention not require any diocese to adopt the minimum cost-sharing guidelines for parity between clergy and lay employees called for in the plan until the study has been acted upon the next meeting of convention in 2015.
The Diocese of West Missouri is asking that the implementation date be suspended and that the convention instruct the Medical Trust to create “a single, unified national plan for the entire Episcopal Church with no variance in premium costs from diocese to diocese, thereby eliminating dramatic cost differences for similar health insurance coverage between dioceses and regions of the Episcopal Church.”
Other Episcopal dioceses have passed resolutions urging changes in the plan, but have not actually filed or planned to file accompanying “C resolutions” with the General Convention office as the other four have.
In addition, the House of Bishops’ Bishops from the Small Dioceses group has asked CPF to consider a major change in the plan. The request came after CPF officials met with them in November 2011, according to CPF.
“Although a single rate was not part of the resolution, at the request of the House of Bishops, the Medical Trust is studying the implications of a single rate on health benefit costs,” Frank Armstrong, Medical Trust senior vice president and general manager and Laurie Kazilionis, vice president for client relations, said in a written statement e-mailed to Episcopal News Service.
Concerns directed at 2009 General Convention decision
The concerns expressed are directed toward a decision General Convention made in July 2009 when, via Resolution A177, it told the Church Pension Fund to implement a denomination-wide health (DHP) plan by Jan. 1, 2013, with benefits to be provided through the Medical Trust. Part of the rationale for the decision was that such a plan would save money, mitigate inequities between lay and clergy employees and improve employees’ access to health insurance.
On Jan. 1, dioceses, congregations (including cathedrals, parishes and missions) as well as certain official church agencies are required to provide health insurance benefits to all clergy and lay employees who work 1,500 hours (30 hours a week) or more per year in the church’s domestic dioceses (including Puerto Rico and the Virgin Islands). Employees who work 20 hours or more a week may voluntarily participate according to guidelines their employers set.
These requirements will not initiate a big change in many dioceses. As of January 2012, according to CPF, 93 of the church’s 101 domestic dioceses and 45 groups are enrolled in one of the 22 Medical Trust health plans offered under the DHP. Those enrollments were “based on the attractiveness of the product and price,” CPF said in the statement. Seventy-eight of those 93 dioceses have been with the Medical Trust since before 2009.
Under the plan, dioceses make their own decisions about what Medical Trust health plans they offer, whether or not to offer domestic-partner healthcare benefits and whether its schools, daycare facilities, and other diocesan institutions are required to participate.
The Medical Trust is what’s known as a self-funded church plan and is the provider of benefits through its partnerships with insurance providers such as Cigna, Kaiser, Aetna, United Healthcare, and Empire BlueCross BlueShield. It currently provides in-network access to 98 percent of covered Episcopal employees nationwide, according to CPF. The Medical Trust’s 22 different plan designs all include mental health, vision, an employee assistance program, and health advocacy benefits. Dental-care plans also are available.
Employees can opt out if they have health benefits through an approved source such as a spouse’s or partner’s employment, military-service benefits or coverage from a former employer.
Resolution A177 and the canon it enacted require that each diocese establish a cost-sharing policy that is the same for eligible clergy and lay employees. The policy determines the minimum amount that a congregation must contribute towards the monthly premium for eligible clergy and lay employees. The dioceses that have already instituted or formulated cost-sharing policies have chosen options ranging from mandating that employers pay the full cost of a specific plan to requiring all employees to pay a percentage of any plan or of a specific plan.
Concern over the costs involved with implementing the DHP is exacerbated by the fact that the church also faces another deadline on Jan. 1, 2013. The 2009 General Convention also made it canonically mandatory for employers to enroll lay employees scheduled to work a minimum of 1,000 hours annually for any domestic Episcopal Church organization or body subject to the authority of the church in a CPF-sponsored lay employee pension plan. The exceptions are Episcopal employers that are providing lay pension benefits through an equivalent non-CPF-sponsored defined benefit plan and schools providing pension benefits through a TIAA-CREF defined contribution plan.
Most employers of Episcopal Church clergy have been required since 1917 to pay assessments into CPF’s pension fund for priests. The current rate is 18 percent of the cleric’s total compensation package (salary, housing, utilities and Social Security tax reimbursement). The lay pension system will require a maximum nine percent contribution, depending on the plan chosen.
CPF predicted in its feasibility report to the 2009 General Convention that the church as a whole could save $134 million in the first six years (beginning in 2013) after the fully implemented denominational health plan replaces the current voluntary and fragmented insurance system.
Jim Morrison, CPF executive vice president and chief operating officer for risk bearing business, told ENS in the written statement that the denomination-wide plan, which is now only partially implemented ahead of the 2013 deadline, has already resulted in what he called “cumulative cost-containment,” i.e., savings over prevailing rates of more than eight percent or $34.5 million from 2010 through to the present. The Medical Trust was able to negotiate with vendors prior to the formal start of the DHP implementation process and thus added $2 million in savings in 2009 added. He said those savings have been passed through by way of lower annual rate increases for participating dioceses in 2009 through 2012.
Armstrong and Kazilionis added that the Medical Trust is maximizing cost-containment through cross-denominational purchasing, “leveraging scale in vendor negotiations, and optimizing provider and pharmacy discounts.”
Morrison compared the DHP’s performance to that of U.S. employers’ experience from 2010 to 2012, who he said saw health insurance premiums increase an average of eight percent to 12 percent annually, while the Medical Trust’s increases averaged only 5.5 percent to 5.8 percent annually during the same period.
An example from one diocese
The Diocese of Newark‘s experience in beginning to implement the DHP is in some ways illustrative of the concerns that dioceses are raising.
The Bishop’s Advisory Committee on HR and Benefits in September proposed that Newark congregations be required to pay a minimum of 90 percent of the cost of single coverage for the average-priced plan offered. The proposal was met with strong resistance from diocesan clergy, who said the cost-sharing minimum essentially cut their salaries and could force them to pay even more to insure spouses or partners, and children.
The Rev. Stephanie Wethered, rector of St. Peter’s Episcopal Church in Essex Fells, New Jersey, told ENS in an interview that it made “no business or moral sense” to her to require all diocesan clergy to face the potential of a salary and/or benefit reduction in order to ensure that a handful of parishes “do the right thing” and insure their eligible lay employees.
St. Peter’s parish fully covers the cost of providing her and its four full-time lay employees with health, short-term disability and life insurance, pension benefits and a health savings account. She said the parish purchases its health insurance for less money outside of the Medical Trust and thus she opposes the mandate that participants purchase insurance via that agency.
A plan to present the cost-sharing proposal at the diocese’s January convention was shelved in favor of a special convention on the issue June 9. In announcing the special convention, Bishop Mark Beckwith said that there are “some critical justice issues in providing parity of benefits for the clergy and laypeople who work for the church” and added that there are also “some significant financial realities that need to be considered.” He said the committee’s proposal had sought a balance between what he called “justice and financial reality.”
Wethered told ENS that she is “heartened” by recent refinements the advisory committee has made to the proposal that will come to the special convention. While the 10 percent cost-sharing proposal is still on the table the group has proposed alternative ways to achieve parity in funding.
Predictions of unintended consequences
Those advocating for changes in the plan not only worry that the ways dioceses set their cost sharing policies could result in an effective salary reduction to those whose benefits are currently fully paid by their employers, they also suggest that employers will choose the minimum standard as the maximum standard and employees would thus have their benefits reduced.
“It’s incredibly naïve to think that [congregational leadership] wouldn’t use that mandate to free themselves of that burden” that the cost of health insurance places on budgets during “these really financially tough times,” Wethered said.
Two members of the Diocese of East Carolina told ENS in a phone interview that A177 mandates are indeed financially burdensome. Monty Pollard of St. Paul’s Episcopal Church in Greenville, North Carolina “it’s not that we don’t care about our employees but it’s a dollars and cents thing” for congregations that are trying to be “disciplined” in managing their budgets.
Dave Whichard said that in many members of their parish are not able to provide to their families the same level of coverage that the diocese says must be provided to the parish’s employees. “You’ve got to have some parity there, too, it seems to me,” he said.
East Carolina’s convention has asked its deputation to General Convention to support efforts to postpone the implementation date and to make the plan “more truly denomination-wide, addressing such issues as the number of bands that establish the costs of such insurance and the lack of a single nation-wide pool of participants.”
Back in Newark the Rev. Thomas Matthews, rector of St. Luke’s Episcopal Church in Phillipsburg, New Jersey, who listened to part of the A177 debate in 2009, said some dioceses’ implementation plans seem to be using the resolution’s mandates as “a reset button on how we cover clergy and laity all together.” He wants to see the 2012 meeting of General Convention stipulate that A177 was not meant to result in “reduction in [clergy] benefits as a way to extend benefits to laity.”
The Diocese of Missouri specifically addressed that concern during its November 2012 convention by saying that employers in the diocese “shall not reduce existing coverage or increase the cost of existing coverage to employees to comply with A177.”
Matthews and Wethered also suggested that, in Matthews’ words, “some lay people are going to have their hours decreased so that churches don’t have to pay for it” because they would then fall below the eligibility definition.
“I may have to cut employees back because of these mandates and what a shame,” Wethered said.
And, the Diocese of Texas has asked whether the church should change its approach to health insurance when the United States also is implementing insurance reform. Among the conclusions a task force spelled out in an October letter to the diocese was the suggestion that in July General Convention “seriously revisit” the denomination-wide health plan in light of both the “cost and complexity of the implementation” of the plan and the implications of federal health care reform. The task force suggested that the diocese hold off on making any decisions on coverage and contributions until after the July meeting of convention.
CPF’s e-mailed statement to ENS said that the church will still need the DHP to assist in cost-containment efforts regardless of federal health care reforms. Armstrong and Kazilionis said that there are several specific provisions of the federal law that may impact the church. “We are working with other denominations through the Church [Benefits] Alliance to determine how groups participating in Medical Trust healthcare plans may be affected,” they said.
They also acknowledged that issues “related to regional costs of living, salary standards, and benefit arrangements have always been a concern for the church” and they said the Medical Trust is “encouraging and facilitating communication at the diocesan leadership level to address this.”
Morrison said in his e-mailed comments that CPF is “very sensitive to cost concerns around the church” and he acknowledged that the economic landscape had changed greatly since the feasibility study was conducted ahead of the 2009 meeting of General Convention.
“We recognize that many dioceses, congregations, and church institutions are experiencing financial stress due to the state of the U.S. economy, which has declined since the last General Convention,” he said.
In that same e-mailed statement, Morrison said he was “not sure how these resolutions will be received at General Convention, but as agents of the Episcopal Church, we will be supportive of the outcome, whatever it is.”
– The Rev. Mary Frances Schjonberg is an editor/reporter for the Episcopal News Service.