By John B. Chilton
In the U.S., healthcare insurance is predominantly an employer-based system. In this environment it falls to the church to consider how and whether to provide health insurance to its active clergy and lay employees. At present within the Episcopal Church this is handled at the diocesan level. This legacy may flow from the decentralization of much of the financials in the Episcopal Church. Budget wise each diocese is a boat with its own bottom.
General Convention 2006 endorsed the Church Pension Group’s recommendation for a church-wide healthcare feasibility study:
Title: Church-wide Healthcare Feasibility Study
Topic: Employee Benefits
Committee: Church Pension Fund
House of Initial Action: Bishops
Proposer: Church Pension Fund Board
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Resolved, That the 75th General Convention endorse the Church Pension Group’s proposal to conduct a church-wide study of the costs and issues surrounding the provision of healthcare benefits to all clergy and lay employees serving churches, dioceses and other church institutions and to report their findings to the 76th General Convention; and be it further
Resolved, That all dioceses, parishes and other church institutions are urged to cooperate with the conduct of this study by responding to requests for data regarding employee census and healthcare costs; and be it further
Resolved, That this study will include an analysis of the potential for a mandated denominational healthcare benefits program and other viable alternatives, culminating in a recommended solution and an actionable implementation plan.
Two key words in this resolution are “mandated denominational” found in the third resolve. If a mandated denominational plan were adopted it would be a significant departure from current procedure where it is the dioceses rather the denomination that determine healthcare benefits. It is instructive that in the second resolve dioceses were urged, not mandated. to respond for data requests.
Health insurance is one of those peculiar products where the cost to the provider depends on the characteristics of the buyer. For insurance providers to cover their costs they must pay careful attention to who is buying the product, and price it accordingly. For the same reason, when premiums are based on the health of the group there is the potential for cost shifting between groups to occur when groups are merged, harming the healthier group. Taking this down to the individual, if you are healthier than average, and you are given the choice to opt out, you might be bettter off going without insurance. Providers take this self selection into account in pricing.
At present, the denomination does offer dioceses elective (as opposed to mandated) healthcare plans priced according to regional costs, and the characteristics of the diocesan membership pool. (The extent to which this service by the denomination has been sought by dioceses has waxed and waned.) But many dioceses prefer to design, acquire and administer their health plan locally. Flexibility is one factor, but my presumption is that cost is the primary reason some dioceses find it is in their interest to go it alone. A mandated plan, by contrast would not allow dioceses to opt out of the denominational plan.
(Readers also may see the parallels between the Roman Catholic Church and the corporate model, and the looser form of hierarchy in The Episcopal Church. In a corporate model the corporation always has the option to decentralize acquisition and administration of employee health insurance to the local level or keep those decisions under central control. But as the Episcopal Church is structured it would take an act of General Convention to mandate the reverse, that is, a centralized clergy and lay employee health plan. Note that a mandate would have the curious effect of disallowing local exemptions from the health plan while the church has allowed local options on other issues such as women in the priesthood.)
The same tension exists within dioceses today where the parish (with few exceptions) is mandated to participate in the diocesan plan. Particularly in parishes with a large staff it may be the case that a parish with a healthy staff can find lower costs (for equivalent coverage) than it would be charged through the diocesan plan. When parishes are free to leave and reenter a diocesan plan, and do so according to the changing health of their staff, a great deal of animosity can result. And insurance companies are loath to deal with you when your eligible population is so ill defined, and self selects on the basis of changing need for health coverage.
GC 2009 is not far off, and the Church Pension Group has commenced its “church-wide study of the costs and issues surrounding the provision of healthcare benefits to all clergy and lay employees serving churches, dioceses and other church institutions” or, in short, Health Benefits For All Church Employees: CPG studies the feasibility. As CPG puts it:
The study will:
Evaluate how the Church provides healthcare benefits to active clergy and lay employees Explore viable alternatives, including the potential for a denominational healthcare benefits program Recommend a solution and a plan for implementing it to the next 2009 General Convention
The CPG is well into the evaluation stage and has reported the results of its Awareness and Opinion Survey. To come are the results (see resolve 2 of A147) of the Employer Health Benefits Questionnaire and the Employee Health Benefits Questionnaire. Also planned are focus groups around the country in Fall/Winter 2007-08; presentations and conversations with the House of Bishops, Executive Council, provincial caucuses, and other church leadership groups; and regional meetings around the country as GC 2009 nears. Indeed, much of this work is also completed or underway.
The first resolve of A147 envisions benefits for all clergy and lay employees. This is a justice and equity issue: at present the church has found a way to provide healthcare coverage for active clergy, but not for many (full time) lay employees. The common situation today is for a diocese to mandate that clergy be covered, and to invite lay employees to participate if they or their employer pays the premium.
The pattern has been that many lay employees are not covered. The reason is that lay employees tend to be younger/healthier than clergy. Unless they themselves have medical problems they find the insurance overpriced because insurance is priced according the health of the participating group, not the individual. The result is that few lay employees participate because they prefer to have the cash to paying the premium (or what is the same thing, they prefer their employer give them cash equivalent rather than give them health insurance).
There are reasons, however, to hope a church-wide plan might reduce premiums so that clergy and lay employees would both benefit. These are what CPG calls the Driving Issues.
First, under a unified health plan the denomination might have greater bargaining power than any diocese can muster on its own. For some of our smaller dioceses small numbers is a reason they cannot negotiate good premiums. But what I’ve been told is that this is not a significant issue once your group is over 150 members or so. A mandate would allow smaller dioceses to join in the negotiating advantage benefit that larger dioceses already enjoy.
Second, it is anticipated that mandating lay coverage will change the composition of the insured pool. Preliminary survey results indicate that the lay group is comparatively younger and healthier than the clergy group. Thus, it can be true that while a lay person might not want to purchase insurance at a premium based on a clergy-only pool, that same person might benefit from purchasing insurance at a premium based on pooling all clergy and all lay employees.
A question that arises is, if mandating lay coverage makes so much sense (because it lowers overall costs of salaries and benefits to clergy and lay employees), why haven’t dioceses done so on their own initiative? Could it be that no one wants to tell lay employees we’re expanding your benefits, but taking the premium out of your salary? If so, then mandating inclusion of lay employees will lower per capita healthcare care costs, but church-wide total healthcare costs will increase as would per capita costs of employing a lay person. The incentive will be to cut employment of lay persons undercutting the benefits of pooling clergy and lay employees.
Finally, a church-wide plan could reduce the administrative burden by relieving “dioceses, parishes, and other church institutions of the burden of developing and maintaining health benefits programs.” This benefit could be significant, particularly for smaller dioceses.
CPG has done a careful job of communicating its study’s progress through its website, and through its periodical Flash devoted to the topic which is mailed to clergy and lay employees of the church. In the May 2008 issue of Flash (PDF) the CPG puts its cards on the table (p. 2):
After a great deal of research and analysis over the past year, we have come to the conclusion that a denominational health plan has many outstanding advantages for the Church. And various comments offered during conversations, emails, and interactions with the Church at various levels indicate that many clergy and lay employees around the country agree. Through focus groups, presentations, and one-on-one conversations – including the April meeting of the Conference of Diocesan Executives (CODE) and the recent annual Medical Trust meeting with diocesan administrators – the majority of employers, clergy, and lay employees have expressed agreement that a denominational health plan is the best approach to take.
A Preliminary Denominational Health Plan is laid out on pages 3 to 6 of the May 2008 Flash. A new survey is being disseminated: “All clergy, lay employees, and General Convention deputies will soon be asked to complete a new survey which will solicit feedback on initial concepts for a denominational health plan and help us gauge how well we’re keeping you informed” (p. 6).
What of the potential for pushback from dioceses that are doing well on their own? To limit tensions between winners and losers from a mandate, the current thinking is that premiums charged to the dioceses will be set based on regional demographics and regional cost of healthcare. The hope is that as a result each diocese would be at least as well off as it is going it alone.
The plan would require that dioceses treat clergy and (“full time”) lay employees with parity. If the diocese requires parishes to pay, say, X percent of the premium for parish clergy, that same cost sharing most hold for full time parish lay employees. I would note that in the end, parity may be more apparent than real. Mandating a benefit might cause a parish to reduce lay employment, or to hold down lay salaries. And could a parish say we treat clergy and lay equally, but we require them both to pay 100 percent of the premium passed to us from the diocese? If so, then a parish might hold lay salaries the same, but increase clergy salaries to keep the latter as well off.
While the Church Pension Group is not saying that it will recommend a denomination healthcare plan, it is signaling that chances are strong that it will and that so far what it is hearing is a consensus across the church. It is giving us all plenty of notice that we should be thinking hard about whether this serves the best interests of the Church.
Dr. John B. Chilton is an economist on a busman’s holiday in Orkney Springs, Va., home of Shrine Mont Episcopal Conference Center of the Diocese of Virginia. He maintains two personal blogs, The Emirates Economist and New Virginia Church Man.