Health Insurance and Justice: The DHP

Justice for lay employees – this was the purpose of the Denominational Health Plan passed in 2009 (Resolution A177).  After all, we have passed resolutions calling for universal health care coverage in the U.S. – why not take the first step and provide it to our own employees?  Most of our clergy (at least those with full-time positions) are covered; it is the lay employees that are often left out of our benefit structures.  Resolution A177 attempts to remedy this injustice.

It seems, however, that it is easier to call for justice when the payment is coming out of someone else’s pockets than it is to do justice when we have to pay for it ourselves.  The Denominational Health Plan has caused a lot of anxiety because it increases employee benefit costs at a time of very tight budgets. 

To date, a number of resolutions have been proposed to modify the Denominational Health Plan, which was passed in 2009. I am married to an actuary, Tom Snook, who is a Principal specializing in health insurance with the international actuarial consulting firm, Milliman Inc. Tom has helped me understand some of the economics of health insurance which are relevant to this health plan, and which I would like to share with you.  

To begin, I’ll review the requirements of the 2009 DHP legislation:

• The DHP ensures parity between health insurance benefits offered to clergy and lay employees, requiring that the same benefits be offered to both, as long as they work 1,500 hours or more per year (i.e., ¾ time or more). 
• The DHP requires that health insurance be purchased from the Church Pension Group’s Episcopal Medical Trust.  The Medical Trust is not a direct provider of health insurance; instead, it negotiates with providers such as Blue Cross, Aetna, etc., to come up with plans for each region of the country. 
• The 2009 legislation asks dioceses to come up with specific regulations for implementing the plan, including questions of whether employees of diocesan schools and other non-church organizations must be included, how much of the cost the employee is required to share, whether domestic partner benefits must be included, etc. 
• The DHP comes into effect on Jan. 1, 2013. 

Because the requirement to cover lay employees equally with clergy employees promises to cost many congregations money, the plan has resulted in some controversy.  Proposals to modify the DHP requirements are in the works, including:

• Several proposals to delay the DHP’s implementation;
• Several proposals to allow insurance to be purchased from other providers than the CPG Medical Trust;
• Several proposals that require equity between geographic regions of the country; and
• A proposal from the Diocese of Olympia (C047), which I’ll get to later. 

Taking these categories one at a time:

(1) Delay in implementation – I imagine the goal here is to simply buy time before congregations have to pony up more money.  Is the hope that the recession will end before we have to come up with more money, that people with deep pockets will start flooding into our congregations between 2013 and 2016, that we who have to run stewardship campaigns will have retired before the plan comes into effect, or some other forlorn hope?  Is it true that justice delayed is justice denied?  I am not sure what we hope to gain here.  But I believe that a delay could result in negative economic consequences for all of us – read on to understand more. 

In addition, please note that the new Healthcare Reform law (if upheld) could impose penalties beginning in 2014 on employers who have 50 or more employees and who don’t provide adequate insurance.  (Click Here for info.)  Most parishes do not have 50 employees, but this penalty could affect dioceses, which are the legal employers of all mission congregation employees.  The penalty is $2,000 per employee, so it could add up to $100,000 if there are 50 employees!

(2) Purchasing insurance from other providers – I get the appeal here.  If you can go out and buy coverage more cheaply from someone else, why pay more for the Denominational Health Plan?  To understand this, you have to understand a concept known as “adverse selection.”

To illustrate: let’s say I have two lay employees in my congregation: Gus and Janet.  Gus is 62 years old, has had numerous heart problems and a previous bout with cancer.  He is nearly uninsurable under any individual plan, because the insurance premiums for him would be astronomical.  He comes to work for the church for next to nothing, just for the benefit of being added to the group health insurance plan provided by CPG, which saves him a fortune.

Janet, on the other hand, is 30 years old and is in excellent health.  She could get health insurance far cheaper on her own, through an individual plan, than she could get it through CPG.  This is because she is far healthier than the average CPG participant (since that average person is, let’s say, a 58-year-old priest).

What is the natural result of allowing the free market to operate on these two employees?  Janet, the younger, healthier employee, goes and buys her insurance elsewhere.  Gus, the older, sicker, nearly uninsurable employee, buys his insurance through CPG. 

Now multiply that effect throughout an entire church of people who have their choice of where to buy health insurance.  What do you end up with?  CPG is covering a population full of older, sicker employees, and CPG insurance is accordingly extremely expensive because of the nature of its covered group.  Note that as it stands now, CPG covers mostly clergy employees, and as we all know, clergy are, on the average, older than the general population.  That means they are less healthy and more expensive. 

Other things being equal, the general effect of requiring all employees, all congregations, and all dioceses to be covered through CPG is that the average cost of insurance through CPG goes down substantially.  That’s because the younger, cheaper folks can’t opt out, and they bring down the average age of the whole group, saving money for everyone. 

Yes, I know it sounds reasonable to allow everyone to buy insurance where they want to.  It’s a free country, right?  But we need to understand the economic effects of the free market on the insurance world before we start waving that free-market banner.  (And, with 50 million uninsured Americans, I’m not sure we can hold up the free market as a good health insurance exemplar.) 

(3) Requiring equity between different geographical regions – again, this sounds like simple fairness.  And sure, it is perfectly possible to calculate health costs across the entire country and charge the average price to everyone, everywhere.  But wait.  If you charge the average to everyone – some people’s rates are going to go down.  And some people’s rates are going to go UP. 

The fact is that health insurance premiums vary in different geographic regions because the underlying health costs vary across different geographic regions.  They vary a LOT.  My husband Tom was kind enough to point us to this report issued by his firm, Milliman, detailing health costs across the country.  I point you specifically to Figure 6 on page 4.  If you live in New York City, Miami, Chicago, etc., you probably pay health insurance costs above average for the country.  Therefore equalizing premiums on a national basis will mean your costs will go down.

However, if you live in Los Angeles, Denver, Dallas, Seattle, Atlanta, or Phoenix, you probably pay health insurance costs significantly below average.  If we equalize costs across the country, your premiums are going to go UP.  In effect, you are going to be paying more in order to subsidize the higher health costs in New York City and elsewhere.

Maybe this is a fair result, and maybe it is a good thing for cheaper regions to subsidize more expensive ones.  But we need to understand that this is the result we would be voting for. I’m not saying it’s bad – you be the judge. 

(4) The Olympia Proposal simply requires that the DHP implementation deadline be suspended, with no new date specified.  It asks that dioceses be given the flexibility to decide what is just and feasible in their own contexts.  Basically this proposal would deep-six the entire Denominational Health Plan, making it go away forever, saying goodbye to churchwide parity between clergy and lay employees (a justice issue, remember?), and giving up any benefits that a churchwide plan could provide.

I must say that the rationale provided in the explanation to the Olympia resolution seems exceedingly weak to me.  There are two reasons given, and basically both reasons are: we can’t trust Episcopalians not to behave badly.  First, according to the explanation:

“One unintended consequence of Resolution A177 would be that vestries would tend to see the minimum level established by the Diocese as an “accepted standard” and reduce existing paid coverage to this level. Then

clergy and lay employees presently receiving more than this minimum would see their benefits package reduced. In the case of clergy whose congregations presently pay premiums for dependents this reduction could be devastating. Yet any attempt by a vestry to transfer lost benefits to another category of remuneration would go against the principle of equity.”

Really, guys, here I just have to say – you don’t have to wipe out the entire DHP in order to solve this problem.  You don’t even have to bring anything to the attention of General Convention.  If this kind of finagling by vestries is a problem in the Diocese of Olympia, my suggestion would be that Olympia pass a diocesan resolution that prohibits vestries from doing it.  Period, end of story. 

The second rationale is this one: 

“Another unintended consequence of Resolution A177 would be that financially hard-pressed congregations would tend to reduce the hours of lay employees and clergy so that they fall under the threshold of eligibility.”

Again, I say, really?  We want to wipe out the whole health care plan because we fear that we might be tempted to artificially reduce an employee’s work hours from 1,500 to 1,499 with the stroke of a pen?  And your employees put up with that?  And your Christian workplaces are willing to do that to their employees? 

I am a vicar (soon to be rector) in a congregation myself, and I have to say that good employees are really hard to find.  I honestly cannot imagine jeopardizing the ministry of a good employee by denying them benefits that they deserve.  Look, I know that the coming health insurance rules are going to be hard for us to pay for.  I just can’t stomach overturning these rules – intended to provide justice and equity – on the basis that we can’t trust each other not to be dishonest.  Surely The Episcopal Church can come up with a better vision than that. 

Please note: +Greg Rickel, the Bishop of Olympia, has shared with me (and given me permission to share with you, Gentle Reader) that he does not support Olympia’s proposed resolution.  Here is a direct quote from Bishop Rickel, shared with his permission:  “Time will not solve any of the issues they bring up, and that is all this offers, for us to wait, yet again, to do what we call on the rest of the world to do at every convention.”

Money-Saving Proposals

As Bishop Rickel points out, The Episcopal Church is good at proclaiming that other people should act justly, but not so good at acting justly ourselves when it costs us money. I’ll let the irony of that statement speak for itself. 

But what should we do about the fact that the DHP costs money, and we don’t have so much money these days?  How should we encourage ministry to keep happening, employees to keep being employed, and churches to keep running even as we are mandating increased employment costs?

I think we can do this without making any changes to the 2009 legislation at all.  Let me point out that the DHP legislation allows dioceses to set minimum coverage and cost-sharing guidelines for churches.  We don’t HAVE to pay 100% of a very rich benefit plan and include the entire family of every employee, even though that is often done for clergy under the current system.  A diocese could create different rules. 

In fact, although A177 does not specifically allow it, a diocese could achieve parity for clergy and lay employees over a period of years by creating a phase-in scheme.  According to a CPG representative I corresponded with, although A177 does not provide for a phase-in scheme on the parity rules, the bishop of each diocese is the one responsible for enforcing the canons of the church.  Therefore, if a diocesan scheme satisfies the bishop that it will achieve the goal of parity in a reasonable period of time, CPG is not going to play compliance police. 

So, if I were going to create a diocesan implementation plan, here is what I would propose to my bishop:

• “Grandfather” the benefits of every person who is already covered under a CPG plan.  All those clergy with 100% family coverage of rich-benefit plans can keep their insurance, and newly added employees do not have to receive the same benefits.
• People working 1,500 hours or more who are not currently insured will have to be added to the plan as of 1/1/13 (unless they meet one of the exceptions, like coverage under a spousal plan).
• Newly added employees (new to the plan, or new to the job, either one) would have to have parity with each other – no difference between clergy and lay benefits.
• The diocese would decide on a minimum amount of coverage required.  Churches could decide to provide more than the minimum, and employees could opt to pay for more than the minimum.  Some of the options below could be chosen by the diocese as minimum standards in order to save money:

          > The minimum could be a high-deductible, low-cost plan.

          > It wouldn't have to include free family coverage. 

          > Employees could share part of the cost of premiums.

          > Employees could pay more to upgrade any of the above.

          > Note, this is similar to what many secular employers do. 

• The grandfather clause takes care of the problem that we have a number of employees who are already covered under very rich benefit plans, and it is an economic hardship to give the same benefits to many newly added employees.  Only newly added employees would be counted in the parity rules. 

The result would be that over a reasonable period of time, we would offer justice and parity to our lay employees, without reducing benefits for people already covered under the old system.  Essentially, as clergy covered under the old system retire, and new clergy come into the system, parity, and justice, will be achieved.  And it will happen without the huge hit to parishes’ bottom line that many people fear is coming next year.  It’s a win-win.  And it doesn’t require any new legislation at all.