More on the Denominational Health Plan

Yes, I know there's an alternate budget proposal on the table!  I'm working that issue and will publish a post as soon as I finish my analysis.  In the meantime, here's this!

Over at Seven Whole Days, Scott Gunn has proposed a principle on political resolutions at General Convention:

Let us tell the world what we are going to do about political problems, rather than telling the world what they should do about political problems.

Well, General Convention has certainly told the US government what IT should do about the problem of health care coverage in the United States.  In 2009 alone:

2009-C071 called on all parts of the church to advocate for universal basic health care for all;

2009-D048 called for universal health care coverage and a single-payer heath care plan;

2009-D088 called for national universal health care reform.

Now it’s time for us to put our money where our mouth is.  That’s what the US government should do; well, what should we do?  It’s easy enough to demand that someone else do something about people who lack health insurance; can we stand behind our convictions when it is going to cost us money?

That’s what we decided to do in 2009.  Resolution A177 established the Denominational Health Plan, to be administered by the Medical Trust of the Church Pension Group.  The DHP has two basic goals: 

• Containing healthcare costs for the church in light of rapidly increasing healthcare costs nationwide; and
• Equal access to healthcare coverage for clergy and lay employees.

Worthy goals – but the DHP has run into some controversy.  Mostly because we have suddenly discovered that covering additional people will cost additional money!  Surprise, surprise!  Justice requires some sacrifices!

Let’s make a couple of points absolutely clear:

• It is absolutely essential for the economics of the plan that everyone be required to participate, because of the concept of “adverse selection,” which I explained in detail here.  Basically, this means that without a mandate, healthier and cheaper employees and groups will be motivated to buy their insurance elsewhere, leaving CPG to cover only older, sicker employees, raising the cost of CPG insurance for everyone. 
• The mandate has not gone into effect yet!  It does not become effective until January 2013!  That means that we have no basis yet on which to judge the effectiveness of the Denominational Health Plan. Don’t judge the DHP as ineffective when we haven’t even seen it at work yet!
• Some folks have complained that since adopting CPG insurance, their health insurance premiums have continued to increase, and cited this as evidence that the DHP isn’t doing its job.  Folks – health costs across the country have continued to increase, by about 9% a year.  A CPG representative tells me that CPG insurance has increased by an average of about 5% a year.  This lower percentage increase is direct savings to us ($37 million so far, according to CPG), attributable to the fact that numerous dioceses have already joined the plan.  Don’t blame CPG that health costs in the U.S.  continue to rise!
• The fact is that the Denominational Health Plan directly pits the interests of clergy employees against those of lay employees.  I believe that clergy need to be very, very careful about voting their own interests in opposition to lay interests.  Lay people are vastly underrepresented in the councils of our church, because there are far more lay people than clergy people, but we have the same number of deputies to General Convention.  If anything, clergy need to bend over backwards to protect the interests of lay people, without whom we wouldn’t have much of a church.  We clergy should not be using our disproportionate power to trample on lay interests.  

Now, on to some more specifics.  The controversies over the DHP fall into three categories:

     1.  Requiring clergy and lay benefits to be equal means either you have to reduce clergy benefits, or you have to offer lay people the same Cadillac benefits the clergy have been getting all these years.  And make no mistake, many clergy people receive true Cadillac plans.  Where most secular employers these days offer high-deductible, low-cost plans, and require employees to pay part of the premiums, clergy have gotten used to expecting low-deductible, benefit-rich plans, fully paid by the church, including full family coverage.  Such a plan in my diocese (Arizona) could easily cost $25,000 a year. 


This is a way, way better plan than the average American worker can expect to receive.  According to a study by the Kaiser Family Foundation, the average American receives a plan worth $15,073 per year, and personally pays 27.3% of the premiums, or $4,129.  (Click Here for the report; click on “Report” and see Figure 16 on page 25.)


So, in a limited-resource world, do we bring the clergy down from a Cadillac to a Chevy in order to provide a Chevy to lay employees too?  I argued here that dioceses actually have the power to create transition rules to phase the new rules in over time, not taking away anyone’s Cadillac, but providing Chevys to all new employees.  I think this is a reasonable result.

Honestly, I think the gospel call to provide health insurance to our full-time lay employees who don’t have other coverage (such as spousal coverage, etc.) really couldn’t be clearer.  I am stunned that anyone who follows the gospel would think otherwise.  See Scott Gunn's post here for a few cogent arguments about this.

     2.  Some people believe that CPG insurance costs more than insurance under other plans.  This may well be true because of the nature of The Episcopal Church’s covered group – mostly clergy, who are older (and therefore less healthy and more expensive) than the average American.  Requiring all employees to be covered may well bring down the average cost for everyone, because as it is, the expensive older employees are the only ones who have an incentive to join the CPG plan.  That's adverse selection for you!  If you don't know what I'm talking about, click here for info.  

Again, the DHP is not fully implemented yet; until it becomes mandatory on Jan. 2013, we will have no way of judging how powerful the effect of the mandate will be.  It is not fair to judge the DHP as inadequate when it hasn’t even gone into effect yet. 

     3.  Differences in price among various groups in the church (for instance, geographic groups).  According to a CPG representative, before the DHP was implemented, CPG health insurance had 14 different pricing “bands,” or price structures, based on factors like geography, demographic characteristics of the group, etc.  They have already reduced this to 10 bands, and will go to 7 bands when the mandate is implemented next year.  This means that pricing differences are being narrowed already, at CPG’s initiative.  

Please note that it IS possible for CPG to institute one standard price that applies churchwide.  However, this would mean that lower-cost groups would be subsidizing higher-cost groups.  It would mean that dioceses in lower-cost areas like Phoenix and Seattle would be paying extra to account for the higher cost of medical care in New York City and Miami.  We as a church should decide whether we are willing to do this. 

The economic risk of letting low-cost groups subsidize high-cost groups is that CPG insurance would be noticeably more expensive than private insurance in low-cost areas, providing an incentive for those cheaper dioceses to drop out of the plan, raising the average cost of insurance for everyone left behind.  Adverse selection at work, again!  Participation in the plan must be mandatory for it to work. 

So – back to the beginning. Should we spend another convention telling the US government what it should do about health care reform? Or should we act on our own to do justice for our lay employees?

As Scott Gunn says, let’s stop telling the world what they should do, and start telling the world what WE are going to do.  Let’s make sure our lay employees are covered.  It’s responsible, it’s fair, and it’s our gospel call to love our neighbors as we love ourselves.

PB's Budget Proposal: Initial Thoughts

I'm working hard on analyzing the PB's budget proposal.  There will be more later, but here are some initial thoughts before I run off to an Arizona deputation meeting!

> It's irregular for the PB to come out with a budget proposal that competes with Executive Council's proposal.  Nevertheless, I am not interested in irregularities, power struggles, or who is allowed to do what.  As Scott Gunn points out, any church member in Alabama could come up with an alternative budget proposal.  I've thought about doing it myself.  What I'm interested in is the substance.  Is there some substance here we can get behind?

> The PB's budget proposal does what I have been advocating, and calculates the budget according to Marks of Mission categories rather than the tired old categories of Canonical, Corporate, and Program (yawn).  I am glad to see mission categories become a priority.

>The chart released with the budget proposal shows that, compared to Executive Council's budget, "mission" has been increased from 59% to 67% of the total budget.  First question:  Do these percentages reflect actual differences in the way we are spending our money, or do they reflect reclassifying things from one category to another?  Initial review shows there's a little of both going on here.

> Nevertheless, there are some terrific new proposals here.  Just one example:  $2 million in grant funding for new church planting.  Friends, we have been needing to do this for years.

> Apparently the PB's staff has been pounding the pavement, burning up the telephone wires in calls to dioceses to wring some additional "asking" commitments from them.  Income has thus been increased by $2 million.  Let's hope this is real money.  But 815 is in a good position to count up actual commitments - a much better position than I am.

> This budget proposes to reduce staff costs at 815 by eliminating 12.75 positions (partly including unfilled positions) and limiting cost of living increases.  Great news - and again, 815 is in a much better position to offer these cuts than I am, or than Executive Council is - they know what the staff does and what is necessary.

> This budget restores Christian Formation as a priority of the church - Hurray!

I will offer more thoughts when I have more time to analyze - but here's what I'm thinking right now.  If we are a dysfunctional church, we will let this proposal get bogged down in questions of who is allowed to do what, miring ourselves in canonical analysis and power struggles.  If we are a church that is focused on change and mission in the 21st century, we will analyze this proposal on its merits, as members of the same team, as co-workers in the fields of the Lord of the harvest.  Let's work together on this.

But What About Jesus?

Is it important that we speak compellingly about Jesus? asks Jim Naughton on Episcopal Café.  There is a lot we can talk about in church: social justice, exegeting the Bible, even church structures, for God’s sake.  But what about Jesus?

I believe that Jesus was the most compelling human being who ever lived.  He could look at people, speak a few words, and change them forever.  People gave away everything they owned to follow him, up to and including their very lives.  Two millennia later, his life and witness is still so compelling that he has over 2 billion followers in the world – almost a third of the earth’s population. 

Yet sometimes I fear that in today’s Episcopal Church, we are losing sight of Jesus.  We get so involved in our structures and our social programs and our conflicts that we somehow lose sight of the main thing: the Son of God lived, proclaimed, and enacted the Kingdom of God.  And the Resurrected Son of God still lives and calls us to follow him in proclaiming and enacting that Kingdom.

But look, once again, at the matters that consume our church. 

• We follow a Savior who had no place to lay his head, yet we maintain a vast, hierarchical, corporate bureaucracy, headquartered in Manhattan of all places, which will spend over a hundred million dollars over the course of the next three years – 55% of which is on administration and governance!  What about Jesus?
• We have so many canonical requirements that we have no money to spend on Christian Formation (or, rather, we choose not to spend that money).  Empowering local congregations to make and teach new disciples is apparently not a high enough priority to spend money on (though the churchwide finance department is worth $15 million to us), so we are willing to jettison any kind of churchwide support for Christian Formation.  Evidently we assume that somehow, someone will pick up the slack – even though we have made no transition plans to make sure that happens.  We have forgotten that Christian Formation is a vital way that people come to know Jesus.
• The time and energy of over 800 deputies (including me) and however-many bishops will be consumed this summer in an adversarial process to pass legislation that will necessarily create winners and losers and cause some minority voices to go unheeded.  We will sit through hearings, and amendments, and amendments to the amendments, and points of personal privilege, and many of us will privately wonder whatever happened to Jesus. 
• For some Episcopal leaders, “mission” seems to be equivalent to charity work.  The Millennium Development Goals have become the reason for our existence, under this way of thinking.  Worthy and exciting as those MDG goals are, I fear that we are in danger of becoming nothing more than a social service agency with stained glass windows.  The kingdom of God is bigger than that.  It includes worship, and service, and evangelism, and teaching, and healing, and proclamation - all the ways in which we follow Jesus.
• We are in chronic, long-term, unfocused conflict.  Just at the time when the long-running conflict over the place of gays and lesbians in the church seems to be heading toward a settlement, people who were once on the same side of that issue are in conflict with each other over a new set of issues.  We have lost trust in each other as faithful servants of Jesus.

And at the same time, our witness to Jesus is not being heard.  Surely, Jesus is faithfully preached, week after week, in our liturgies, and God’s grace in him is made present in our sacraments.  But membership, attendance, and finances in The Episcopal Church are all continuing to decline.  We are not proclaiming Jesus in a compelling enough way that people are coming to meet him in our church.  And we can’t even focus on that decline because we are too busy arguing with each other.

It is time for a change.  The mid-20^th-century bureaucratic corporate paradigm was right for the time it was created, but it is not right for our time.  We need to change the way we order our common life together.  We need to find a way through all this conflict.  We need to use our resources wisely, for the mission that Jesus is sending us to do.  We need to follow Jesus. 

Let’s put everything on the table at this Convention – the budget, the structures of the church, the shape of Convention itself.  Let’s not spend our time wrangling over niceties in an endless series of resolutions that will make no difference to the church.  Instead, let’s have a conversation about where Jesus is leading us.  Let’s pray and read the Bible and discern where God is calling us to go.  Let’s network and share and listen for the voices of the ones who aren’t often heard – the younger, less experienced people who have a better understanding of the future that lies ahead. 

Let’s set the stage for a real conversation about mission.  I argued here that it is a mistake to make long-term restructuring decisions based on short-term budget considerations.  So let’s not do that.  Let’s pass a transitional budget, as I proposed here, correcting errors, keeping major programs in place and refusing to add new ones.  Then let’s spend the next three years praying, discerning, and talking together, on a grassroots, churchwide level, about Jesus.  Let’s ask Jesus to guide us.  Let’s become a church that, in every part of our common life, loves, follows, and proclaims Jesus.

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.