From Greg Hubbard, Director of Operations
The word itself (is it a word now?) evokes strong emotional responses in most people, whether positive or negative.
The Patient Protection and Affordable Care Act (Obamacare’s more proper name) has been a source of anxiety for churches mostly because it has marked such a dramatic change from the past. I will just refer to the law as the “ACA.”
I do not have the space or expertise to provide an exhaustive review of the ACA. But I hear churches asking several questions about what the ACA really means to them as they try to provide coverage for their staff members.
- What are the implications of the ACA if our church already has a group health plan in place?
If your church has a group health plan, then the best way to get answers to your questions is through the broker who helped you set up your plan. Now that the ACA is in full force, the plans that your broker makes available to you should be compliant with the ACA.
Of course, you may still face a significant issue: rising premiums! In response, your broker will likely provide your church with multiple options to help you select the plan that best provides coverage in your budget range.
- What if premium increases make it impossible for our church to afford a group health plan?
Your church may have to make choices it has never faced before about how much health coverage you can afford to provide for your staff members and their families. Some churches are changing to more affordable plans that pass on more out-of-pocket expenses to their employees. Other churches are deciding to pay a smaller percentage of the premiums while passing on a higher percentage of premiums to their employees.
Some churches, those with staff sizes that allow them to do so, are deciding not to provide health benefits at all. While this may seem harsh at first, it may make sense for some churches to get out of the health benefits “business” altogether and encourage their employees to buy individual or family plans through the exchanges found on healthcare.gov.
The plans available on the exchanges allow an individual or family to get health coverage that often is subsidized. This means that the employee will qualify for a tax credit which helps them pay for their own health insurance premiums when buying their own health coverage on the exchanges. This may be the most affordable way to get extensive coverage for many employees. The health benefits available through the exchanges are from well-known health insurance companies like Blue Cross, United Health, Anthem, Aetna, and others.
- Can our church just pay the premiums for our employees who purchase insurance on the exchanges?
In a word, no! This practice may not be beneficial to employees. If the church pays for (or reimburses) an employee’s health insurance premiums outside of a recognized group plan, often the money spent by the church will be considered taxable income. Even the rules of cafeteria plans have changed dramatically under the ACA. As a general rule, either the employee must pay for his own insurance through the exchange, or the church must provide a group health plan.
Of course, churches are free to increase their employees’ salaries if they decide to no longer provide a group health plan. But churches should be careful to avoid designating portions of employees’ salaries for any medical purposes.
It is very important for churches to understand this issue:
The provisions of the ACA may deem a church’s action of paying for its employees’ individual plan medical premiums to be, in reality, a form of a group health plan in and of itself. This is true whether the church thinks of it this way or not. And this type of “group health plan” is most likely not compliant with the provisions of the ACA for several technical reasons which are beyond the scope of this article. The church, by inadvertently creating a “group health plan” that is not compliant with the ACA, may expose itself to hefty penalties ($100 per day per employee impacted – which amounts to $36,500 per year per employee!). To avoid this significant financial exposure, churches are better of either participating in a recognized group plan, or going to the other extreme and staying completely out of health benefits for their employees, which will likely lead those employees to participate in the exchanges.
Your church may need to seek expert advise on the more specific technicalities introduced here. Please keep in mind that this article is intended to be a general overview of the issues, not specific advice about your situation.
Greg Hubbard serves as Director of Operations for Orchard Group. He helps new churches with various aspects of their project management timeline before and after launch. Greg has served on new church plant teams and, in a former life, practiced law.