Village Missions and the Affordable Care Act or ObamaCare

Posted in: Director's Blog
Tags: , ,
Date: November 23, 2013

Background:  When I became Executive Director in November 2000, Village Missions had a self-funded health insurance plan, in other words, we were our own insurance carrier.  We collected premiums from the churches we served and used a T.P.A. (Third Party Administrator) to administrate medical bills.  We carried stop-loss insurance to cover major medical expenses.  Over the years, various consultants advised us on the best structuring of our plan.  One particular challenge was finding P.P.O.’s (Preferred Provider Organizations) for missionaries serving in diverse and often extremely rural locations.

At the time I became Director, the premium charged was insufficient to meet the medical costs.  I worked with the Village Missions Employee Benefit Board to eliminate the deficit through a premium increase.  Although some churches ended their relationship with Village Missions because of this increase, the plan was balanced and the deficit eventually erased.

For a period of three years prior to 2012, we were able to maintain our premium at $950 a month, in spite of double-digit health care cost increases.  Unfortunately, one of the ways we lowered costs was by raising our stop-loss level to $160,000.  Although this lowered premiums, when six of our missionaries became seriously ill, the plan began to go into serious deficit in 2011.  The Board voted to increase the premium to $1,025 per month in January 2012, but this amount was too little, too late. By July 2012 our plan had experienced a $750,000 deficit.  The Benefit Board made the decision to switch to Regence Blue Cross, a group plan, in August 2012.  This required a premium increase to $1,216 per month for a couple or family.

We learned two things from our experience that are relevant for the national health care debate.  First, the margin of profit for health insurance companies is small.  Our self-funded plan ended with a significant loss.  Second, only a small group of seriously ill people in a plan accounts for most of the cost.  Some within this group may have chronic, long-term conditions.  Others may have serious health issues that are temporary, such as treatable cancer.  But together, they are the significant cost drivers in any plan.

So, with that background in mind, this is the announcement and explanation I recently sent to our missionaries and churches.

Re: No Increase in Village Missions Benefit Plan Premium in 2014

I am happy to report that no increase in the premium for health insurance, disability, and life insurance (the Village Missions Employee Benefit Plan), will occur in 2014.  I am thanking the Lord for this unexpected development.

If you don’t want to read all the details which follow below, here are the summaries:

  • Several aspects of the ACA (Affordable Care Act/ObamaCare) put upward pressure on our premium.
  • In negotiations, Regence Blue Cross went from a 9.3% increase in premium for 2014 to no increase.
  • Changes in our plan will not have a significant impact on most missionaries.
  • At this point, Village Missions is required to provide health insurance under the ACA.
  • Other options continue to be explored, but for now, the Village Missions Employee Benefit Board believes we should stay with Regence Blue Cross as our health insurance provider.

Upward Pressure on Plan: As you know, ObamaCare or the Affordable Care Act (ACA) has been much in the news.  One underreported aspect of the ACA is the fees charged employer provided insurance plans to help pay for the exchanges.  We are being charged the “carrier tax” (2.3% of previous year premium) and the “reinsurance fee” (1.6% of previous year premium) in 2014 as well as a 3.47% fee to help pay for the Oregon Health Exchange.[1]

 We are being charged this fee because we are headquartered in Oregon.  Recently, the Obama administration indicated that they would exempt unions from the reinsurance fee but other employers such as Village Missions are required to pay it.[2]  In addition, mandated changes in coverage under ACA put upward pressure on our plan as well as the estimated 6% increase in medical costs.

Negotiations Eliminate Increase: Initially, Regence Blue Cross (our health insurance provider) wanted to increase our premium by 9.3%, an increase of $112 per month.  Our Benefit Board told our consultants that this increase was unacceptable.  Our consultants were able to find some cost savings in their proposal and some relatively minor changes in coverage resulted in a small decrease in the premium.  The changes in coverage actually brought us more in line with the ACA, avoiding the future Excise Tax (40%) in 2018 for having a so-called “Cadillac” plan. [3]  This Excise Tax for “Cadillac” plans is another little known aspect of the ACA that affects employer provided plans.

Changes in the Plan: Changes in the new plan are relatively minor.  The deductible increases from $750 per person and $1500 per family to $1,000 per person and $2500 per family.  Yet, now office visits as well as prescription costs will count towards the deductible (they didn’t before) and the co-pays for physicians and specialists are the same at $25 per visit.  Maximum out of pocket expenses have been raised from $1500 to $2,500 individual and $3,000 Family to $7,500 to comply with ACA.  Of the 709 Village Missionaries and dependents in our plan, 87% did not even reach the $750 deductible in 2013.  The Helping Fund will be available for the seriously ill Village Missionaries most affected by the changes in our plan.

Village Missions Required to Provide Coverage:  Village Missions as an employer with over fifty employees is currently required under the ACA to provide health insurance or otherwise face the “Sledge Hammer Penalty.”  This is an annual tax of $2,000 for each full-time employee, disregarding the first 30 full-time employees.[4]  Village Missions, however, is different from a regular employer in that our Village Missionaries have, in effect, a dual-status employment between the local church and us.  The United Methodist Church is similar in that their local districts provide health insurance, which is paid for by each church in the district.  Interestingly, the United Methodist Church, a big advocate for the ACA, has now petitioned the IRS (yes, the IRS) to be exempted from the requirement to provide insurance. [5]  [6]They believe that each local pastor could obtain cheaper insurance through the exchanges.  Of course, the appeal came before the exchange disaster that is now occurring. At this time, our consultants believe Village Missions is required to provide coverage, pending the outcome of this appeal.

Other Options Considered: The Benefit Board considered other options such as going back to a self-funded plan or obtaining coverage through a Christian sharing plan.  Three factors caused the Benefit Board to stay with Regence Blue Cross at this time.  First, Blue Cross could cover almost all of our Village Missionaries in their various and often remote locations.  The care received by missionaries has been excellent and we have received virtually no complaints in the office.  This is especially important considering the turmoil currently existing in health care caused by the ACA.  Second, when we switched to Regence Blue Cross we received a one-month premium holiday of $213,935.  As part of our agreement, we would have to refund this premium if we leave Regence Blue Cross before 2015.  Third, we have some missionaries that are severely ill with chronic conditions.  Stop loss policies under a different carrier would start over again.  We are not sure how Christian sharing plans would treat such individuals, as most Christian sharing plans do not cover pre-existing conditions.  Interestingly, somehow Christian sharing plans were exempted from the requirements of the ACA such as covering pre-existing conditions.

Summary: The Village Missions Employee Benefit Board will continue to monitor the rapidly changing health care environment.  They are committed to providing good health care for our missionaries at a cost that our churches can afford.  The increases in insurance in recent years have affected Village Missionaries, the churches we serve, and Village Missions.  Yet we have seen God provide and the fact that we don’t have to increase our premium this year is a wonderful answer to prayer.  Please keep praying!

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