Health Insurance

Costs of providing health insurance to our clergy and church staff are sure to rise sharply next year. HUM News explores why - and what we can or can't do about it.

Whether they were driven by the $10 bookstore gift certificate, or motivated by a concern for their health, Scott Orbaugh was just glad to see more than 250 South Indiana Conference pastors and church staff members disappear into the tent outside the Indiana University Auditorium June 6-8.

Inside the tent, screenings for blood pressure, triglycerides, height/weight measurement and other free health checks were offered during the annual conference meetings. All were designed to keep those attending mindful of their current health state and, equally important, what direction it may be headed.

Orbaugh, South Indiana Conference's Benefits officer, observed "Wellness is the key to improving quality of life for our members, and ultimately helping to contain health care costs..You can bury your head in the sand and hope health insurance costs are not going to rise, but we've taken the approach to be proactive."

(The costs to pastors and churches vary from conference to conference and year to year. Currently the split is approximately 35 percent (pastor's part) and 65 percent (church's part).)

Health insurance premiums are predicted to rise in the neighborhood of 16 percent next year for South Conference pastor insurance. That would place the total church/pastor premium at around $1,093 a month for a mid-range salaried pastor with dependents. In 1990, that same total premium total would have been just $285 a month.

This year, the North Conference had its premiums rise a whopping 19 percent, costing a total of $805 for a pastor with dependents (figure represents combined church and pastor portions). John Stemen, minister of administration at St. Joseph UMC in Fort Wayne, remembers receiving news of that 19 percent increase last October.

Biting the bullet

"You just kind of bite the bullet," said Stemen, who needed to find an additional $12,000 in the budget of his church, which nearly 800 people attend each Sunday. St. Joseph's answer was to forgo raises and delay hiring for an adult education position. North conference churches pay 60 percent of the average pastor's premiums, while South conference churches pay 65 percent.

Health insurance's growing share of the budget is limiting the dollars churches can spend on new staff, ministries and building and campground maintenance and expansion, said Brent Williams, North Indiana Conference director of finance and administration.

"I'd say in the last six years, it's gone from being a topic that was there, to the major topic when it comes to preparing budgets across the country," said Williams. "We've had increases of 25 to 50 percent in the amounts being charged to retirees in the last four years. The amount of drug costs for retirees has risen from $500,000 to over $1 million."

The Rev. Roy Eaton retired in 1995 after serv-ing his final six years as Marion District superintendent. Eaton said his insurance premiums were $65 a month in 1995, but have risen to $235 a month this year, and are due to rise again in 2003.

"If you compare apples with apples, we've got a pretty good deal," said the 71-year-old, who also pastored in Chesterton, Fort Wayne and South Bend. "Our policy is a group policy for all the actives and retirees. I get a better rate because others are contributing."

Being 'self funded'

Rather than buy an insured product from a health insurance company like Anthem (Blue Cross/Blue Shield) or Aetna, both the North and South Indiana conferences self-fund their respective insurance programs. What is paid in premiums returns in claims. But when claims outpace premiums (along with apportionments and any investment income), that means the conferences must tap into reserve funds

South Conference's claims reserve fund was down to $511,000, as reported during this year's annual conference. That was "far less than recommended by consultants who have reviewed the plan," said the report. A committee was named to address the problem, as well as examine "rapidly escalating retiree medical costs."

Orbaugh said self-funding is still saving his conference money. He said 93 percent of all income goes directly back to South Conference members in the form of claims. Only 7 percent is used for administration fees.

One way the North Conference saves money is by receiving a discount for its pastors' medical services at Indianapolis' Methodist Hospital, said Williams.

Many of the UM conferences across the nation have combined their health insurance buying power through HealthFlex, an insurance product administered by the Church's General Board of Pensions and Health Benefits in Evanston, Ill. HealthFlex supplies insurance to 32 of the 68 conferences nationally, including conferences in northern Illinois, and with the Redbird Missionary Conference in Kentucky.

Orbaugh said , "We solicit competitive bids from several organizations, including Health Flex for a fully insured health insurance product every couple of years. We've consistently found that our overall costs are 10 to 15 percent lower by continuing to self fund our benefits," he said. Nyhart Company administers claims for the South Indiana Conference. As Orbaugh puts it: "We're self-funded, not self-insured."

While lay employees may opt out, both Indiana conferences require pastors to belong to their respective health insurance plans.

"The reason for that is the affordability for the whole group," said Brent Wilson, treasurer and director of administrative services for the South Indiana Conference. "Should the young healthy (pastors) leave for their own interests, you'd be left with those with greater health risks."

Why those costs are so high

Wilson said his conference has 800 plan participants with an average age of 59½ .

"That in itself explains why we have significant cost," he said. "Besides the age, the lifestyle has become significant. Pastors lead a sedentary lifestyle and many are overweight. Significant numbers are diabetic."

So both conferences have included a wellness benefit. The South Conference's benefit pays 100 percent for preventive healthcare, such as annual physicals, up to $500.

And at this year's annual conference, visitors to the health screenings tent could enroll in free "personal wellness coaching." Those at high-risk for health problems would be assigned a nurse who would consult with the pastor or lay employee, set health goals and periodically check on progress.

Rising prescription drug costs are to blame for a significant portion of the escalating premiums, said both Williams and Wilson. Orbaugh said those trips to the pharmacy added up to the largest claims category for the South Indiana Conference, even topping the dollars spent on hospitalization.

Williams said prescription drug needs were not only costly for his North Indiana Conference's 580 members, but he also termed it a "crisis" for the nation. "All we're doing is passing on the cost," he said.

A better insurance deal?

But for church administrators like Stemen, it seems like a better insurance deal must be available somewhere. He said he would like individual churches to have the option of searching for their own best rate. Stemen compared it to the debate in the North Indiana Conference over property and liability insurance, with those rates recently rising 25 percent, he said.

Lucy Hill, church business administrator for Meridian Street UMC in Indianapolis, understands Stemen's attitude.

"As large as (the conference is), and to contribute as much as we do, you'd think we'd get discounts and the costs wouldn't be so high," said Hill. Her church has up to 700 people attend each week.

Hill, whose husband Ralph pastors at the Greenwood UMC, said it's harder for churches to absorb higher health insurance costs since, unlike businesses, they have no ability to simply raise prices. The Meridian Street UMC helped meet its costs with "faithful" church giving and endowment money specified for maintenance, she said. It also continues to use three full-time pastors, when it previously functioned with four.

The United Methodist 'way'

As we age, we necessarily face higher medical costs. That in mind, South Conference Treasurer Brent Wilson said, "In theory younger pastors do help subsidize older active pastors' comparatively higher medical costs. It's that principle that keeps any insurance system working and in balance."

Despite any administrator's desire to shop for a better health insurance rate for his or her individual church, the conference system is likely to continue, according to one district official.

"That's the United Methodist way," said Larry Ray, Fort Wayne District superintendent. "We may not like what we all do together, but it's part of our tradition and history. We usually get more done together than separate."

South Indiana Conference portion of
monthly insurance cost

Pastor with dependents, based on average salary.
(Pastor's percentage varies with salary, averages 35 percent of insurance total cost.)
2002 - $363.38
2001 - $328.58
2000 - $312.88
1997 - $269.78
1990 - $110.69
1985 - $75.76

Church portion per pastor (averages 65 percent of insurance total)
2002 - $579.65
2001 - $530.00
2000 - $505.00
1997 - $435.33
1990 - $178.68
1985 - $122.31

Medicare-eligible retired pastor with wife (averages 40 percent of total)
2002 - $223.61
2001 - $204.50
2000 - $174.04
1997 - $138.92
1990 - $74.48
1985 - $42.36

Lay employees (100 percent, unless churches subsidize)
2002 - $1,038.23
2001 - $938.79
2000 - $893.95
1997 - $770.51
1990 - $316.25
1985 - $216.47

Figures supplied by Scott Orbaugh, South Indiana Conference benefits officer