Faced with an imminent $28.6 million deficit in its healthcare plan, the Presbyterian Church (U.S.A.)’s Board of Pensions unveiled at its Oct. 27 meeting here a new dues structure that for the first time could result in plan members sharing the dues cost of their healthcare coverage.
The board will take a final vote on the new dues structure ―informally called “Dues Plus” by board members ― at its March 2013 meeting, with the plan going into effect Jan. 1, 2014.
Under the proposal, member dues beginning in 2014 will be 19 percent of effective salary. Those mandatory dues would also cover 65 percent of dependent coverage, which would be optional. (Dues for 2013, which include family coverage, are 21 percent.)
A fixed premium/flat dollar amount would be added to cover the remaining 35 percent for dependent coverage. Members may choose from among differing levels of coverage for dependents: member plus partner, member plus child(ren), and member plus family (partner and children) . Dependent coverage would be paid by the employing organization, the plan member or a combination of the two.
John Hamm, chair of the BOP’s Healthcare Committee said, “If we maintain the status quo, it will require that we increase medical dues in 2014 to 25 percent of effective salary. We are concerned that dues at that level would be prohibitively expensive for our churches and other employing organizations.”
Board members were pretty clear that they are stuck between a rock and a hard place, with rising healthcare costs far outpacing dues increases. There was no increase in medical dues from 2007 through 2011, followed by 0.75 percent increases each year for 2012 and 2013. And with the aging PC(USA)-member population, the board concluded that the current dues system is simply untenable.
“There are ways to reduce the $28.6 million deficit,” Hamm told the board. “We can reduce benefits, increase revenue, eliminate coverage for certain benefits, implement more narrow and tightly-priced networks, increase members cost-sharing for services and enforce compliance and accountability standards to improve member health and thereby reduce costs.”
But after several months of intense study of the issues, the board decided to take a different approach, said BOP Vice-President for Benefits Patricia Haines. She acknowledged that the proposal will modify “the historically understood community nature and call neutrality of the plan.”
The community nature of the current medical plan means that higher-paying employers effectively subsidize lower-paying employers through percentage dues. Call neutrality means that all plan members and family members must be covered by employers, no matter how large the family.
Haines noted, however, that the new dues structure might actually result in a cost saving for some churches. For instance, those with a single pastor or pastor whose spouse and/or dependents have other healthcare coverage, would see their dues go down from 21 percent in 2013 to 19 percent in 2014.
“This new dues structure provides choice and flexibility for employers and members,” said Hamm, but “there will be blood,” as some employers pass on all or part of the cost of optional spouse and dependent coverage to plan members.
Though the board’s Healthcare Committee was unanimous in its “Dues Plus” recommendation, “this was not a pleasant discussion,” Haines said. “The choices are tough. Those who potentially get hurt are members with dependents.”
PC(USA) demographics are far different now than when the current plan was constructed, Haines said. “Churches and plan members will have to figure out what is best for them. There’s an absolute potential for added financial burden to plan members.”
Healthcare plans in which employees make no contributions (beyond deductibles and co-pays) “are increasingly rare, said BOP President Rob Maggs. “We’re taking a step that many employers took in the 1970s.”
The board will host webinars on the new plan in January, said BOP Communications Executive Susan Reimann. They will be part of a comprehensive communications effort to inform employing organizations and plan members about the changes.
In other business, the board:
- Approved a 7 percent increase in monthly subscription dues for the Medical Continuation Program, effective in 2013.
- Approved a 1.5 percent increase in monthly subscription dues for the Medicare Supplement Program, also affective in 2013.
- Approved dues increases in the Optional Dental Program administered by Aetna of 9 percent for the PPO option and 5.5 percent for the DMO option.
- Learned that the return on the BOP’s Balanced Investment Portfolio for the nine months ended Sept. 30 was 11.4%. Longer term performance was 9.8% for the three years, 8.7% for the 10 years, and 8.2% for the 20 years ended Sept. 30, 2012. The portfolio’s value as of Sept. 30 stood at $7.4 billion.
- Approved a Christmas gift of $250 per individual or $500 per couple to all plan members who were receiving income and/or housing supplements from the board as of Nov. 1, 2012.
- Received a report that approximately 20 covered partners have enrolled for medical coverage under the new plan provision for domestic partners coverage. That coverage goes into effect Jan. 1, 2013.
- Announced that, beginning Jan. 1, 2013, no new contributions will be permitted to the Retirement Savings Plan by plan members in Puerto Rico. The change, made to comply with new Puerto Rican tax laws, affects fewer than 10 plan members.