Like other stories with roots in religion, this one begins with a covenant: The denomination’s 2,000 congregations across the United States are obliged to purchase health care for their employees through the Pension Boards, the denomination’s benefits administrator, if the cost of insurance is within 15 percent of a competitor.
But if the board’s health insurance exceeds the cost of the covenant, the informal agreement can be broken in favor of using a local health insurance provider. When health premiums climbed by 25 percent one year in the late 1990s, the plan’s attrition floodgates opened.
By the end of the millennium, the Pension Boards had lost 1,100 households, dropping to 6,000. Its member pool had shrunk and its costs continued to climb.
"When people bail out, the cost goes up for everybody that is left," says Scott Patterson, senior minister at Dover Congregational United Church of Christ in Westlake, Ohio, a suburb of Cleveland. His church is part of the health plan because he thinks the church "has a commitment to the denomination."
As is the case for employers in the for-profit sphere, the rising cost of health care has made it increasingly difficult for churches and nonprofit organizations to offer health care benefits. In a 2004 survey of nonprofit organizations in the realm of services to children, the elderly, community development and the arts, the Johns Hopkins Center for Civil Society Studies found that they were shifting more of the cost of health care onto their employees, who already make less than private-sector workers. More than 60 percent of the organizations reported increasing their employees’ share of health costs. Still others eliminated raises or reduced other employee benefits in response to rising health benefits costs.
In the case of Patterson’s church, the health care covenant was honored, but only after some internal discussion.
"We don’t have very many churches that have spare money lying around," Patterson says. "Health care is a place where some of the business people feel we could cut costs. But that, I don’t think, would be of great benefit to the clergy. I think it would hurt us in the long run."
Though some churches have introduced co-pays for drugs and doctor visits, congregations pay health care premiums. That arrangement is sacred ground. Having clergy themselves pay premiums would cut into their already low salaries. Average clergy salaries at the United Church of Christ are about $46,000 for men and $41,000 for women, amounts that have not kept up with other nonprofit professions, says Michael Downs, president of the Pension Boards of the United Church of Christ based in Cleveland. (Catholic priests have no family to support and take a vow of poverty.) Stagnant salaries have also been coupled with a drop in the social standing of clergy.
"There was a time a generation or two ago that those who made a choice to become clergy were the cream of the crop," says Kenneth Ulmer, director of health plans for the Pension Boards. "They had respect and a high position. On the social side, that has deteriorated dramatically."
The result has been that new ministers come into the fold when they are older, many as midlife career changers. In the Episcopal Church in the United States, the average age at ordination is 44, says Matthew Price, director of research for the Church Pension Group. Thirty years ago, three out of every four Episcopal priests were under 35.
That group has aged and not been replaced. Now only one in four priests are under 35.
"As a result, we are only getting people who are in that part of their life when they are significant users of health care," Price says.
Different faiths, different needs
Unlike the private sector, where the young and healthy offset the costs of older workers who typically spend more on health care, a majority of church clergy and lay workers are older than 45. The average age at the United Church of Christ is 57, Downs says.
Catholic clergy and lay workers are even older, with an average age of 65, he says. In the Episcopal Church, the average age is in the low 50s, Price says.
These trends span church denominations and are a source of common consternation for members of the Church Benefits Association, a group representing more than 50 church denominations that was founded in 1915. At one time the members considered forming a common health plan design for the entire group in order to lower costs. That idea never got off the ground.
"Although we work very well together, the idea of getting a common plan design was not effective," says James Sanft, chairman of the association’s health benefits committee and an actuary for the Lutheran Church-Missouri Synod. "We all had different business models."
Congregations in the United Church of Christ pay a flat fee toward their benefits regardless of congregation size or how old its members are. Thus the covenant: The more people in the plan, the cheaper it is.
The Evangelical Lutheran Church of America, on the other hand, has six rate classes for health plans based on geographic differences in costs. A congregation’s contribution rate is a function of a pastor’s compensation, says Brad Joern, director for health products at the ELCA Board of Pensions.
Given the plan differences, the benefits association focused on drug expenditures. In 2001, the group formed a coalition to purchase prescription drugs from a pharmacy benefit manager.
Today, there are two coalitions: Eighteen denominations contract with Medco, and seven buy through Express Scripts.
"The more lives we bring into the coalition, the better our deal gets," Sanft says. By bringing a large volume of consumers together—168,000 households in the Medco coalition alone—administrative savings enjoyed by the PBMs get passed on to the church groups, as do rebates and discounts on wholesale prices. Using two PBMs keeps prices competitive.
During a 36-month period from 2001 to 2004, the Medco coalition saved $30 million on pharmaceutical spending, Sanft says. Modeled after the success of the drug coalitions, the association began to purchase medical insurance and mental health services collectively.
Savings from these programs have been modest, but there have been other benefits. Meeting with insurance companies and medical providers has helped those companies understand the special needs of clergy and church bodies, Sanft says.
"Professional church workers often feel they live in glass houses," Sanft says. "They’re always being watched. They are expected to have no issues, but they have normal pressures like anyone else. Everybody knows their business. It may be a big risk for them to step out because they are supposed to be the caregiver; it might be different for them to step out and say, ‘I need help.’ "
Purchasing coalitions also exist in the private sector, but the church health care coalitions differ in an important respect: Each denomination shares information about their demographics and plan designs that private-sector companies usually hide because competitive benefits packages are a powerful recruitment and retention tool.
Lutherans have lower per-person health care costs because their large network of parochial schools includes a younger population and more women, as opposed to the mostly male makeup of other church groups. Frank discussions about each member group’s costs help each understand why those costs vary among the denominations.
"We are so open about sharing information because at the core, we are about the same thing, which is the mission of the church," Sanft says.
Some miss out on savings
Not all churches have benefited from the coalitions. The Presbyterian Church in America, which has 5,000 church employees and is concentrated in the Southeast and Midwest, dropped its health plan in February because of escalating costs and low enrollment, says Chet Lilly, the denomination’s business manager. The church, with only 800 people enrolled when its health plan closed, could not make enough money in fees to support its administrative costs.
"The cost way exceeded what we could bring in with that particular plan," Lilly says.
For others, the savings from purchasing coalitions are not enough to offset the expense of maintaining old buildings and the cost of other forms of insurance.
At the Episcopal Diocese of New York, which includes 200 congregations in 10 counties, parishes are required to pay clergy a minimum salary—for someone with 15 years of ordained experience that equals $42,000 a year—plus housing and benefits. Though the benefits are managed by the Church Pension Group, the parishes are responsible for the cost.
"There are a number of parishes that used to afford a full-time clergyperson and now are looking for a part-time clergy," says Gerald Keucher, comptroller for the diocese. "It’s the continuing pressure on budgets, as so much of what churches have to buy increases so much faster than the general rate of inflation."
At one such parish 75 miles north of New York City, the minister accepted less than the minimum pay and received health insurance through his wife’s employer in order to serve the community he called home. Upon his retirement, the parish of about 60 congregants realized it could not afford a new priest. A call for a part-time priest was eventually answered by a doctor who was making a midcareer switch and was willing to work part time at a local hospital.
The church warden, who asked that neither he nor his church be identified for fear of upsetting other struggling congregations in the area, called the part-time clergyman a "gift from God."
"He’s ministering to the body and now he’s ministering to the soul," the warden says.
Still, the savings for members of the various coalitions have stemmed the upward spike in health care costs and funneled money back into the churches. The Episcopal Church has saved about $10 million since joining the pharmacy benefits coalition in 2001. Its plan has gained about 1,500 households, says Tim Vanover, the administrator of the Church Pension Group’s medical trust, which has 15,000 households totaling 22,000 people.
Downs, of the United Church of Christ, says cost growth for his plan is now below the national average. The plan’s attrition has subsided. Part of the savings, Downs says, has increased good will among denominations.
"The ecumenical church is coming together," Downs says. "We may have different points of view on a number of things that are theological, but we have come together to leverage the purchasing power of the church to get better health care outcomes."