11 Church Plant Health Insurance Options (yes, eleven!)

Patrick Bradley — Mon, 15 Oct 2018 09:00:48 +0000

by Patrick Bradley: Turns out there are lots of church plant health insurance options. It’s still a little complicated, but you have more options than ever to choose from. Here’s an overview as a springboard to your research.

If you’re a new church hiring staff or an established church that’s never offered health insurance before, you have two basic paths to choose from: offer nothing (but pay employees well enough that they can get an individual plan), or offer an employer plan to church employees.

Individual Plan Options (Church Offers No Plan)

Small businesses with fewer that 50 employees are not required to offer health insurance. So in lieu of a group plan, the church could increase employees’ pay up front to offset the burden. You just don’t get to stipulate that it must be spent on health insurance. And it is taxable income to them.

In all of these scenarios, church employees would have to arrange for their own insurance.

Employees’ options include:

1. Get Insurance through an Obamacare Exchange

Start at healthcare.gov It will help you find your state’s exchange or direct you to the federal exchange if your state doesn’t have one. You’ll have lots of options to choose from. Bonus: ministerial housing allowance does not count as income for Obamacare, so you’re more likely to get a government subsidy to help pay your premiums.

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Churches Can Reimburse Health Insurance Premiums Again – But is It Worth It?

Patrick Bradley — Mon, 19 Feb 2018 17:31:00 +0000

by Patrick Bradley: Some churches used to reimburse health insurance premiums as a benefit to their employees. The passage of the Affordable Care Act initially made that illegal – they wanted all employers to offer group health insurance to their employees. But now the 21st Century Cures Act has made it possible for churches to reimburse health insurance premiums again.

This fix was around in 2017, but it flew under my radar. This stuff just won’t stop changing! Here’s what I’m learning:

The Old Way to Reimburse

Before the ACA, group health insurance plans were stupid-expensive if your church only had a handful of employees. And rates were based on things like the age of your oldest employee and whether any of the employees or their dependents had preexisting health conditions. That made it impractical for many smaller churches to offer group insurance.

Some churches had figured out that they could reimburse their employees for health insurance premiums. It didn’t count as income to the employee (at least not taxable income), so it was kind of like the employee had to get their own individual policy but the church “paid” for it.

Starting in 2015, the penalty for continuing an arrangement like this was $100/day/employee. Many churches stopped offering any kind of plan or reimbursement and the employees were forced to go to their ACA insurance exchange.

The New Way (QSEHRA)

Now churches, within certain limits, can return to a kind of reimbursement arrangement.

Church Eligibility

For this to work, your church has to:

Have fewer than 50 employees
NOT offer a health insurance option

Employee Eligibility

If you reimburse health insurance premiums through QSEHRA, you must cover employees except:

employees younger than 25
part-time or seasonal workers (though can opt to cover them)
employees in their first 90 days on the job
…and a few other categories that would be unusual at a church

So basically you have to offer the same benefit to all full-time employees. You can’t discriminate between clergy and non-clergy. But “same benefit” can be a percentage such that each employee doesn’t necessarily get the same dollar amount[2].

Rules

Some other rules for a QSEHRA:

2018 Reimbursements can’t exceed $10,250/yr for family coverage ($854.17/mo) or $5,050/yr for employee-only ($420.83/mo)
Employees have to maintain and prove that they have Minimum Essential Coverage – and those popular health care cost sharing ministries don’t count
Employees have to turn in receipts (which means churches have to review & pay them)
Your church will have to adopt a formal QSEHRA plan document
…and probably a few other rules, too

Drawbacks

Converting to a QSEHRA

If your church has been around long enough to have done things the Old Way, you may fixed it by just increasing everyone’s salary by the amount you’d been reimbursing them. But under this new arrangement, your church can’t go back. MinistryWorks tells us, “Your ministry cannot ‘carve out’ a portion of workers’ wages to fund the benefit. The benefit must be paid in addition to regular wages.”[2] So now you’d have to increase everyone’s salary again.

Compliance

A huge drawback is that creating a QSEHRA program also creates a HUGE bureaucratic burden. You’ll have to:

Give every employee proper written notice (and document it)
Get receipts for expenses and proof of coverage from employees
Report the reimbursement amount on their W2s
Comply with HIPAA privacy and data security requirements
Figure out if it creates any ERISA obligations

Reduced Subsidies

Another drawback I see is if the employee has been getting a tax subsidy that pays for part of his/her health insurance premium through the ACA exchange: their subsidy will be reduced by the amount of the QSEHRA they receive, even down to $0[3]. So basically the cost is transferred from the government (taxpayers, really) to the church. Why would your church sign up to pay what’s already being paid by the government? Just calling it like I see it.

Add to that, nobody is writing about whether employees have to count the QSEHRA reimbursements as qualifying income they’d have to report to their ACA exchange. I’m not sure anyone really knows the answer to that yet. But worst case would be ‘yes’, which would double-ding the employee.