Dioceses Trying to Cope with Health Insurance Headaches
Episcopal News Service. July 30, 1992 [92168]
David Skidmore
Most headaches go away with time, but not the nation's health-care migraine. The skyrocketing cost of health care -- projected to hit $817 billion this year -- is forcing insurance companies to jack up premiums and employers to pass more of the cost on to employees or trim benefits.
This crisis is no stranger to the Episcopal Church either. In urban dioceses where medical costs run high, the annual premium for an insured and his or her family can approach $10,000. The problem has also struck the rural dioceses. In Montana, premiums surged 24 percent this year, and in West Virginia, they shot up 32 percent. Battered by double-digit rate increases, many dioceses are responding by upping deductibles, placing tighter strictures on treatment -- particularly elective surgery and mental health care, requesting the insured to share premium costs, and, in several cases, opting out of the church's health plan.
The Diocese of Los Angeles is among those bailing out. Faced with a 32-percent jump in its premiums, Los Angeles this January pulled out of the Church Insurance Company's plan -- the Episcopal Church Clergy and Employees' Benefit Trust -- replacing it with a comparable Blue Cross and Blue Shield plan that boosted premiums half as much.
"Our experience there [with the church's plan] was very poor," said Peter Mann, administrator for the diocese. With the church plan, the diocese was swamped with claims, he said. "There were no controls."
Breaking with Benefit Trust was difficult, said Mann, since the diocese had been with the program since its inception in 1979. But with claims outpacing premiums -- a 42-percent increase over premiums last year -- a change was needed. "We made it reluctantly, but we had to do it."
Not all dioceses are feeling the sting of higher premiums. Rates for the Diocese of New York, insured through the Benefit Trust, remained unchanged from 1991, as did those for the Diocese of Maryland enrolled with Blue Cross and Blue Shield.
Some rates did soar, said Michael Shenk, senior administrator for the Benefit Trust, but not nearly as much as was rumored. "If you look at the group as a whole, a good third had no increase at all. This idea that everybody is going up 20 to 30 percent is not true."
Even for those that did sustain drastic hikes, such as the Diocese of the Central Gulf Coast, the reaction is often as much relief as exasperation. Last year Central Gulf Coast generated nearly $90,000 more in claims than it paid in premiums, prompting the Benefit Trust to bump this year's premiums by 32 percent -- the maximum allowed under the trust's plan. Yet Vince Currie, the diocese's administrative officer, isn't complaining.
"We were glad to get it, frankly," Currie said. "The company probably lost about $150,000 on us. Our premiums should have gone up about 85 percent."
The diocese looked at Blue Cross and Blue Shield, said Currie, but its coverage "wasn't even close" to what they had with the church's plan. In fact, he said, the diocese couldn't even find a company willing to give it a quote.
Like other dioceses, Central Gulf Coast is searching for ways to contain costs. But options are limited. Five years ago the diocese approved a premium participation plan calling for the insured to pay 15 percent of their annual premiums. Churches went along with it for three months but then caved in to pressure from clergy who felt it went against the spirit of their job agreements. Now, only diocesan staff are levied the 15 percent.
The common denominator behind the premium hikes, said Shenk, is an increase in claims, up 17 percent last year. But that rate isn't out of line with the rest of the industry, he noted. In 1991, health claims nationwide rose 12.1 percent, and in 1990, they jumped 21.6 percent.
Over the long term, said Shenk, the church's plan has actually done better at controlling claims than the industry as a whole. Liberty Life Insurance Company, the claims administrator for the Benefit Trust, reported that claims under the health plan increased by 65 percent to 70 percent between 1983 and 1991, whereas claims for the rest of the industry during that time went up by 250 percent, he noted.
A big factor in the increases, said Shenk, is an aging clergy population. Most seminary graduates were in their 20s in the 1950s and 60s. But today a sizable share are in their 40s and 50s. The result is not only more claims, but costlier claims. "Having five major heart problems in a particular diocese can wreak havoc with their claims," Shenk said.
As to neglecting cost controls, Shenk said that the trust has taken a number of steps, among them emphasis on second opinions, stricter guidelines for lab tests, and increased use of third parties for care management. For example, all substance abuse and mental health treatment is managed by Preferred Health Care, a private, Connecticut-based firm. The trust has also contracted with two other firms to precertify inpatient hospitalization and provide mail-order prescriptions.
Sky-high costs and claims are also threatening to become a deciding factor in parishes' employment decisions. With premiums typically two to three times higher for family coverage than for single coverage, vestries may be tempted to disregard clergy with spouses and children. "Frankly, it's more economical to have a celibate priest, or a priest who doesn't have children to insure, than it does to have a priest with children," said Idaho's Bishop John Thornton.
Over two thirds of Idaho's 33 churches average just 75 members, and for these congregations, Thornton said, single or spouse-only clergy stand out on the balance sheet over clergy with family.
Although Connecticut's bishop would likely block a clergy call based on family status, said Jack Spaeth, diocesan director of administration and finance, a priest's family ties remain a concern for vestries. "Subconsciously do parishes think about that?" Spaeth asked. "I suppose they do."
That's the predicament facing St. Andrew's parish in Destin, Florida. This year the Central Gulf Coast congregation will be paying $12,000 in premiums for its two clergy. Next year that will be compounded when their six lay employees are added to the pension and health plans. "We are staring at having to come to grips with some very serious financial realities," said the Rev. Mike Hesse, rector for the 700-member congregation.
The parish is coping with the added pension cost but hasn't yet found a fix for the additional health coverage. "Right now it's still in the abstract. Reality has not struck yet," said Hesse.
Smaller congregations, Hesse said, are the most at risk. "Vestries might opt to replace full-time employees with part-timers in order to come under the 1,000-hour standard imposed by the equalization resolution, or perhaps lay off their parish secretaries, leaving their rectors to shoulder all the administration.
The solution is not apt to be one of financial wizardry, said Hesse. "What I finally have to believe is that God is in charge and he will take care of us."