Protect your ministry with GuideStone s self-funded health plans Ministries are searching for ways to comply with health care reform and provide quality health coverage to their staff without breaking the bank. GuideStone s health plans are specifically designed for ministries just like yours. Our health plans are self-funded, based on Biblical values and comply with applicable Patient Protection and Affordable Care Act (PPACA) provisions. Like most employers, ministries are trying to brace for PPACA s impacts. There is some discussion in the insurance market of how self-funding is exempt from some of the regulations. It s important to consider that self-funded plans are subject to many of PPACA s provisions and must comply. There are also many other risks employers should evaluate when considering self-funding on their own. When a ministry participates in GuideStone s self-funded health plans, the employer can reap certain advantages of self-funding without taking on risks that are shouldered by GuideStone s plan. Specifically designed for ministry organizations, this report contrasts the dangers associated with employers contracting with an insurance company so they can self-fund health care claims on their own as compared to the benefits of employers choosing GuideStone s self-funded health plans. When a ministry participates in GuideStone s multiple employer, self-funded health care plan, the employer can reap certain advantages of self-funding without taking on risks that are shouldered by the plan as a whole.
Overview of self-funded health plans Self-funding means employers pay for employees claims when a health care expense occurs instead of prepaying premiums to an insurer. Typically, only very large employers (more than 500 employees) self-fund their own health plans because of the risk involved. This approach may make sense for very large employers because generally, more employees and especially more healthy employees help spread the risk and lessen the impact of extremely high claims. Ministries with fewer than 500 employees should carefully consider the risks involved, simply because most have so few employees. With self-funding, employers are responsible for setting aside reserves (readily available funds) to pay claims. This may require hiring an expert, like an actuary, to determine how much money to put in a health care fund. In addition, the employer may need to engage a third-party payer to administer the claims. The employer may also want to hire an investment adviser to manage the reserves on an ongoing basis. Even then, reserves may not be enough to cover all claims, so employers sometimes purchase stop-loss coverage to protect themselves from claims in excess of their reserves. Stop-loss coverage pays for some or all of a catastrophic claim one that exceeds a set threshold, usually $250,000. For smaller employers, self-funding a health plan on a stand-alone basis may not be the right choice for every ministry. What should my ministry consider about self-funding? As your advocate, GuideStone shares seven main areas ministries should carefully consider before self-funding on their own. Please keep in mind that GuideStone makes available self-funded, church health plans that are specifically designed for ministries just like yours. In fact, we are the largest denominational medical benefits board. When a ministry participates in GuideStone s multiple employer, self-funded health care plan, the employer can reap certain advantages of self-funding without taking on risks that are shouldered by the plan as a whole. Compare the differences of self-funding on your own with GuideStone s self-funded health plans. GuideStone s self-funded solution was designed to handle all seven duties for ministries so they can invest more time and money into ministry work. Plus, employers are able to comply with applicable PPACA provisions with an advocate on their side. 1. Designing the right benefits Employers with at least 50 full-time, including equivalent, employees are subject to the Employer Shared Responsibility provisions of PPACA, which will take effect January 1, 2014. Employers are responsible for offering coverage to full-time employees and their dependents or risk paying a penalty. Employers will need to comply with certain provisions of PPACA (including offering coverage that is affordable and of minimum value). If self-funding on their own, employers will also need to comply with HIPAA and applicable state laws. GuideStone is committed to offering affordable, quality health coverage that not only complies with applicable PPACA requirements, but also stays true to our Christian values. Some PPACA provisions do not apply to self-funded plans, like GuideStone health plans. That means GuideStone has more flexibility in benefit design and more control over rates, so we 2
are able to provide affordable, quality coverage to ministries. With GuideStone, employers can organize employees by class (e.g. ministerial and non-ministerial). Because of our unique benefit arrangement, employers have the freedom to offer health plans to select classes. This affords employers flexibility when designing cost-effective employee benefits packages. Plus, our plans are portable. That means if an employee with GuideStone health coverage changes employment to another eligible ministry employer, that employee can keep his or her plan and transfer it between ministries. In addition, an employee can continue coverage during a gap in employment. Plus, GuideStone s plans are family friendly. They are priced in such a way that regardless of the number of children a family has, employees do not pay additional costs for every child. 2. Maintaining reserves Employers that self-fund their employees claims must have funds available and accessible to pay claims. Many employers keep two months of reserves on hand to cover regular medical bills, and seven months of reserves available for catastrophic claims. This may be a challenge for ministries operating on a donation basis. The reserves need to be set and maintained at a level appropriate to handle all employee claims, which may require an expert. Too few reserves may be detrimental to your plan because your ministry cannot pay for all of the claims incurred; too much money may mean those dollars could have been allocated to ministry work. Setting reserves may require analysis of past health care expenses, future projections, fixed costs from third-party administrators and more. A small employer without an expert in self-funded reserves may have a difficult time successfully operating a self-funded plan. GuideStone pays your employees claims. We assume the risk for your ministry. As a self-funded, multiple employer, church health plan, GuideStone s plan reserves are monitored by actuarial, investment and plan professionals. With GuideStone, your ministry does not have to maintain its own reserves to pay claims because the plan pays your employees claims. 3. Paying claims Self-funded employers may choose to administer paying their employees health care claims. That means someone on staff at your ministry has to keep up with making payments and tracking expenses for every covered employee. This may require an expert skilled in complying with HIPAA employee privacy and taxable benefit rules. Recordkeeping information may be useful to determine reserves for coming years. Your ministry would also be responsible for paying run-out claims when an employee s employment or the health plan is terminated. That means all claims incurred while the plan was in place or the employee had coverage, but received after the termination date, must be paid by your ministry. By self-funding, employers assume responsibility and liability for claims. That means your ministry may be at risk for legal action taken in connection with claim denials. With GuideStone, it is the plan as a whole that pays your employees claims, which can help save your ministry money. The plan sets rates for each employer based on their demographics and actual or expected claims. This is what sets Guide- Stone s self-funded, church health plans apart from self-funded employer plans. Because there is no commission or profit motive, excess funds resulting 3
5. Administering the plan Employers self-funding on their own will also have to administer and operate the plan. This means your ministry will need to handle administrative duties like structuring the plan, preparing plan documents, determining premium equivalents, insuring proper medical management, processing and handling claims, sending required employee communications, negotiating contracts, complying with health care reform and other government regulations, and more. Employers can elect to contract with a third-party administrator to handle administering the plan on their behalf by paying Administrative Services Only (ASO) fees. Employers must follow legal guidelines set by government agencies, such as the U.S. Department of Labor, U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services. Employers will be held responsible for paying applicable PPACA fees and taxes. With GuideStone, employers do not have to deal with many of the administrative matters related to the health plan. For example, GuideStone provides a single billing source for all medical and other health care-related products. We manage vendor performance, advocate for your ministry s employees and act as a liaison on your ministry s behalf. GuideStone negotiates contracts with third-party administrators, determines premium equivalents for employee contributions and participants on continuation, maintains appropriate reserves, complies with health care reform requirements and so much more. 6. Reporting and auditing Employers who self-fund on their own are responsible for reporting important information to the IRS. For each plan year, employers are required to submit Schedule A 5500 to provide the government with how much was paid in premium and in broker comfrom various cost-containment efforts can be returned to our customers in the form of lower rates. 4. Protecting against high claims Employers self-funding on their own should consider purchasing stop-loss coverage from an insurer to protect against catastrophic claims. According to market data, employers anticipate that 1.45% of employees will have a claim over $100,000. Not only are these claims extremely expensive, but also these claims could possibly wreck the entire fund for all employees. Stop-loss coverage pays some or all of claims exceeding a threshold. This coverage may help reduce your ministry s exposure to risk by protecting the reserves, but purchasing this coverage requires extensive research. If a participant experiences a catastrophic claim and stop-loss pays toward that participant s claim, the stop-loss provider may choose to remove that participant from your ministry s policy the following year. Should this occur, your ministry would be at risk for paying that participant s ongoing claims without stop-loss protection. The U.S. Department of Labor requires self-funded health plans to be properly administered and legally operated. With GuideStone, since the plan as a whole pays claims, your ministry does not need to purchase stop-loss coverage for that purpose. The plan provides your ministry with protection against large, catastrophic claims. When calculating rates, claims over $100,000 are pooled with the claims of other similar-sized groups like yours, instead of being charged to your ministry. In effect, this arrangement is, in some ways, similar to $100,000 stop-loss coverage. We have never terminated a participant because of high or frequent claims. 4
mission each year. Also, employers self-funding on their own must follow state law reserve requirements and report accordingly. GuideStone s church health plans are exempt from filing Schedule A 5500, so your ministry would not have to handle this reporting task. We are a non-profit ministry organization and our insurance experts have no commission incentive. Plus, our total reserves and surplus levels are maintained at or above industry standards. The reserves are calculated each month by a certified actuary, and reviewed by another certified actuary. GuideStone s medical program has proven to be financially sound throughout its almost 50 years of existence. 7. Contracting with third-party administrators Typically, employers contract third-party administrators to handle administration and gain access to networks. This means employers must pay ASO fees. Generally, broader networks with greater provider discounts cost more in ASO fees, and narrow networks with limited provider discounts cost less in ASO fees. It s important to have a network behind your ministry s health plan. Without contracted discounts with doctors, hospitals, pharmacies and other health care providers, your ministry s health plan may essentially pay full price for these services. That means employees claims experience will be challenging for your ministry s reserves, and stop-loss coverage becomes more expensive. GuideStone is a founding member of the Church Benefits Association, which has hundreds of thousands of participants. That translates into purchasing power for competitive rates (lower ASO fees) with industry-leading third-party administrators and their broad networks, as well as access to medical and prescription drug discounts. We can use this size and scale to contract nationwide networks with bestin-class health care providers at major discounts. Discounts are important to drive down claims costs, which is a major source of cost to most health plans. It helps your ministry and your employees save money. We hope your ministry understands the risks associated with self-funding on your own: designing the right benefits, maintaining reserves, paying claims, protecting against high claims, administering the plan, contracting with third-party administrators and complying with applicable laws. GuideStone s self-funded solution was designed to handle all of these duties for ministries so they can invest more time and money into ministry work. Plus, employers are able to comply with applicable PPACA provisions with an advocate on their side. Our commitment is to provide health plans that bring value for your organization, while not sacrificing the values of your organization. GuideStone Financial Resources of the Southern Baptist Convention welcomes the opportunity to share this general information. However, this information is not intended to be relied upon as legal advice. This information may be subject to interpretation or clarification over time, so we cannot guarantee its long-term accuracy or how it might be determined to apply in certain situations. However, we hope it will provide you a useful frame of reference as you endeavor to carry out your responsibilities and serve your employees. Get Health Care Reform Updates at: www.guidestone.org/healthreform 2013 GuideStone Financial Resources 22438 06/13 5