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(OPINION) Churches, temples and other religious organizations often employ experienced, highly skilled people — talented employees who could otherwise find work in the private sector but are called to service by their faith and belief in their community’s mission and values. 

These employees will often compromise on salary to do meaningful work, but they do expect adequate benefits and health care. For church leaders — often under pressure to keep a close eye on expenses — finding and paying for health care can be the most stressful part of the job. 

The rising cost of group health insurance puts religious organizations between a rock and a hard place: unable to provide the coverage their employees need without paying a price they can’t afford. Every year, church leaders face the uncertainty of renewing their group health insurance plan. Some churches or temples see renewal rate increases as high as 20%, leaving the organization with no choice but to pass on the costs to their employees. 

As the renewal uncertainty comes to a boiling point, some religious leaders are taking a new approach: letting go of their group health plans in favor of giving their employees choices in the individual market.

Using health reimbursement arrangements (known as HRAs) — which allow employers to reimburse employees for plans purchased through the individual marketplace — these churches have been able to provide employees with quality health care without taking on the enormous expense of group coverage. 

Why health care costs keep church leaders up at night

Religious organizations face a set of common challenges. No matter the creed, organizations must recruit, train and retain talented employees, while also navigating legal, regulatory and compliance issues unique to the space. Budgets are always tight and dependent on donations. 

Offering health insurance is key to retaining and recruiting top talent — especially the highly skilled employees that religious organizations need. However, group health plans are a poor fit for religious organizations. The plans are too expensive, struggle to accommodate part-time employees, and have rigid participation requirements. 

Church employees and pastors don’t have the time to manage group plans — which involves navigating renewals, changes in coverage, and administrative tasks — nor can they afford the uncertainty of renewal costs that increase every year. If a single employee or one of their dependents gets sick or has an accident, the overall group rate skyrockets as a result. 

Benefits of HRAs

Fortunately, group health plans aren’t the only option. HRAs allow organizations to escape the cycle of expensive plan renewals. In some cases, this model allows churches to offer employees health insurance for the first time. Employers simply set an allowance for health care, and employees choose the plan that best fits their needs. 

For churches, HRAs mean savings and cost control. Employees who choose an HRA join the country’s largest risk pool — the 20 million Americans who purchase insurance on the individual market. As a result, there is no risk of unexpected price increases due to an expensive diagnosis, nor do leaders have to worry about participation requirements, because the plan stays in place regardless of who enrolls.

For employees, HRAs mean quality coverage. The individual marketplace offers ACA-compliant, HSA-compatible plans across multiple carriers and tiers. Employees choose the level of coverage that meets their needs and determine how much they want to pay for health benefits, instead of having to pay for more or less coverage based on the health status or health choices of their co-workers. 

There are two types of HRAs for businesses: a qualified small employer HRA (QSEHRA) for churches with less than 50 employees and the individual coverage HRA (ICHRA) for churches of any size. Reimbursing a pastor for an individual health plan is a tax-free and flexible way for small churches to offer benefits; HRAs help keep pastors in place. 

On the other hand, the Affordable Care Act requires large churches to offer affordable health insurance with minimum essential coverage to their full-time employees and dependents, or they may incur penalties. By shifting from group coverage to individual plans, churches large and small can take control of budgets and return their focus to the organization's actual mission.

Saving on costs and upgrading care

In Rockwall, Texas, Redeemer Church knew it needed to take care of the diverse team of pastors that in turn shepherds the church. 

Balancing the needs of full-time and part-time employees, as well as both clergy and nonclergy employees, the church initially offered a traditional group health plan that proved expensive and rigid, with a one-size-fits-all approach to benefits. Prices went up year over year, and the administrative burden continued to pile up. To combat the rising prices, Redeemer Church Rockwall opted to stop offering group health insurance and instead give salary increases to cover the costs of medical sharing plans. But employees were subject to income tax based on those increased salaries, and the church was paying employer and payroll tax on the funds.

Julie Meyer, the church’s director of operations, discovered QSEHRA and soon made the transition. The new model decreased the tax liability for nonclergy full-time staff and allowed their benefits dollars to stretch further. One employee not only saved the taxes he would have paid on the increased salary but also found that a $750 medical device for his wife is covered alongside his sharing ministry and MEC plan.

The Reform Jewish Congregation in Harrisburg, Pennsylvania, faced a similar challenge. The 250-family congregation has deep ties to the region and plays a pivotal role in various social justice initiatives but found itself grappling with a dilemma all too familiar to small organizations: the escalating costs and complexities of health care benefits. 

The congregation’s small group health plan, catering to just one employee, wasn’t just expensive — it was draining. Priced at $2,300 per month with a $2,000 deductible, the group plan swallowed nearly 30% of the personnel budget. Reform Jewish Congregation was weighing whether to compromise on the quality of benefits or forgo them altogether when they found HRAs. 

Onboarding to the new HRA system took the rabbi and the congregation president just over an  hour, and managing the plan — and ensuring the rabbi received his tax-free payment for health care — requires mere minutes each month. By switching to an HRA, the congregation cut costs by 35% and provided the rabbi a plan with no deductible that now included dental and vision coverage as well. The transition didn’t just save money but also upgraded care for the congregation’s leader. 

Religious organizations of all sizes are using HRAs to boost recruitment and keep their mission-critical employees happy and healthy. Religious organizations are always quick to support the families they serve, but need to support their own employees as well. HRAs help churches extend their mission further, helping the people who help people. 

Jack Hooper is the CEO and co-founder of Take Command.