What ideas can a church consider to control its rising health care costs?
Many ministers and their employers are looking for alternative plans to control rising health care costs without neglecting those in need of medical services. Because of the Affordable Care Act (ACA) requirements, many churches have reconsidered the medical benefits it offers to employees. If the church employs a single employee—a solo minister, the ACA has one set of requirements. Generally, there is more flexibility when there is only one employee. But for churches with two or more employees who participate in medical benefits, the ACA has stringent requirements.
We suggest that you consult your tax professional when offering medical benefits. The benefits the church offers may very well be 100 percent taxable to the employee.
For example, be aware that if a church covers the monthly share costs of an employee for a health-sharing plan (e.g., Samaritan Ministries International, Medi-Share, or Christian Healthcare Ministries), the amount paid by the church is subject to income tax for all employees and to FICA tax for all non-minister employees. Many health care benefits also disqualify church employees from receiving premium tax credits on the healthcare.gov Exchange.
Churches are considering several alternative options. One in particular is an HDHP tied to an HSA. By offering a High Deductible Health Plan (HDHP), the employees of the ministry may also be eligible for a Health Savings Account (HSA). The HSA benefit funds a bank account that the employee can use for qualified medical expenses. Any unused balance at the end of the year carries forward into the next year.
There are many forms of Health Reimbursement Arrangements (HRA) that are beyond the scope of this blog post. They include: Individual Coverage HRAs (ICHRA), Excepted Benefits HRAs, Qualified Small Employers HRAs (QSEHRA), and Flexible Spending Accounts (FSAs). Unfortunately, FSAs are "use it or lose it" benefits which are lost if the funds are not spent by year end.