Your ministry is vital work. In order to do it well, it takes a lot of time and energy to meet the demands of your role. One of the best ways to avoid that time away from your ministry is to stay on top of your health.
That’s one of the reasons why churches provide health insurance — even if they don’t have to. Healthy staff are an essential part of keeping the ministry running. Even with insurance benefits, sometimes large out-of-pocket expenses can stop people from getting the help they need. Luckily, there are ways to reimburse staff when they use their church health insurance.
The Affordable Care Act (ACA) was the catalyst for finding creative solutions. After the ACA was passed, most premiums went up. This was because the ACA now required benefit providers to broaden their coverage. This raised costs, which were then passed on to the members.
The ACA also created two paths to coverage. The first and more traditional path was for an employer to offer a group plan. The second was for individuals who purchase a plan on their own. This has made it a bit trickier to understand the financial implications for those who need to use their health insurance.
Both paths apply to situations commonly found with church health insurance. Let’s take a high-level look at them.
Understanding the HRA and HSA for church health insurance reimbursement
Higher insurance costs have led to an emphasis on making coverage more affordable. One of the strategies is to reserve a pool of money for individuals to use when they need it.
Over time, the Health Reimbursement Account (HRA) and Health Sharing Account (HSA) have become two important tools to help offset their health care and health insurance costs.
Both individuals and employers have to consider the affordability of insurance plans. Sometimes they select a plan with high fees, large copays, and extensive out-of-pocket costs. Usually, this brings down the plan price and can result in savings over more user-friendly plans — until someone has to use it.
By saving money in an HRA or HSA, there are funds available to cover the costs of accessing medical services. There are also tax benefits, as this money is put into the account as pre-tax income. It’s a great way to build in some savings on costs associated with commonly used services.
Both plans have a similar intent, but there are key differences in how they are administered.
The Health Savings Account (HSA)
An HSA is a savings account specifically for covering health care costs. It works a lot like a regular savings account at your bank.
Individuals contribute to the fund which grows over time. Spouses and other family members are covered by the plan and employers can also contribute if they wish. Many of these plans can even earn interest.
But there are rules for using an HSA. Some are:
- You won’t be able to use it to pay your premiums
- You can only use it for High Deductible Health Care Plans
- The money is yours, so unspent funds roll over year after year and follow you if you change jobs
- HSA contributions, fund growth, and withdrawals are tax free
- How you use an HSA can change when you turn 65
It is also important to note that there is a maximum amount that you can save each year.
The HSA is an option for church staff who have to purchase an individual plan or who work in a church with a group plan that qualifies as a High Deductible Health Care Plan. It’s not a reimbursement (unless the church decides to contribute) but it is a way to help offset a staff member’s health insurance costs.
The Health Reimbursement Account (HRA)
An HRA is an employer-funded savings account very similar to the HSA. The key difference is that the employer makes a defined contribution to this account. The employee can then draw from it to cover medical expenses.
These are not like a bank savings account. You can’t withdraw funds and then pay a bill. You have to pay first and get reimbursed after. Employees don’t have to report reimbursed expenses as income, but they also don’t own the funds. It’s up to the employer if unused funds roll over from year to year as well.
An employer (in our case, a church) may be a part of a group plan which means they are paying the premiums. But if they selected a plan with lower fees and higher out-of-pocket costs, they could set up an HRA for their staff members. It is a good way to achieve balance. The church pays less in premiums but then offers a bit of cushion to their staff so that they can afford to use the provided benefits.
Choosing the right church insurance plan
Finding the right insurance plan can feel overwhelming. Plans from different companies all seem to have different options, costs, and benefits. When a church employs less than 50 people, they aren’t required to provide health insurance — it's tempting to not bother with it at all or go with the cheapest plan you can find.
While that could be seen as being a responsible steward of church resources, it is not in the best interest of the people who make the church run. People get sick, have accidents, and need preventative treatment. Providing an affordable insurance plan for them allows them to spend more time on the work of the church.
Investigating the potential of an HSA or HRA plan within your church is one way to balance the needs of the church with the needs of its staff. Another way is to work with a benefits partner that offers comprehensive plans at affordable rates.
Reformed Benefits Association was created to provide insurance for 100% faith-based organizations. We understand the pressure you’re under to deliver a powerful ministry that changes lives while also looking after the administration of your church. Our mission is to make insurance easy for you and your church.
We offer multiple group insurance plans that provide excellent coverage. They differ in pricing to allow you to find the one that fits your church's health insurance needs and budget. Through an HRA, you will even be able to reimburse your staff for qualifying medical procedures.
Want to learn how easy insurance can be? Contact us with your questions and let’s have a conversation about your church’s health insurance.
The information contained in this blog is for educational purposes only. Please seek professional advice before acting on the information you have read above.