We are nearing the end of open enrollment on the Obamacare healthcare exchanges. If you are not satisfied with your current health insurance (or lack thereof), now is the time to address it. Health insurance is a big topic among pastors because many churches do not have the resources to provide insurance the way large for-profit employers do.
What is a pastor to do? Here are your options, depending on whether or not your church is willing and able to help you out in this area.
Many churches struggle to pay their pastors a salary and only dream of being able to help with healthcare costs. If you’re serving one of those churches, you still have some options. While in the US healthcare is often tied to employment, it doesn’t have to be.
The most basic option available to you is to just pay cash for your healthcare needs, the way you do for your groceries or haircuts. Healthcare costs a lot more than groceries and haircuts, though, so this is not a popular option. Also, some medical providers only work with insurance companies so your options may be limited if you self-pay. The Affordable Care Act, or Obamacare, imposed a penalty tax on people who just pay cash and don’t have insurance, but after 2018 that will be gone.
A non-insurance option that exempts you from the Obamacare penalty is participating in a health sharing ministry. In a health sharing ministry, a group of people (usually Christians) help pay each other’s medical expenses.
With some, you pay a monthly fee to the organization and then they help cover your medical costs. With others, you send your money directly to the other members who have medical needs at the time. This follows more of an Acts 2 model where everyone helps to take care of each other. You can read more about the top medical sharing ministries and how they work here.
Another option is to buy your own individual health insurance. You can do this directly with a health insurance company or through the healthcare exchanges, or marketplaces, established by the Affordable Care Act.
If you purchase insurance through the marketplace, then you may also be eligible for premium tax credits to help offset the cost of your insurance premiums. Eligibility is based on income and family size. One nice thing for pastors is that the housing allowance does not count as income for the premium tax credit calculations.
If your income is low enough, you may be eligible for Medicaid, which is the government program that provides health insurance for low-income people. There is also CHIP, or the Children’s Health Insurance Program. It is another government program that does the same for children. As with the premium tax credits, your housing allowance is not included in income when calculating eligibility (unless eligibility is based on blindness, disability, or being over age 65).
The final way to get healthcare coverage on your own is to get it through your spouse’s employer. If your spouse works and has access to group health insurance, then that may very well be your best option.
When your church is willing and able to help with your health insurance needs, then you have more options.
Some churches choose to simply give their pastor some extra money to go towards healthcare costs. All that the church provides is money, the pastor has to choose one of the above options and implement it.
This arrangement is nice in that the church is helping out and the pastor has complete freedom to make decisions. However, from a tax perspective, it is not very efficient. Because the payments made to the pastor are not a part of an IRS qualified plan, they are considered income and taxed accordingly. A $1,000 stipend can quickly dwindle down to $600 after federal and state income taxes and SECA (Social Security taxes).
There are ways for a church to reimburse a pastor for healthcare expenses without having it count as taxable income. Health reimbursement arrangements (HRAs), also called health reimbursement accounts or personal care accounts, are set up according to IRS rules to do just that. Most churches would offer a solo employee HRA (for only covering 1 employee) or a qualified small employer health reimbursement arrangement (QSEHRA), which is designed for organizations with fewer than 50 employees.
This is how they work:
For QSEHRAs, the church must offer the same reimbursement to all eligible employees. The one exception is differentiating between single coverage and those with families. For 2019, the annual limit for single employees is $5,150 and for employees covering their families is $10,450. As long as the plan is offered fairly among employees and the expenses are qualified under IRS rules, then the reimbursement money is tax-free.
One thing to keep in mind, though, is that qualified reimbursements offset premium tax credits if you purchase insurance through the exchange. Your tax credit will be lowered based on your church’s reimbursement. Thus, you could end up in a situation where the church is simply paying instead of the government and the pastor receives no added benefit.
Churches or denominations with the available resources can offer group health insurance just like many companies do. Group health coverage usually has lower premiums than individual insurance policies. This is because there is more room for negotiating and the risk is spread among more people.
Even if your denomination does not offer group insurance or your church cannot afford it on their own, you may be able to join with another group to reap the benefits of group insurance. Some churches are eligible to participate in group insurance through Christian organizations like Guidestone. Others have been able to obtain group coverage through organizations like their local chamber of commerce.
Another church-sponsored option is an Obamacare Small Business Health Options Program (SHOP). This works much like the individual insurance marketplace set up by Obamacare but is for small businesses (and churches). There are some participation requirements that churches must meet to participate and they would have to help cover the costs of the insurance as well.
Just as there is a small business option on the Obamacare exchange, there are also options for churches among medical cost-sharing ministries. Two that offer them are Sedera and Aliera Healthcare.
Those are your options if you’re a pastor looking for health insurance. Remember, starting in 2019 there is no individual mandate, or penalty tax for not having insurance. It’s still a good idea to be covered, though. Hopefully, one of the options above is a good fit for you and your family.
