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Terminating a group health Church Plan


Guest pedmund

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Guest pedmund

We currently have a self-funded Church Plan that we are contemplating terminating due to lack of sufficient participation (550 employees with only 150 currently enrolled). Lack of participation is mostly due to premium cost (most of the employees are service workers). We are exploring other avenues of medical coverage such as a classing out employees, implementing a carve out plan for management employees and a mini-med plan for the service employees.

Are there any legal ramifications that should be taken into consideration before making a decision to terminate the self-funded plan?

Are there any special notices that will need to be communicated to employees currently enrolled in the plan should the decision be made to terminate?

This plan IS NOT subject to COBRA.

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Guest Danny Miller

In the case of a church plan not subject to ERISA, the main consideration is whether the plan sponsor has preserved its right to terminate the plan in the plan document, and hasn't done anything "outside the document" to indicate that it would not terminate the plan.

No notice of termination would need to be given, unless the plan called for notice to participants.

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It is good that you are considereing alternatives in order to boost enrollment.

Are the premiums the same for each employee, regardless of age?

If so, have you considered premiums based on a percentage of salary?

Those paying x premiums get y benefits; those paying 5x premiums get 5y in benefits.

Don Levit

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  • 3 weeks later...
Guest gdburns

Don

I have been trying hard to figure out how your plan design could be accomplished. Can you expand?

I assume that this is a fully insured plan since such variations would probably not be allowed by the software etc used by Claims Administrators and employer payroll systems.

Since the amount of benefits (coverage) is set by the insurance company How do you change it at the employer level?

Since the coverage is through a regulated insurance policy which has predetermined coverage with a predetermined related premium, How can you have "x premiums get y benefits; those paying 5x premiums get 5y in benefits", Unless a specially filed product which was built on units of coverage is used?

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gdburns:

This particular church plan is self insured.

The plan sponsor is able to determine the benefits and price accordingly.

He would still be subject to not discriminating due to health status.

So, for example, assume the plan is set up with a $5,000 deductible, with $50,000 of benefits per year.

The premium turns out to be "x" for each employee, with the employer paying half.

If one employee pays nothing, he ends up with half the benefits (or, its actuarial equivalent).

Don Levit

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Guest gdburns

You are right. For some reason I did not notice that the OP did say that this was a self funded plan.

But, I still cannot see your initial plan design as being workable. While it is true that the employer can concoct about anything they wish, that does not mean that it can be administered by the Claims Administrator or even deducted by the Payroll system.

By the way, your second design is not even close to your first.

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gdburns:

That is an excellent idea you brought up, about units of coverage.

This is the type of plan I am envisioning, where, for example, each unit represents x amounts of dollar benefits. These dollars can be used for all covered benefits above the deductible.

We have currently, with group plans unable to base premiums on health status, a community-rated premium.

This premium would be similar to buying various "units" of coverage.

Don Levit

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Guest gdburns

The problem is mainly with the current Claims and Payroll software. Not so much the actual software but the ability of the users to use it for something new. There is no problem with the concept from an underwriting or regulatory stand.

Such a concept would , IMHO, be of great help to employers and employees to control costs. I also think that it would provide a base for controlling utilization. But like many ideas, it might never get off the ground simply because it is new and might be percieved as shaking the status quo.

Happy Thanksgiving!

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