wfn.org | Retiree medical coverage poses challenge for United Methodist

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Church

July 22, 1998        Contact: Tim Tanton*(615)742-5470*Nashville, Tenn.
10-71B{433}

NOTE:  This story is accompanied by a sidebar, UMNS #434.

EVANSTON, Ill. (UMNS) - Providing for retirees' future medical coverage
is the most pressing benefits issue facing the United Methodist Church
in the years ahead, according to a report to the denomination's pension
agency.

That was among the conclusions of a report made to the churchwide Board
of Pension and Health Benefits at its July 20-21 meeting. The study,
along with recommendations, was submitted by a board-appointed group
called the Benefits 2000 Task Force.

"Universally and without qualification, we believe the issue of future
retiree medical liability to be the single most worrisome benefit issue
facing the United Methodist Church in the 21st century," the task force
stated.

"Provided that retiree medical inflation rates adhere to projections,
and that the church takes no action to reduce its costs relative to the
benefit, annual conferences could experience annual premium costs in the
$1 million to $3 million ... range for retiree health coverage alone,"
according to the report. The costs will be long term, since the average
United Methodist clergy retiree lives for about 20 years after
retirement, the report noted.

The Benefits 2000 Task Force was appointed less than two years ago to
assess where the denomination stands with regard to the benefits it
provides. Through the pension board, the United Methodist Church covers
about 25,000 retirees or survivors and 40,000 active clergy, lay
employees and their families.

The 18-member task force was led by retired Bishop Clay F. Lee of
Jackson, Miss., and it also included Bishop Bruce P. Blake, chairman of
the board of pension and head of the Oklahoma Area. The task force's 29
recommendations covered every major area of the agency's work, including
pension, health, long-term care, death, disability and welfare benefits.

Now each of the board's committees is reviewing the report and will
respond to the recommendations at the directors' October meeting. The
board will be asked to adopt the report in January, and it will work
toward approving proposed legislation to the 2000 General Conference by
next July, Blake said.

The rise in retiree health care costs mirrors the trend seen in
corporate America, according to Barbara Boigegrain, top staff executive
of the pension board.
 
"Overall, from a national economic perspective, retiree health care
costs have been increasing," Boigegrain said. That area of care has
increased faster than trends in other medical costs, she noted.
"Prescription drug costs have been increasing very rapidly, and that is
a significant portion of retiree health costs."

Several years ago, to comply with new accounting standards, corporations
began projecting their liability for retiree medical benefits on their
balance sheets, she said.

"If conferences were to calculate their projected liability for the
retiree health care that they provide today, they would see very
significant liabilities," Boigegrain said. "Some conferences have taken
steps to limit those liabilities as far as not promising the benefits in
the future, but I think this issue bears a lot of consideration."

Another factor is that the government is moving to limit Medicare costs.
The Balanced Budget Act of 1997 outlined significant changes to how
Medicare will be provided in the future, Boigegrain said. Medicare
coverage will move more into a managed care setting, and part of the
government's strategy is to shift costs to private employers, churches
and other plan sponsors, as well as to retirees themselves, she said.

Given those factors, she said, "we see retiree health care starting to
represent some very large dollars to the denomination."

When corporate America started booking the liability of retiree medical
coverage, companies began terminating their retiree health care plans,
Boigegrain said. "We would not like to see the same thing happen" in the
United Methodist Church.

The task force believes that retiree health care should continue to be
provided, especially to itinerating clergy, she said.
 
In the report, the task force recommended that the board aggressively
try to quantify the total liability for the church's annual (regional)
conferences, in order to report on the situation to the 2000 General
Conference. 

The task force also recommended that the board bring together different
parts of the church during the 2001-2004 quadrennium to discuss how the
denomination can pool its resources to "provide some level of retiree
health care support over an extended period."

The board's health benefits committee, meeting on July 20, decided not
to wait until the next quadrennium, but to go ahead and work on
assembling a group that could look at the problem. In the next two to
three months, names of possible participants in such a group will be
gathered, with an eye toward convening them a year from now.

"Our thinking is that there is an awful lot of resources within the
United Methodist denomination and a lot of brilliant people, and that we
should find varieties of ways to bring those people into discussion,"
Boigegrain said. Those resources include United Methodist hospital
systems, nursing homes and other agencies, in addition to people in the
denomination who are renowned health care experts, she said.

Boigegrain emphasized that a massive, nationwide system administered by
the board of pension is not "on the radar screen." Health care is viewed
as a local issue that would be addressed better through coalitions and
groups. "The important thing is to get to the table and talk about it,"
she said.

The report also touched on the related issue of long-term care for
retirees. Some of the same factors affecting retiree benefits, such as
Medicare changes, are also at play with long-term care. The task force
recommended a number of measures, including assessing various long-term
care providers and providing information on them to beneficiaries, and
exploring the feasibility of the church offering a long-term care
product during the next quadrennium.

In other areas, the task force reported that the average participant "is
in need of significant benefits education and financial planning
assistance." The panel recommended providing or contracting with someone
else to make such assistance available.

The group also expressed concern about ministers opting out of the
Social Security program, and it said the board and the annual
conferences should discourage such waivers.

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