Balancing risk, rising costs, and member care in a fragmented system

The U.S. healthcare system is a complex mix of public and private arrangements, shaped by decades of policy decisions and market forces. At its core, it is largely an employer‑based system, with most Americans (53.7%*) receiving health coverage through their workplace. For those who do not have access to employer-sponsored coverage, the individual marketplace offers another way to obtain coverage, though sometimes with higher costs and more variability. In addition to these private options, public programs — most notably Medicaid and Medicare — provide coverage for low-income individuals, older adults, and people with certain disabilities. Together, these components form a patchwork system that can be difficult for individuals to navigate.

Across this system, healthcare providers are generally reimbursed based on the type and number of services they deliver, rather than on the outcomes they achieve. This fee‑for‑service structure incentivizes volume over coordination and can lead to a fragmented experience for patients. Individuals may find themselves interacting with multiple providers, each operating within their own system and workflow, often with limited communication among them. As a result, care can feel disjointed, repetitive, and inefficient.

A church plan

The Medical Plan operates within this broader landscape as an employer‑based plan. More specifically, it is a self‑funded church plan. Under Section 414(e) of the Internal Revenue Code, a church plan is defined as an employee benefits plan established by a denomination or organization whose primary purpose is to maintain and administer retirement, medical, and other benefits plans for ministers, church employees, and employees of affiliated organizations that are controlled by or associated with the denomination or organization.

As a church plan, we are part of the Church Benefits Association (CBA), which is made up of over 50 denominational benefits plans. Because many denominations also offer healthcare coverage, we have created purchasing coalitions, where possible, enabling us to negotiate more advantageous pricing for different types of benefits, such as medical and prescription drugs.

A pay-as-you-go plan

As a self‑funded plan, the Board bears the full financial risk for healthcare claims and related administrative costs. Highmark Blue Cross Blue Shield administers medical claims and Express Scripts administers pharmacy claims, but the payments themselves come entirely from Board funds — funds generated through employer dues. And unlike the Defined Benefit Pension Plan, which is asset‑based, the Medical Plan operates on a pay‑as‑you‑go basis, meaning that dues collected in any given year must be sufficient to cover that year’s claims and administrative expenses.

When annual dues are not enough to meet these obligations, the Board draws on reserves. These reserves have been intentionally built over time to help manage the inherent volatility of healthcare costs. Reserves provide a buffer against unexpected spikes in claims and help ensure the stability and continuity of the plan for the members and organizations it serves, but they are not designed to support losses for extended periods, which makes it imperative that we predict, as accurately as possible, the annual revenue we will need.

A delicate balance

As one can imagine, projecting future costs, especially with healthcare costs continually rising faster than the rate of inflation, is not a simple task. It involves a bit of art and a bit of science. In the coming weeks, we’ll explore what drives healthcare costs nationally and how the Board works to predict Medical Plan costs from one year to the next.

*Health Insurance Coverage in the United States: 2023; U.S. Census Bureau