Medical Plan pricing
By Todd Ingves, Vice President, Health & Well-Being
Careful pricing is essential to maintaining the financial health and sustainability of the Medical Plan. The Medical Plan is self-funded, which means that while our business partners Highmark Blue Cross Blue Shield and Express Scripts administer key components, the Board of Pensions bears the full financial risk for healthcare claims and related administrative costs.
The plan also operates on a pay-as-you-go basis. Ideally, the money collected each year through employer dues should fully cover that year’s medical claims and expenses. When claims and expenses exceed available funding, the Board must use plan reserves to cover the shortfall. Because these reserves are limited, it’s imperative that we estimate future costs as accurately as possible.
To do this, Board staff work closely with certified medical actuaries throughout the year. Together, we gather data, evaluate risk, and apply professional judgment, born of skill and experience, to predict future medical trend and project the necessary revenue targets, which in turn ultimately determine dues for the upcoming plan year.
Guiding principles behind our pricing approach
Predicting future costs is a delicate balance of science and art, but it is only part of the process. Two key concepts also shape how we determine Medical Plan pricing.
A community-based model
We use a community-based approach to risk sharing. Instead of pricing coverage based on each employer’s individual claims, risk is spread across all employers. This protects individual congregations and employers from sharp increases due to unusually high claims within their unique employee population. The strength of the plan lies in the collective, enabling all participants to benefit from shared risk and greater stability.
A commitment to breaking even
Our pricing philosophy is fundamentally different from that of commercial insurance carriers. Traditional insurers typically build in profit margins that can be as high as 10%, or even 15%. In contrast, our pricing is designed to break even.
We aim for a 99% loss ratio, meaning nearly every dollar collected is expected to go toward paying claims and expenses. This results in virtually no margin and reflects our commitment to affordability and responsible stewardship.
Funding decisions that reduce volatility
Our approach to pricing is not the only tool used to manage costs. Over the years, our Board of Directors has made several strategic funding decisions that help minimize year-to-year volatility and protect the financial stability of the Medical Plan.
Disability claims funding
Beginning in 2015, disability plan reserves have been used to fund medical claims for members who are receiving disability benefits under the Death and Disability Plan. These individuals remain on the Medical Plan for the duration of their disability, and their medical expenses can be substantial. Paying these claims from disability reserves reduces pressure on Medical Plan pricing for all members.
High-cost claims reserve
In 2018, the Board established a separate reserve that offsets the impact of any claim that exceeds $300,000 annually. By isolating expenses that are over this threshold and excluding them from Medical Plan pricing calculations, the plan is better protected from sudden cost spikes, which helps keep pricing more stable from year to year.
Built-in support for congregations
Along with these guiding principles, pricing for the Congregational Pastors Package and Transitional Pastor’s Participation includes income-sensitive dues, which enables congregations with fewer resources to provide medical benefits to pastoral leaders at a cost that is less than the actual cost of coverage.
An additional subsidy was approved at the March Board of Directors meeting for the Congregational Pastors Package, beginning Jan. 1, 2027, along with a new reserve fund to support new and existing subsidies with allocable assets from the Board of Pensions Balanced Investment Portfolio.
A balanced, sustainable approach
Through a combination of community-based risk sharing, break-even pricing, and thoughtful funding strategies, we work to balance affordability with long-term sustainability. These principles enable the Board of Pensions to remain responsive to member needs while protecting against unnecessary volatility and preserving allocable assets for when they are truly needed.
This is all part of our commitment to use plan resources wisely and to provide the best possible benefits at the best possible price — in service to our members.
