Health Insurance For Pastors: What Are Your Options?

by

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. 

On Your Own

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.

Pay Cash

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. 

Health Sharing Ministry

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

Individual Health Insurance

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.

Medicaid

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).

Spouse’s Employer

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. 

If The Church Will Help

When your church is willing and able to help with your health insurance needs, then you have more options.

Informal Stipend

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). 

Qualified Reimbursement

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:

  1. The church sets a reimbursement allowance.
  2. The pastor pays for health expenses.
  3. The pastor submits proof of expenses to the church.
  4. The church reimburses the pastor for the expenses, up to the preset limit.


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. 

Group Health Insurance

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.

Obamacare Small Business Health Options Program

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. 

Employer Medical Cost-Sharing Ministry

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.

0
14 Responses
  • Jeff Pospisil
    December 9, 2019

    I get this question quite a bit so I love the answer…especially helping clear up QSEHRA for me. I’ve read about QSEHRA but never understood how it worked until your explanation.

    • Amy
      December 9, 2019

      I’m so glad I was able to help you, Jeff!

  • Rachael
    December 18, 2019

    We purchased health care through the market exchange and receive a subsidy. Can the church pay directly to the dental office for cleanings for our family, and list this under benefits. Would this affect our subsidy?

    • Amy
      December 19, 2019

      Rachael,
      To be eligible for a subsidy, your employer cannot offer health insurance that is “affordable” and provides “minimum value.” (https://www.healthinsurance.org/special-enrollment-guide/an-sep-if-your-employer-plan-doesnt-measure-up/) If the church is only paying for dental cleanings, I don’t think that would qualify as “minimum value,” but you should double check with the people at healthcare.gov.

      Now, if your church pays for your dental cleanings, that will count as taxable income for you. It will be subject to income and payroll taxes and factor into the calculations for the amount of subsidy you are eligible for. I am not sure if it will offset your subsidy. However, with this arrangement there is no benefit for them to pay the dentist directly instead of giving you the money as income. If you do it that way, then you don’t have to worry about it offsetting the subsidy the way an HRA does because the money is not restricted to healthcare. As I mentioned, they can reimburse you for your dental cleanings through an HRA so that it isn’t taxable income, but those reimbursements would offset your subsidy.

      • Rachael
        December 20, 2019

        Thanks for the info. I love you website, you have such a wealth of information and it has been so helpful to our family. Thank you!

  • Amy
    December 23, 2019

    You’re welcome, Rachael!

  • Coo
    February 9, 2020

    I have a question, I am a pastor and my salary is 32k plus 18k in housing allowance. The church is unable to offer health insurance. When filling out medicaid forms I only report 32k or $2,666 a month as salary correct? If this is the case my family of 5 (husband,wife, and three kids) will qualify for medicaid.

    • Amy
      February 10, 2020

      That is correct. The formula used to calculate income for Medicaid purposes does not include the housing allowance. Details can be found here: https://www.medicaid.gov/medicaid/eligibility/index.html

      • Lauren
        July 30, 2020

        Ok, so if my husband’s salary and housing allowance are lumped together in one check twice monthly, I can still deduct his housing allowance from that total when applying for health insurance? If they ask for pay stubs, do we just explain that a portion of the funds go toward our housing allowance and we do not need to report that income when they ask for income we receive? All this makes me so nervous and I just want to be sure we are following all the rules properly. Thank you.

        • Amy
          August 1, 2020

          Lauren, when applying for health insurance, income will be taxable income so the housing allowance is not included. Is there anything on the pay stub that differentiates between salary and housing allowance? It should be differentiated on your annual form W-2. If it isn’t clear that part of the pay check does not count towards income, then you may get push back. You could try showing them your W-2 and tax return and explaining how it works to them. Unfortunately, most people are not familiar with ministerial taxes and so you may have some trouble with it.

  • susan
    February 10, 2020

    can a church offer its members health care insurance in other words the church would be the umbrella a large group of people could sign up for health care under in order to obtain the low rates that an employer such as walmart would enjoy

    • Amy
      February 10, 2020

      Susan, I have never heard of that being available. You would need to speak with a health insurance specialist to find out for sure.

  • Hallie
    April 5, 2020

    If the church directly pays for the Pastor and his wife’s part of a HealthShare plan, is that counted as taxable income for the Pastor? Can the church pay the wife’s part as well?

    • Amy
      April 9, 2020

      Hallie, that would all be taxable income for the pastor.

What do you think?

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.