So to answer your question, I would say that the yearly sacrifice only covered certain people, that is to say the children of Israel, those who were a direct descendant of Abraham, Issac, and Jacob, as long as you were not cut off from among your people.
But I personally disagree with calling the Church Israel though, but that is just my opinion.
Take this along with context of many other places (like not all that are descended from Israel are Israel, Romans 9:6):
For he himself is our peace, who has made us both one and has broken down in his flesh the dividing wall of hostility by abolishing the law of commandments expressed in ordinances, that he might create in himself one new man in place of the two, so making peace, and might reconcile us both to God in one body through the cross, thereby killing the hostility.
That is why it depends on faith, in order that the promise may rest on grace and be guaranteed to all his offspring—not only to the adherent of the law but also to the one who shares the faith of Abraham
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[/size][/font]The problem with today is our nationality way of thinking. When we think of Israel, we think that some people (Abraham, Isaac, Jacob) got together, established a nation, and that's what God had a covenant with. That's not true. God made his covenant with a PEOPLE, not a nation in our modern sense.
Israel is simply this: God's people. It didn't even have anything to do with bloodlines. In fact, and most people don't know this, Gentiles could become members of Israel THEN, just as it is NOW.
If a stranger shall sojourn with you and would keep the Passover to the Lord, let all his males be circumcised. Then he may come near and keep it; he shall be as a native of the land. But no uncircumcised person shall eat of it. There shall be one law for the native and for the stranger who sojourns among you.
"Old" or "Original Israel" contained both JEWS and GENTILES who SUBMITTED TO GOD'S LAW.
"New" or "Present Israel" contains both JEWS and GENTILES who SUBMIT to CHRIST'S HEADSHIP.
Shockingly similar, isn't it???
So what changed between the OC (Old Covenant) and NC? The fulfillment of the law.
Under the old law, faith and the sacrificial system- saved people. Works were something that was mandatory, the sacrificial system was a sacrifice for when 100% of the time, someone couldn't keep the law.
Under the new law, faith and the final sacrifice (Christ)- saved people. Works are still mandatory, the sacrifice of Christ atoned for when 100% of the time, we can't keep the law.
Again, shockingly similar, isn't it?
Let me clarify something about the works. They are still mandatory in the sense that we are condemned by the works. Just like in the OC. What differs is that in the OC, one had to rely upon their own works for atonement. They could sacrifice a sheep, or they could ignore it. It was works based in the OC more so of how the sacrificing was done. If you failed to keep that work, you perished.
In this NC... There's nothing we can do that can separate a Christian from the sacrifice of Christ. He's got us covered- we can't screw it up. So it's not dependent upon our works to sacrifice, but upon his: which has already been done for us.
In a nutshell this is a description of the Israel of Old and the Israel of New, and the difference of why it changed.
Most people don't realize how similar they really are. The Old was a shadow of the New.
However once you realize that Old Israel was God's People... And New Israel is God's People... Israel hasn't changed. It's still God's People, which includes you and me.
What was the purpose of Israel the Nation, then? Well, they were given a King. They were given a Temple. Christ had not yet come, and God was behind a veil.
The King was his rule over his people and his Priests were the ones who once a year entered the Holy of Holies.
Christ came, as a man, and changed that. He removed that veil, giving us direct access to God. No longer did we need a King. No longer do we need a Priest. So you can see here, the Israel the Nation is dissolved. Christ is our King, Christ is our High Priest. (Amen!!)
I think once you look at Israel like this, for what it is (God's People)... You'll easily see why Israel is the church today. You'll also see why I believe there's no special status with Israel the Nation today. It's a renamed nation of men and nothing more.