Kittens say “mew”; insurance brokers say “mewa” – not “myū-ah”, but “mē – wăh.” A MEWA may be a “cool cat” or a predator depending on where you live. In Washington, many employers hang out with the safe version. They get their health insurance through MEWAs.
MEWA is an acronym for “Multiple Employer Welfare Arrangement” and describes an organization that is not an insurance company but offers or provides health plan benefits to the employees of two or more employers. For example, many trade associations offer health plans to their member employers and when they do, they act as a MEWA. The association contracts with an insurance company to provide coverage for members. Which brings up another important point of semantics – you say association, I say MEWA. The labels attached to a MEWA do not affect regulatory status.
Nationally, MEWAs have a deserved reputation for fleecing unsuspecting employers; particularly, MEWAs providing benefits through self-funding rather than purchased insurance coverage. With few exceptions, all employer health plans must follow federal regulations under the Employee Retirement Income Security Act (ERISA) and other federal laws. ERISA does not permit states to regulate employer health plans; however, ERISA does permit states to regulate insurance companies.
In the 1970s, MEWAs were more commonly known as METs, not baseball’s version but “multiple employer trusts.” MEWAs were created as a type of “employer plan” to escape state insurance regulation and were subject only to federal oversight. That oversight functioned like Mr. Magoo and Congress gave states the authority to regulate MEWAs in 1983. Washington State began regulating self-funded MEWAs in 2004 and still does not directly regulate fully insured MEWAs.
Washington State carved out a unique position in the health insurance market for trade associations back in 1995. An example of this carve-out originating when the state’s 1993 health care reform act was dismantled declares:
Employers purchasing health plans provided through associations or through member-governed groups formed specifically for the purpose of purchasing health care are not small employers and the plans are not subject to [rules governing small group insurance rates].
As a consequence, a substantial and competitive “association” market largely supplanted the traditional small group market. Washington State considers these association plans to be “large group” plans.
Insurance companies providing coverage through associations are able to use traditional underwriting tools to establish rates for these organizations. The private, non-association small group market must set rates in a manner that mirrors federal health care reform – a “modified community rate” that limits the factors that can be considered when setting rates. For example, the price for coverage in the association market varies more between the oldest and youngest beneficiaries than is permitted in the small group market.
Where Washington State considers the association as one large group plan, the federal government considers the MEWA as a collection of small group plans and even individual plans. These associations and “member-governed groups” are considered MEWAs, subject to the MEWA provisions of ERISA. Each employer is considered as having a separate plan despite the presence of the “association plan.” Here is how the DOL describes the federal law and its application to associations:
[I]ndividuals typically covered by the group or association-sponsored plan are not “employed” by the group or association and, therefore, are not “employees” of the group or association. Rather, the covered individuals are “employees” of the employer-members of the group or association. Accordingly, to the extent that a plan sponsored by a group or association of employers provides benefits to the employees of two or more employer-members … the plan would constitute a MEWA… United States Department of Labor (DOL) MEWA guide
When the insurance reform provisions of HIPAA were implemented, the federal agencies responsible declared that federal and not state law would determine whether a particular health plan was large group or small group or individual.
We are aware that many states categorically regulate health insurance coverage offered through associations as “group” coverage. However, for the purpose of determining whether any particular insurance coverage is group rather than individual coverage within the meaning of title XXVII, it is irrelevant whether there is an association involved, and it is also irrelevant whether state law classifies association coverage as “group” coverage for purposes of state insurance laws… health insurance is considered to be offered in connection with a group health plan either because a group health plan exists at the association level, or, more commonly, because an employer-member or employee-organization member of the association maintains a group health plan…to the extent an association has any members that are small employers (which are defined generally as employers with two to 50 employees), the issuer is subject to the requirements that apply to small group coverage, such as those related to disclosure, with respect to any small employer in the association. [Program Memorandum CMS August 2002]
These views under the HIPAA reforms matter now because the same agencies will make decisions about the application of health care reform to MEWAs and the plans purchased by employers through associations. Questions about the applicability and timing of various provisions of health care reform depend upon characterization of the health plans purchased through the MEWA. Other health care reform provisions directly address MEWAs.
Under the new federal health care reform provisions, life got tougher for those who attempt to use associations to lie, cheat or steal. Here are the new criminal provisions under health care reform:
(a)…No person, in connection with a… [MEWA]…, shall make a false statement or false representation of fact, knowing it to be false, in connection with the marketing or sale of such plan or arrangement, to any employee, any member of an employee organization, any beneficiary, any employer, any employee organization, the Secretary, or any State, or the representative or agent of any such person, State, or the Secretary, concerning —
(1) the financial condition or solvency of such plan or arrangement;
(2) the benefits provided by such plan or arrangement;
(3) the regulatory status of such plan or other arrangement under any Federal or State law governing collective bargaining, labor management relations, or intern union affairs; or
(4) the regulatory status of such plan or other arrangement regarding exemption from state regulatory authority under this Act…
(b) … Any person that violates [these provisions] shall upon conviction be imprisoned not more than 10 years or fined under title 18, United States Code, or both. [§ 6601 of the act]
In addition, MEWAs will be required to register with DOL.
The Secretary shall, by regulation, require multiple employer welfare arrangements providing benefits consisting of medical care (within the meaning of section 1191b (a)(2) of this title) which are not group health plans to register with the Secretary prior to operating in a State and may, by regulation, require such multiple employer welfare arrangements to report, not more frequently than annually, in such form and such manner as the Secretary may require for the purpose of determining the extent to which the requirements of part 7 are being carried out in connection with such benefits. [29 U.S.C. 1021(g) as amended by §6606 of the act] [Editor’s note - almost 666]
DOL also has new authority to issue cease and desist orders and seize temporary control of a MEWA if it believes the MEWA has engaged in fraudulent activity or “creates an immediate danger to the public safety or welfare, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury.” [§6605 of the act]
There’s nothing to “mew” about here. As I have written before and will continue to repeat, we know little about what DOL or HHS will do with health care reform. We must wait and comment. As Rumsfeld put it:
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know.