Last year, the Washington Insurance Commissioner’s Office (OIC) took on the Department of Labor’s (DOL) role in reviewing multiple employer welfare arrangements (MEWA) to determine whether the arrangement constituted a single plan for ERISA purposes. Essentially, the OIC created a “pre-certification” process to review Washington’s many association plans and to determine which ones were “bona fide” under ERISA. Associations were instructed to provide the “pre-certification” letter to their insurer for any large group filing for the association. You can find much of the discussion of the law and related issues here and here.

In September of 2012, the OIC announced this process and unveiled its first review and approval letter (the Washington State Master Builders Trust). In its letter, the OIC acknowledged that the DOL has jurisdiction but that the OIC had analyzed the association Trust and determined that the Trust would, “at least in form, constitute a bona fide group or association of employers…for purposes of Title I of ERISA.” The OIC also requested all large associations to schedule meetings with the OIC to discuss transition plans.

In November, after meeting with OIC counsel on behalf of clients, I sent a letter to the OIC objecting to the agency’s certification process noting both that the certification was of no value in satisfying federal law and that the letters created legal risk for associations and employers who relied upon the certification as proof of bona fide status under ERISA. The OIC continued issuing letters; however, these later reviews were far more cursory and the letters very brief.

In March of this year, Teresa Miller, acting director of the Oversight Division of CCIIO, wrote to Insurance Commissioner Kreidler explaining that a state actions that prevented application of federal health care reform to the small group market was preempted by ERISA and the reform law. Her letter repeats longstanding federal law. DOL has made it clear that classification of health plan coverage offered through an association is a matter of federal law that preempts state determinations. A recent example can be found in the DOL letter to the Nevada Attorney General.

“Whether the Plan is a single employer plan for purposes of ERISA is also a question of federal law. To the extent that Nevada state law purports to govern the determination of whether a particular arrangement is a MEWA for purposes of ERISA, it is preempted by section 514 of ERISA.”

Thus, it should come as no surprise that the OIC has now decided that it “is no longer able to review and provide feedback on draft AHP documents and employee categories.” Instead, many are surprised the OIC permits those associations who obtained letters from the OIC to use these letters in marketing health plan coverage. Here is one marketing effort forwarded to the OIC for response at the beginning of July:

“The MBA Health Insurance Program has been given the approval from the Washington Insurance Commissioner’s office to continue as one of the very few “bona fide” association health plans in the state of Washington post health care reform. Click here for more detail.  As part of your due diligence, feel free to ask other association health plans that may present themselves as an option for your employee benefits, if they can provide a similar approval letter.”

The use of the Insurance Commissioner’s regulatory review, however flawed, should not be tolerated by the agency, particularly when that process favors only those associations reviewed before the Commissioner pulled the plug on the effort. Producers and associations should sell the value of their products and services rather than hint of regulatory favoritism.

For insurance producers considering a similar effort on behalf of associations, consider the following:

    • Even the Commissioner recognizes that he has no authority to determine the “bona fide” status of an association under ERISA even if he makes such a determination for state regulatory purposes.
    • The Commissioner stopped reviewing associations; thus, any statement about an association relative to the Commissioner’s view of any other association is in itself deceptive marketing.
    • A producer’s representation to anyone about an association’s compliance with ERISA ought to be supported by the association or producer’s counsel unless the producer intends to rely upon OIC attorneys for legal advice about matters outside OIC jurisdiction.
    • Finally, given the DOL’s rather stingy approval of MEWAs as bona fide associations, you might want to consider the consequences of drawing so much attention to any plan that has not been reviewed and obtained a DOL opinion letter. I understand DOL gets irritated at MEWA claims of legitimacy that don’t originate in Washington D.C., especially when the claims are used to market insurance.

This is the kind of mess that gets created when regulatory agencies overreach. Let’s see how the OIC cleans this up…if it ever does.