:: A Short Course In MEWA’s (Unit 1) : Overview

Anyone who works in the claims administration field should understand enough about MEWA’s (”Multiple Employer Welfare Arrangements”) (a/k/a “multiple employer trusts” or “METs”) to be able to identify them and the inherent risks that they pose.

MEWA’s have been associated with many failed plans and much fraud and abuse. This short course addresses the basic operation of MEWA’s, their key characteristics and their recent resurgence under somewhat surprising circumstances.

What They Are

MEWA’s provide health and welfare benefits to employees of two or more unrelated employers who are not parties to bona fide collective bargaining agreements. A good example of a MEWA is a plan sponsored by a trade association for its members.

The technical definition is found in 29 U.S.C. 1002(40). (”The term ‘multiple employer welfare arrangement’ means an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing any benefit described in paragraph (1) to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries . . .)

The Employee Benefits Security Administration sums up the good and the bad aspects of MEWA’s as follows:

In concept, MEWAs are designed to give small employers access to low cost health coverage on terms similar to those available to large employers. For certain employers they represent the only available option for providing employees with health care because insurance companies often will not insure small employers who do not fall within their desirable risk category.

And, while allowing that “MEWA’s can be provided through legitimate organizations”, the EBSA notes that:

they are sometimes marketed using attractive but actuarially unsound premium structures that generate large administrative fees for the promoters. In addition, certain promoters will set up arrangements that they claim are established pursuant to a collective bargaining agreement and, therefore, are not MEWAs but legitimate benefit plans free from state insurance regulations. Often, however, these collective bargaining agreements are nothing more than shams designed to avoid state insurance regulation.

EBSA Website, MEWA Enforcement

What They Are Not

Not all multiple employer plans are MEWA’s. For example, MEWA’s are to be distinguished from multi-employer plans. The term “multiemployer plan” means a plan maintained pursuant to a collective bargaining agreement to which more than one employer is required to contribute. See, 29 U.S.C. 1002(37). By statutory exclusion, governmental plans, and some less common entities such as rural electric cooperatives, escape MEWA classification.

Why MEWA’s Can Be Dangerous

Until 1983, ERISA did not specifically regulate MEWA’s. In that year, Congress amended ERISA Section 514 to except MEWA’s from federal preemption of State regulation. The EBSA notes the reason for the 1983 ERISA amendments:

In many instances MEWAs, while operating as insurers, had the appearance of an ERISA-covered plan — they provided the same benefits as ERISA-covered plans, benefits were typically paid out of the same type of tax-exempt trust used by ERISA-covered plans, and, in some cases, filings of ERISA-required documents were made to further enhance the appearance of ERISA-plan status. MEWA-promoter claims of ERISA-plan status and claims of ERISA preemption, coupled with the attributes of an ERISA plan, too often served to impede State efforts to obtain compliance by MEWAs with State insurance laws.

While the 1983 amendments (discussed in more detail later) ameliorated the problem of unsound or fraudulent MEWA’s, the amendments did not eliminate the problem. As an example, note the following from the EBSA enforcement bulletins:

The Department has devoted significant resources to investigating and litigating issues connected with abusive MEWAs created by unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations. Particular emphasis has been put on identifying ongoing abusive and fraudulent MEWAs, and working to shut down such operations . . . To date, the Department has:

• initiated 710 civil and 150 criminal investigations and obtained monetary results of over $180 million. There are currently 106 civil and 48 criminal investigations open
• Indicted 119 individuals with 90 convictions

Back To the Future

You should not conclude that the MEWA concept is on the way out. In fact, it is on the way back in. The present administration supports the concept of “association plans”. In many states, supporters of professional employer organizations have influence in State legislative bodies and have succeeded in some cases in obtaining protective legislation. Thus, you will be seeing more, not less, of the MEWA. As a matter of self-defense, the benefits professional must be prepared for what that means.

Next >> A Short Court in MEWA’s (Unit 2) : “State Law or Federal Law >>

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