EBSA Proposes Rules to Regulate MEWAs

December 5, 2011 (PLANSPONSOR.com) – The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) announced two proposed rules under the Affordable Care Act. 

The proposed rules are meant to protect businesses and workers whose health benefits are provided through a multiple employer welfare arrangement (MEWA). 

During a press call, Phyllis C. Borzi, assistant secretary for EBSA explained, “MEWA is an arrangement in which small employers are encouraged to participate. The reason small employers are attracted to MEWAs is because they provide health insurance at affordable costs.” Borzi adds, when properly operated, MEWAs provide an excellent source of affordable healthcare coverage for employees. However, not all MEWAs operate properly.

Borzi said, the way fraudulent MEWAs work is you will be injured or ill and think you have healthcare coverage, however, later on you will find out your health insurance was a scam. The fraudulent MEWAs start off by collecting premiums from employers and employees, but then they do not pay the claims, or sometimes they will pay the smaller claims, but then ignore the larger claims. Before anyone can stop the fraudulent MEWAs, the operators have disappeared without a trace.

In order to regulate MEWAs, the DoL is proposing new rules to enhance the reporting requirements of MEWAs so employers, workers and their families will not unexpectedly be cut off from their health insurance services.   

Borzi said the new rules the DoL is proposing would require all MEWAs to register with the DoL before the organization can begin operating in a state, otherwise the MEWA will be subject to penalties. This will also allow the DoL to keep track of MEWAs as they move from state to state, and also it will make it so the MEWA will need to identify its’ principals. She added, the operational details of the MEWAs will be posted on the DoL website. This will make it possible for small employers to be able to go directly to the DoL website to see if the MEWA they are considering doing business with is actually registered with the DoL.

Under the proposed rules, Hilda L. Solis, secretary of labor, will also be able to issue a cease and desist order when it become apparent fraud is taking place or an arrangement is causing immediate danger to the public safety or welfare. If approved, Solis would also have the ability to seize assets from a MEWA when there is a probable cause that the plan is in a financially hazardous condition. 

Borzi added, “The goal of the [rules] is to allow us to get in early and hopefully reduce the losses of small businesses and employees.” 

Complete details on all provisions will be published in the December 6 Federal Register, and also are available at http://s.dol.gov/KO.