Labor wants to tighten MEWA rules

The Employee Benefits Security Administration (EBSA) is trying to add new layers of regulation for multiple employer welfare arrangemets (MEWAs).

MEWAs give small employers a way to join together to run health plans free from state regulatory oversight. MEWAs are regulated at the federal level, out of the reach of state agencies, and the federal government has not been especially vigilant.

In the past, financial advisors used MEWAs to help doctors and other highly paid professionals shelter income from income taxes.

Today, EBSA officials say, federal regulators are alarmed by the idea that some MEWAs have been ignoring state laws requiring health plans to maintain minimum levels of reserves. Some of the under-reserved MEWAs become insolvent and leave consumers with big, unpaid medical bills, officials say.

"In the worst situations, operators of MEWAs have drained their assets through excessive administrative fees or outright embezzlement, resulting in harm to participants and their families," officials say in the preamble. "In some cases, individuals incur significant medical bills before they learn that claims are not being paid — and that they are liable and need to pay their medical bills themselves."

In a MEWA background sheet, EBSA officials cite one plan that failed owing about $17 million to patients and providers, and another that failed owing $27 million.

Officials at EBSA, an arm of the U.S. Labor Department, report in proposed MEWA regulations that Section 6605 of the Patient Protection and Affordable Care Act of 2010 (PPACA) has given the Labor Department the authority to issue cease-and-desist orders against MEWAs when a MEWA appeared to be operated in a fraudulent or unsafe manner and to order the seizure of MEWAs when there is probable cause to believe they are in a financially hazardous condition.

One set of the proposed regulations, which would implement the PPACA 6606 authority, would "serve as an additional enforcement tool to protect plan participants, plan beneficiaries, employers or employee organizations, or other members of the public against fraudulent, or financially unstable MEWAs," officials say in the preamble to one batch of the new proposed regulations.

Another set of proposed regulatios would require each MEWA to register with the Labor Departent before it can set up operation in a state, to help the department track MEWAs.

MEWAs of all sizes that are subject to the Employee Retirement Income Security Act would have to file Form 5500 annual returns.

Labor Secretary Hilda Solis says too many MEWAs have been taking advantage of employers. "These proposed rules under the Affordable Care Act will crack down on those who want to use MEWAs to defraud American families," she says.

Originally published on LifeHealthPro. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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