The U.S. Department of Labor is ramping up its oversight of the multiple employer welfare arrangement industry.
The agency posted a notice on its site recently that emphasized new rules that apply to the MEWAs. It used the “news” that new 2013 Form 5500s would be available for review only on its Employee Benefits Security Administration page to raise the MEWA regulatory issue.
The more stringent rules were included in the Patient Protection and Affordable Care Act and were specifically designed to tighten oversight of MEWAs.
A MEWA is defined by the DOL as “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 … [welfare plan benefits] to the employees of two or more employers.”
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The reason for DOL’s heightened oversight of MEWAs stems back to their emergence years ago as insurance plans that weren’t covered by state regulations and therefore were quite a bit cheaper than traditional plans that had to adhere to both state and federal laws. MEWAs, at least as their promoters expressed it, were subject only to ERISA oversight.
Let’s let the DOL’s website page devoted to MEWAs tell the rest of the tale.
“For many years, promoters and others have established and operated multiple employer welfare arrangements (MEWAs), also described as ‘multiple employer trusts’ or ‘METs,’ as vehicles for marketing health and welfare benefits to employers for their employees,” says the DOL’s website. “Promoters of MEWAs have typically represented to employers and state regulators that the MEWA is an employee benefit plan covered by the Employee Retirement Income Security Act (ERISA) and, therefore, exempt from state insurance regulation under ERISA’s broad preemption provisions.
“By avoiding state insurance reserve, contribution and other requirements applicable to insurance companies, MEWAs are often able to market insurance coverage at rates substantially below those of regulated insurance companies, thus, in concept, making the MEWA an attractive alternative for those small businesses finding it difficult to obtain affordable health care coverage for their employees.
“In practice, however, a number of MEWAs have been unable to pay claims as a result of insufficient funding and inadequate reserves. Or, in the worst situations, they were operated by individuals who drained the MEWA’s assets through excessive administrative fees and outright embezzlement.”
In a nutshell, government attempts to increase oversight of MEWAs hadn’t worked well. And even though the laws were toughened considerably in 1983, they were far from airtight. Fraudulent operators would sign up employers and get their money before authorities could get the legal gears in motion to stop them.
The DOL’s hope is that the PPACA will give state and federal authorities more law to work with when it comes to regulating MEWAs. Here’s how the DOL site describes the PPACA’s role in MEWA regulation:
“The Patient Protection and Affordable Care Act established a multipronged approach to MEWA abuses. Improvements in reporting, together with stronger enforcement tools, are designed to reduce MEWA fraud and abuse,” the DOL says. |
“These include expanded reporting and required registration with the Department of Labor prior to operating in a state. The additional information provided will enhance the state and federal governments’ joint mission to prevent harm and take enforcement action. The ACA also strengthened enforcement by giving the Secretary of Labor authority to issue a cease and desist order when a MEWA engages in fraudulent or other abusive conduct and issue a summary seizure order when a MEWA is in a financially hazardous condition.”