A plan is a MEWA

[katieinny]

It's likely that a plan offering health and welfare benefits to multiple employers is a MEWA. I see that they must file a Form M-1 annually.

It's an ERISA plan and files 5500s, as do the underlying employers.

My boss just asked me what the significance of being a MEWA is, and I realized that I don't know the answer. Help!

[WDIK]

http://www.dol.gov/ebsa/Publications/mewas.html

[Ron Snyder]

As mentioned on the other thread, the significance of the plan's being a MEWA is that it is subject to both Federal and state regulation. State regulation is much more difficult because only a few states have MEWA laws; those that don't require the MEWA to license as a full-blown insurance company.

[Don Levit]

Vebaguru:

You are correct about states that do not have MEWA laws simply applying the state laws, as if the insurer were a full-blown commercial insurer.

However, this strategy , while legal, is illogical, as well as actuarially unsound.

These are not my words, but the feeling of the NAIC, as well as the Lewin Group, a well-respected actuarial firm.

States that pretend that MEWAs have similar liabilities as commercial insurers do have discretion in how those state laws are applied.

Typically, the commissioners have the right to adjust the requirements, as they see fit for the public interest.

Also, the 1983 MEWA amendment which specifically allowed states to regulate MEWAs says that states may apply any and all insurance laws to ensure the timely payment of benefits. It does not say that states must apply all laws, and that the laws they do apply should be geared toward the financial integrity of the MEWA.

The laws as they are applied are not to discourage the formation of MEWAs, as employers are encouraged through ERISA, as well as Supreme Court rulings, to form benefit plans.

Don Levit

[Ron Snyder]

You're mistaken if you believe that state insurance commissioners can lower minimum capital and surplus BELOW statutory minimums for an insurance company engaging in the same line of business. This has not and will not happen.

The 1983 MEWA "amendment" was nothing more than the Secretary of Labor announcing that federal regulation of MEWAs did not preclude state regulation. (ERISA gave the Secretary discretion with respect to federal pre-emption.)

There have been so many illegal health insurance arrangements masquerading as MEWAs that states without MEWA laws automatically close down all such arrangements as illegal insurance arrangements. Only MEWAs which are fully insured by an admitted carrier are allowed to continue to operate.

Please cite those "Supreme Court rulings" which encourage MEWAs. I am aware of none. ERISA doesn't encourage the establishment of MEWAs, it discourages it. The purpose of defining MEWAs in ERISA is to set them apart from those plans that are encouraged so that they can be separately regulated.

[Don Levit]

Vebaguru:

I agree with you that many MEWAs have been nothing more than shams. The vast majority of the problems occurred because the MEWAs were unlicensed; not because their structure itself was flawed.

The reason the MEWA Amendment was passed was, primarily, due to the confusion as to whether or not states had the authority to regulate these entities. The Congress clearly said that the states did have regulatory authority.

The primary objective of that authortity, as stated in the law, was to ensure the timely payment of benefits.

Nothing in federal law states that MEWAs are to be discouraged. Congress could have outlawed them in 1983, but, instead wisely allowed states to regulate them, so these financial fiascoes were less likely to occur.

States without MEWA laws close down unlicensed MEWAs.

California is one state that passed a law in 1995 banning all future MEWAs from being formed. This law, in my opinion, is illegal, because California has only the authority to regulate MEWAs. Only Congress can outlaw MEWAs, as they are clearly provided for in ERISA, and as I stated before, they were not banned by Congress in 1983.

The Supreme Court rulings encourage the formation of employer benefit plans, of which MEWAs are one type.

The Texas MEWA statute has specific reserve requirements. In Art. 3.95-8 it states in © (d) "on application of a MEWA, the commissioner may waive or reduce the requirement for aggregate stop-loss coverage and the amount of reserves required on a determination that the interests of the participating employers and employees are adequately protected."

Don Levit

[Ron Snyder]

You seem to be shooting from the hip with your assertions.

Please provide a citation to the "MEWA Amendment" you refer to.

Also please provide a citation to at least one case where the Supremes encouraged MEWAs or even welfare benefit plans. In the few cases that are out there, the SC has found against the health or welfare benefit plan, in favor of IRS, in favor of plan participants, etc. I have yet to see a case where the Supremes provide the asserted encouragement.

[Don Levit]

Vebaguru:

To summarize the purpose of the MEWA amendment, the DOL booklet entitled "MEWAs" provides a good summary. "Prior to 1983, a number of states attempted to subject MEWAs to State insurance law requirements, but were frustrated in their regulatory and enforcement efforts by MEWA-promoter claims of ERISA-plan status and Federal preemption.

Recognizing that it was both appropriate and necessary for states to be able to enforce State insurance laws, the Congress amended ERISA in 1983, as part of Public Law 97-473, to provide an exception to ERISA's broad preemption provisions for the regulation of MEWAs under State insurance laws.

As a result of the 1983 MEWA amendments to ERISA, states are now free to regulate MEWAs.

The Department has expressed the view that any state insurance law which sets standards requiring the maintenance of specified levels of reserves and specified levels of contributions in order for a MEWA to be able to pay benefits will generally not be 'inconsistent' with the provisions of Title 1.

To cite a Suprteme Court case, I turn to Inter-Modal Rail Employees Ass'n. v. Atchison, Topeka, & Santa Fe, 520 U.S. 510,515. Reasoning that Congress specifically provided employers the freedom to amend or terminate welfare benefit plans in order to encourage the voluntary adoption of such plans, since Congress knew that the inability to amend such plans in light of unforeseen events might deter employers from adopting such plans.

Could you cite a Supreme Court case which will explain in a bit more detail your concerns?

Don Levit