More than ever, health insurance legislation has limited choices and flexibility when it comes to coverage offerings. What was seen as complicated ten years ago, seems simple today. If you are at all involved in the sales and/or service of small group insurance products, you have likely encountered MEWAs or been asked to advise on the pros and cons of such an arrangement.
Multiple Employer Welfare Arrangement, otherwise known as MEWA, is defined by ERISA as “an employee welfare benefit plan, or any other arrangement which is established or maintained for the purpose of offering or providing medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries.”
Historically, MEWAs were made up of related industry groups, associations, etc. and may now include chamber associations. Small employers combine to share in the overall claims risk of the established trust. For these small employers, grouping together may provide a means of purchasing employee health coverage that takes advantage of economies of scale. A group of small employers may be able to negotiate lower premiums and better coverage than what a small employer can negotiate on its own with today’s limited plan offerings.
Some highlights of a MEWA:
- MEWAs are governed by trustees and by-laws.
The board of trustees is responsible for oversight of the plan and compliance with all applicable Federal and State law.
- Ohio’s Department of Insurance regularly monitors financial controls, pricing, reserve funding, plan compliance and governance and issues a Certificate of Authority to approved MEWAs.
- MEWAs can be fully insured or self-funded. Self-funded MEWAs are more common, heavily regulated, and must maintain stop-loss insurance, which offers protection from large financial losses.
- Claims administration and service agreements are routinely handled by an established insurer who may also provide network arrangements and services.
- MEWAs are generally considered a single large ASO employer, which enables unrelated employers to participate in a single plan giving the trust “group purchasing power” for such ASO arrangements and stop-loss coverage.
- This larger pool of business enables more stable renewal increases. Similarly to most self-funded programs, well-run MEWAs tend to perform below health care trends year over year.
- MEWAs fall outside the community rating requirements of ACA and risk is medically underwritten, which enables employers to take advantage of preferred health factors.
- Some MEWAs offer a composite rating.
- Membership fees vary based on the relationship the MEWA has with a chamber, association or other entity. MEWA groups likely encounter additional employer and/or member level advantages of belonging to the MEWA, such as discounts on other services, etc.
- MEWAs share a common renewal date and based on filings, may allow one life groups/sole proprietors to participate as long as they are set up according to guidelines established. Those that accept that segment size may not exceed more than 10 percent of their total risk from that “1 life” sector.
- Considering the volatility in the individual health market, however, this option may prove especially beneficial for these sole proprietors.
This alternative self-funded solution may be a good fit for your small group clients. Cornerstone offers several MEWA options for your small groups. Call us today to see if you and/or your clients may be eligible.