According to a News Release dated 12/5/11, the Employee Benefits Security Administration (the “EBSA”) has issued two proposed rules, under the Affordable Care Act, to protect businesses and workers whose health benefits are provided through a multiple employer welfare arrangement, often called a “MEWA”.
The problem? According to the News Release, MEWAs frequently have been used by scam artists and criminals to defraud consumers, resulting in an inability to pay medical claims. When such MEWAs become insolvent, they may leave consumers with substantial unpaid medical bills. For employers or employee organizations that have paid premiums or made contributions to a MEWA, and thought they were doing the right thing for their workers and their families, the impact also can be significant. MEWA sponsors make the arrangement attractive by offering low premiums. However, they have often have taken advantage of gaps in the law to avoid state insurance regulations, such as a requirement to maintain sufficient funding and adequate reserves to pay the health care claims of workers and their families. In the worst situations, the sponsors have drained their assets through excessive administrative fees or outright embezzlement.
The News Release says that the proposed rules call for MEWAs to adhere to enhanced reporting requirements, so that employers, workers and their families will not unexpectedly be cut off from needed health care services. The rules also will increase the enforcement authority of the Department of Labor (the “DOL”) to protect participants in such plans and allow the DOL to shut down MEWAs engaged in fraud or other activities that present an immediate danger to the public safety or welfare. According to the News Release, under the proposed rules:
• MEWAs must register with the DOL prior to operating in a state or be subject to substantial penalties. This step will allow the DOL to track MEWAs as they move from state to state and to identify their principals, which will provide the DOL with important information regarding potentially fraudulent MEWAs.
• The secretary of labor will be able to issue a cease and desist order when it appears that fraud is taking place or an arrangement is causing immediate danger to the public safety or welfare.
• The secretary of labor could seize assets from a MEWA when there is probable cause that the plan is in a financially hazardous condition.