There are three general types of self-funded plans listed in ERISA: Single employer, multi-employer based on collective bargaining agreements, and multiple employer welfare arrangements (MEWAs). While the first two types of plans are full ERISA plans, MEWAs enjoy a hybrid status between federal and state regulation. This status can make MEWAs very complicated, but it does offer an intriguing self-funded solution outside of government-run health insurance exchanges.
What are MEWAs?
According to ERISA, a MEWA, also known as a “multiple employer welfare arrangement,” is an employee welfare plan or arrangement that provides welfare plan benefits to the employees of two or more unrelated employers. These arrangements allow these employers to pool contributions together to allow them to use their collective buying power to offer better benefit packages at lower rates thanks to economy of scale.
ERISA sets minimum standards for these plans and MEWAs are required to file Form M-1 with the DOL, which reports on if a MEWA is compliant with applicable federal laws. In addition, a MEWA must determine whether ERISA applies to the MEWA itself or if its rules should separately apply to each participating employer.
Even if ERISA applies, individual states are allowed to regulate MEWAs. According to the MEWA Guide to Federal and State Regulation, “While the range of State insurance law permitted under Section 514(b)(6)(A) [of ERISA] is subject to certain limitations, the Department of Labor believes that these limitations should have little, if any, practical effect on the ability of States to regulate MEWAs under their insurance laws.” The level of regulation can vary by the state and its specific insurance laws, so some state departments may be more active than others. This also means that it’s up to each state to allow for MEWAs, although many states currently approve of the arrangement.
What are the Benefits of MEWAs?
Even if a state’s department of insurance approves of MEWAs, the arrangements still need to make sense for Employers, Brokers, and Carriers for them to sign on to the arrangement. For Employers and Brokers, the benefits are simple: the rates for healthcare plans are generally less than what they are in the marketplace for typical small group products.
• Allows groups to get out of modified community rated products
• Allows them to shed the 10 essential benefit requirements that small groups must provide
• Price – more people paying the premium (the law of large numbers begins to apply)
• Allows sole proprietors to be treated like a group as long as they are in the same profession/metro area
• Reduces administrative costs
For Carriers, MEWAs offer some other benefits. These arrangements serve as an alternative to the Affordable Care Act, as they feature some uniquely designed benefits without some of the mandated benefits, tax, and fees typically imposed by the ACA. Also a self-funded MEWA does not offer community rates. This allows small employers to benefit from the preferred health status of their own employees. Finally, unforeseen risk and solvency issues can be mitigated since MEWAs can be highly regulated by each state’s Department of Insurance, The Department of Labor, and the Internal Revenue Service.
How FormFire Helps Administer MEWAs
While the Association owns the trust for the MEWA and the Carrier offers the plan, FormFire serves an important role as a technology provider. FormFire’s insurance enrollment and quoting system acts as a complete benefits solution thanks to features like:
• Secure collection and storage of medical information and employee data
• A uniform online interview for Employees that can be mapped out to thousands of different Carrier forms
• Online management tools that can scale with large groups and digitize information for quoting and sale installation processing
FormFire technology makes it easy for MEWAs to administer a benefits plan from enrollment to enrollment and stay compliant. Request a demo of our software today to see how the FormFire system can add value for your association.