Multiple Employer Welfare Arrangement (MEWA) Presented by Steve Doty, Aldrich Benefits LP

Regulation of MEWAs Under ERISA Passed in 1974 ERISA covers plans, funds or arrangements that constitute an “Employee Welfare Benefit Plan.” MEWAs that constitute “Employee Welfare Benefit Plans” are subject to ERISA provisions governing employee benefit plans ERISA

Employee Welfare Benefit Plan What is a MEWA? Employee Welfare Benefit Plan as defined by ERISA “Any plan, fund or program which is established or maintained by an employer or by an employee organization, or both, for the purpose of providing for its participants, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits…”

Multiple Employer Welfare Arrangement (MEWA) as defined by ERISA What is a MEWA? Multiple Employer Welfare Arrangement (MEWA) as defined by ERISA “An employee welfare benefit plan, or any other arrangement which is established or maintained for the purpose of offering or providing any benefit, to employees of two or more unrelated employers.” (i.e., not part of a “controlled group”) Coverage offered by a Bona Fide Association is typically considered a Multiple Employer Welfare Arrangement. (MEWA)

History of MEWAs

Prior to 1983 Insurers and others established MEWAs and METs History of MEWAs Insurers and others established MEWAs and METs MEWA, (Multiple Employer Welfare Arrangement) MET, (Multiple Employer Trust) MEWAs, & METs promoters claimed ERISA preemption exempting them from State insurance regulation Many MEWAs and METs had insufficient claims reserves Some cases of excessive administrative fees and embezzlement Prior to 1983

ERISA Amended 1983 1983 Congress amended ERISA History of MEWAs 1983 Congress amended ERISA Provided an exception to ERISA preemption of State insurance laws States could now regulate plans offered to MEWAs ERISA Amended 1983

Regulation of MEWAs Under State Law

State Regulation of MEWAs “Fully Insured” MEWAs, provide benefits guaranteed under an insurance contract issued by an insurance carrier qualified to do business in the State “Fully Insured” MEWAs, any state law which regulates insurance may apply States regulate the insurance carriers and the plans they offer plans to MEWAs States regulate “Not Fully Insured” MEWAs, as an insurer What State Laws Apply to MEWAs

Advantages and Disadvantages of MEWAs

Advantages and Disadvantages of MEWAs Pools small employers, share claims experience Plan is rated as a single large employer, avoiding many ACA requirements for small employer plans Plans are controlled by members, through a Board of Trustees Greater Flexibility Pre ACA, allowed self employed an alternative to individual plans What Are Some Advantages to MEWAs?

Advantages and Disadvantages of MEWAs Participation is voluntary Difficult to set rates Cannot prevent high claim utilizer employers from enrolling Smaller pool than carriers small employer pool Employers can leave at any time Potential for “death spiral” What Are Some Disadvantages to MEWAs?

ACA Impact On MEWAs and Association Plans

ACA Impact on MEWAs and Association Plans Group has formal organizational structure Group exists for reasons other than sponsoring a health plan Commonality of Interest Coverage only available to employer members Employer defined as have at least 1 common law employee Self employed and sole proprietors lost coverage, forced into the individual market Bona Fide Association Requirements

Executive Order 13813 Impact On MEWAs

“Promoting Healthcare Choice and Competition Across the United States” Executive Order 13813 Signed October 12, 2017 Effective 60 days after final rules published Final rules likely published Spring/Summer Possibly take effect late Summer early Fall Expands definition of “employer” Includes sole practitioners and self employed individuals Does not limit the size of employers who may participate Applies Large Group rules under the ACA, employers not subject to “look through doctrine” “Promoting Healthcare Choice and Competition Across the United States”

“Promoting Healthcare Choice and Competition Across the United States” Executive Order 13813 Expands “commonality of interest” test Current test – Must be “Bona Fide Association” meaning the association exists for reasons other than providing insurance Under new rules - Employers could band together in an organization for the sole purpose of providing health insurance to employer members Commonality of interest – “common industry” and/or “common geography” “Promoting Healthcare Choice and Competition Across the United States”

Bona Fide Association Requirements Executive Order 13813 Group exists for purpose of sponsoring a health plan Employers act as employer for anyone covered Group has formal organizational structure Group activities controlled by employer members Commonality of Interest Coverage only available to employer members Coverage must comply with HIPAA non discrimination Group is not a health insurer or controlled by health insurer Bona Fide Association Requirements

Working Owner Definition Executive Order 13813 Working Owners, i.e., sole proprietors and self employed individuals, may act as employers for purpose of participating association health plan Must have ownership rights Must earn wages from trade or business Not eligible to participate in any subsidized group health plan maintained by any other employer Must work 30 hours/week or 120 hours/month, or, Earned income from business that at least equals the cost of coverage or owner and any covered beneficiaries Working Owner Definition

Non Discrimination Requirements Executive Order 13813 Prohibits eligibility and premium differences between employers based on health status, including claims experience Permissible to set rates based on gender, age, industry or business size Non Discrimination Requirements

MEWA Compliance

M-1 Due March 1 of each year Must be filed electronically MEWA Compliance Due March 1 of each year Must be filed electronically Filed by plan administrator – Provide following information Sponsoring Entity List Board, Officers or Trustees Administrator, Agent, Financial Institution Holding Assets Fully Insured - Carriers Information Verification of Compliance with Part 7 of ERISA M-1

Form 5500 Form 5500 filed annually Must be filed electronically MEWA Compliance Form 5500 filed annually Must be filed electronically Due last day of the seventh month following the end of the plan year Attach list of participating employers with EIN numbers Form 5500

Questions?

Thank you! This presentation is current as of the date presented and is for informational purposes only. It is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Please contact legal counsel for legal advice on specific situations. This presentation may not be duplicated or redistributed without permission. © 2014, 2016 Zywave, Inc. All rights reserved.