The quest to escape the upward premium spiral has hurt some small employers. Some have been hurt by fly-by-night Multiple Employer Welfare Arrangements (MEWAs) that ended up being unable to pay claims, says the U.S. Department of Labor (DOL). In its quest to stop such MEWAs, DOL is proposing new enforcement and oversight rules.
DOL will target MEWAs in the following ways, DOL Assistant Secretary Borzi stated in a conference call on Dec. 5.
- MEWAs must register with DOL before starting business in a state. All MEWAs (and certain other entities that provide health benefits to the employees of two or more employers) will have to file a revised version of the Form M-1 with DOL;
- DOL could issue cease and desist orders without prior notice or hearings, preventing MEWAs from enrolling new enrollees if they present fraudulent or abusive behaviors (such as failing to pay claims);
- DOL would gain fast-track power to seize assets from a MEWA when there is probable cause that the plan is in a financially hazardous condition. This would enable DOL to preserve the plan assets before they’re totally dissipated, she said.
The health reform law (the Patient Protection and Affordable Care Act – PPACA) added the tools to prevent insolvent or fraudulent MEWAs from operating, DOL says here.
Reporting requirements for MEWAs have been in place since 1999 (see this 2010 M-1 form).
But many MEWAs slipped through the cracks — and by the time they proved themselves to be improper, their owners and officers had absconded with funds, and often moved on to set up fraudulent entities in other states, Borzi said.
The enhanced reporting will allow DOL to hit the ground running when it gets a report on a MEWA’s fraudulent activity from state insurance authorities, she said.
Employers Will Vet Prospective MEWAs on New DOL Site
A DOL website containing information on MEWAs will appear around Summer 2012, and employers will be able to learn about prospective MEWAs by looking them up there. Information on who operates the MEWA and where MEWA funds are held will be included. If a MEWA is not listed on the DOL website, Borzi urged small employers to bypass that vendor and select a MEWA that has been registered with DOL.
A comment period on the proposed rules will remain open until March 5, 2012.
The Heartbreak of MEWA Scams
Some employers used MEWAs as an option for quality coverage, but saw their premiums or contributions wasted and their employees harmed economically when MEWAs ended up not being above board.
According to Borzi, such MEWAs become increasingly slower about paying small claims, and drag their feet on paying — or just don’t pay — larger claims. Before long, they stop paying all claims. By the time complaints reach state authorities, the MEWA’s officers have disappeared leaving beneficiaries with unpaid claims, often after having embezzled plan funds, she said.