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December 05, 2011 at 10:01 AM
The Employee Benefits Security Administration (EBSA) is trying to add new layers of regulation for multiple employer welfare arrangemets (MEWAs).
MEWAs give small employers a way to join together to run health plans free from state regulatory oversight. MEWAs are regulated at the federal level, out of the reach of state agencies, and the federal government has not been especially vigilant.
In the past, financial advisors used MEWAs to help doctors and other highly paid professionals shelter income from income taxes.
Today, EBSA officials say, federal regulators are alarmed by the idea that some MEWAs have been ignoring state laws requiring health plans to maintain minimum levels of reserves. Some of the under-reserved MEWAs become insolvent and leave consumers with big, unpaid medical bills, officials say.
“In the worst situations, operators of MEWAs have drained their assets through excessive administrative fees or outright embezzlement, resulting in harm to participants and their families,” officials say in the preamble. “In some cases, individuals incur significant medical bills before they learn that claims are not being paid — and that they are liable and need to pay their medical bills themselves.”
In a MEWA background sheet, EBSA officials cite one plan that failed owing about $17 million to patients and providers, and another that failed owing $27 million.
