Make Sure Employers Know Their Responsibilities in a MEWA

There are few things more complicated in running a multiple employer welfare arrangement (MEWA) than making sure that the employer members understand their rights and obligations in relation to the association and its health plan. These are typically spelled out in a contract between the employer and the MEWA, commonly called a subscription or participation agreement. In fact, some states require these agreements and actually dictate some of their terms. Whether required or not, the importance of documenting the relationship between the MEWA and its member employers cannot be overstated.

Here are some of the areas that these agreements should cover:

Covered Employers: Clearly outline which employers are covered by the terms of the arrangement. Although this might seem obvious, be sure to include how employers who are part of an affiliated group of employers or employers under common control are handled.

Coverage Effective Date: What must the employer do to effect coverage and when does it attach? For example, must the employer meet participation requirements or submit statements of health?

Premiums: How are they determined, in what amount, and when may they change? Likewise, when are they due and what happens if they are late?

Contributions: Must the employer make a minimum contribution toward coverage?

Coverage Termination: What happens if an employer’s membership lapses or fails to meet the MEWA’s coverage rules? Under current DOL rules, a MEWA cannot offer coverage to a sole proprietor without employees. Does the agreement require the employer to notify the MEWA if this situation arises?

Terminal Liability: This may be an issue for self-insured MEWAs or those with minimum funding arrangements in insured plans. Does an additional obligation exist for an employer leaving such a MEWA?

Medical Loss Ratio Rebates: This is a concern for fully insured plans: will the MEWA refund a rebate to the employer or apply it to future benefits? ERISA requires an employer to share rebates with employees in proportion to their contributions – and the MEWA must ensure an employer does so.

Document Distribution Requirements: MEWAs often rely on member employers to distribute SPDs, SBCs, COBRA initial notices, and other required documents to employees. Does the agreement clearly delegate this responsibility to the employers and articulate a mechanism to verify compliance? Keep in mind that the MEWA plan administrator remains liable under ERISA if an employer does not perform its obligations.

COBRA Qualifying Event Notices: MEWAs are reliant on member employers to forward COBRA qualifying event data for appropriate handling, timing a critical element of the compliance obligation. Does the agreement clearly describe the circumstances and timing for notification of these events?

Indemnification: If an employer fails to properly perform its duties, does the agreement require them to indemnify the MEWA against potential losses?

State-Required Notices and Provisions: States often require that self-insured MEWAs notify employers that they are self-insured and state guarantee funds will not cover shortfalls. States may also require a MEWA member agreement to contain language stating the employer must contribute more money in the event the MEWA cannot pay claims.

A well-crafted subscription agreement brings clarity and certainty to the operation of a MEWA. A poor one (or none at all) can lead to misunderstandings, creating disgruntled members, dismayed employees, curious inquiries from the DOL or state regulators and of course, litigation.

Leave a Reply

Your email address will not be published. Required fields are marked *