A Multiple Employer Welfare Arrangement (MEWA) is a collectively sponsored employee benefit plan that provides benefits to the employees of two or more employers. MEWAs are typically formed by associations of employers within the same industry or geographic region to provide health insurance and other welfare benefits to their employees.
Understanding Multiple Employer Welfare Arrangement (MEWA)
MEWAs enable smaller employers to join together to purchase health insurance coverage as if they were a single large employer. By pooling their resources, these employers can achieve economies of scale and access more favorable terms and pricing from insurance providers than they might be able to obtain individually.
MEWAs are regulated under the Employee Retirement Income Security Act (ERISA) and are subject to oversight by the U.S. Department of Labor (DOL). However, MEWAs are exempt from certain state insurance regulations under ERISA’s “savings clause,” which allows them to operate across state lines without having to comply with all of the insurance requirements of each state in which they operate.
Types of Multiple Employer Welfare Arrangements (MEWAs)
There are two main types of MEWAs: fully insured MEWAs and self-funded MEWAs.
- Fully Insured MEWAs: In a fully insured MEWA, the sponsoring employers purchase health insurance coverage from an insurance company or carrier. The insurance company assumes the risk of paying claims and provides administrative services, such as claims processing and customer service, to the MEWA and its participants.
- Self-Funded MEWAs: In a self-funded MEWA, the sponsoring employers establish a trust fund to pay for the health benefits of their employees. The employers contribute money to the trust fund, which is used to pay claims and administrative expenses. Self-funded MEWAs assume the financial risk for paying claims and may purchase stop-loss insurance to protect against catastrophic losses.
Regulatory Oversight of Multiple Employer Welfare Arrangements (MEWAs)
MEWAs are subject to regulation at both the federal and state levels. The DOL oversees MEWAs under ERISA to ensure compliance with federal laws governing employee benefit plans, such as reporting and disclosure requirements. States also have authority to regulate MEWAs under their insurance laws, although ERISA preempts certain state insurance regulations.
Key Takeaways
- A Multiple Employer Welfare Arrangement (MEWA) is a collectively sponsored employee benefit plan that provides benefits to the employees of two or more employers.
- MEWAs enable smaller employers to join together to purchase health insurance coverage as if they were a single large employer, allowing them to achieve economies of scale and access more favorable terms and pricing from insurance providers.
- MEWAs are regulated under the Employee Retirement Income Security Act (ERISA) and are subject to oversight by the U.S. Department of Labor (DOL) and state insurance regulators.
- There are two main types of MEWAs: fully insured MEWAs, in which employers purchase health insurance coverage from an insurance company, and self-funded MEWAs, in which employers establish a trust fund to pay for the health benefits of their employees.
