Multiple Employer Welfare Arrangement (MEWA)

A multiple employer welfare arrangement (MEWA) is a vehicle for marketing health and welfare benefits to employers for their employees. Also described as a "multiple employer trust (MET)," a multiple employer welfare arrangement is when a group of employers pool their contributions in a self-contributing benefits plan for their employees. The employers make contributions into the plan based on the number of employees they have and the estimated costs associated with each employee. MEWAs are a way for smaller companies to offer employee benefits outside of the government-run health insurance exchanges by sharing risk. They became popular as a result of the Patient Protection and Affordable Care Act (ACA).

As defined by the Employee Retirement Income Security Act (ERISA), a multiple employer welfare arrangement is "an employee welfare benefit plan, or any other arrangement which is established or maintained for the purpose of offering or providing" medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries.

In short, a multiple employer welfare arrangement is a good way for smaller employers to get group health and other insurance benefits for their employers. By pooling their contributions together, these smaller employers are better positioned to offer the best benefit packages from insurance companies due to economies of scale. Also, since each employer is a partner in a MEWA, they have the ability to suggest plan changes.

For more on MEWAs from the Department of Labor, see ERISA's Multiple Employer Welfare Arrangement informational page, which lists the rules governing them, as well as fact sheets, filing requirements, news releases, current amendments, public comments and more.

One issue with multiple employer welfare arrangements is that some MEWAs find themselves unable to pay claims due to inadequate funding or reserves. Worse yet, due to poor management or outright fraud and embezzlement, some MEWAs have seen their funds drained. As such, most MEWA administrators and participants buy stop-loss insurance to limit their liability. Such insurance covers errors and omissions, fidelity bonds, directors and officers, crime, cyber liability and more.

MEWAs must follow ERISA law, and also may be subject to state insurance regulation, which can vary by jurisdiction (some states are MEWA-friendly; some do not allow them). An example of such state-level regulatory requirements can be found here from the New Jersey Department of Banking and Insurance (and example of a state with generally higher oversight standards). At a minimum, MEWAs must follow filing, reporting and funding guidelines.