Health Insurance at the Intersection of State and Federal Regulation: Confused Regulation of ERISA Fully Insured MEWAs

   By R. Dean Conlin, Partner, Locke, Lord, Bissell & Liddell, L.P.

Small employers have struggled to have the same funding and plan design flexibility and uniform plan coverage for group health insurance as larger employers. A fully insured, multiple employer welfare arrangement ("MEWA") might suffice, but it relies on federal preemption of state insurance regulation. The Department of Labor's advisory opinions on this issue are analyzed and the current status of MEWAs is explored in this commentary by R. Dean Conlin.

A key provision of the Affordable Care Act is the requirement that individuals either purchase minimum essential health insurance or pay a penalty ("individual mandate").  This watershed requirement has been challenged as a violation of the federal Commerce Clause.  Whether or not the ACA's individual mandate survives this challenge, large employers will likely continue to provide health insurance to their employees through self-funded plans that rely on the preemption of state insurance regulation by the Employee Retirement Income Security Act of 1974 ("ERISA").  This commentary first describes ERISA's preemption of state insurance regulation that would otherwise prevent large employers from being authorized to provide their employees with uniform plans of tailored health coverage.

The commentary next explains that small employers have long struggled to provide similar self-funded health plans.  For the past decade, Congress has considered, but not passed, association health plan legislation that would permit small employers to group together through trade and professional associations, either to purchase health insurance from commercial insurers or to provide their own coverage through self-funding.  At the present time, however, without any further Congressional action, a form of association or multiple employer health plan could be provided nationwide pursuant to ERISA.

This commentary carefully examines the fully insured, multiple employer welfare arrangement authorized by ERISA.  While exploring the intersection of state and federal insurance regulation, the article dissects confusing opinions issued by the Department of Labor that effectively prevent small employers from utilizing a fully insured MEWA.

R. Dean Conlin, a partner with Locke, Lord, Bissell & Liddell, L.P., has more than 35 years' experience in a wide range of insurance regulatory, transactional and corporate matters for domestic and alien insurers and reinsurers. He has organized and represents alternative risk vehicles including risk retention groups, captives, intergovernmental cooperatives, and multi-employer pools. In addition, Mr. Conlin has focused on managed health care since the early stages of preferred provider networks. His clients include regulated insurers and alternative risk vehicles that provide managed health care coverage. His work for these clients, including preferred provider organizations, has ranged from product development to regulatory counseling.

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