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CCH® BENEFITS — 02/28/11

MEWA Subject To State Laws Because It Was Not Fully Insured

from Spencer’s Benefits Reports: An employee welfare benefit plan can be a multiple employer welfare arrangement (MEWA), but if it is not fully insured, “State insurance laws may be applied to the MEWA to the extent that such laws are ‘not inconsistent’ with the provisions of [ERISA] Title I,” ruled the Department of Labor in Advisory Opinion 2011-02A, dated Feb. 4, 2011.

If the MEWA is “fully insured,” the ERISA Sec. 514(b)(6)(A) exemption would limit the application of state insurance laws to those laws pertaining to the maintenance of specified levels of contributions and reserves.

The Advisory Opinion was requested by the State of Florida Department of Financial Services in order to ascertain the application of state insurance laws to Peck & Peck, Inc., d/b/a Green Cross Managed Health System (Green Cross) and Depawix Health Resources, Inc. (Depawix). Green Cross claims to offer health benefits to individuals and group benefits to employers for their employees, some programs of which are self-funded and others are insured through Blue Cross Blue Shield of Georgia.

In order to participate in a Green Cross program, prospective participants must agree to become employed with a “dual employment provider,” whether or not they are already employed. “Employees” of these providers must agree to participate in a study to test the Green Cross principles of health management. Depawix appears to be the only “dual employment provider.” These “employees” are required to fill out a Green Cross Health Risk Assessment questionnaire annually, check in monthly with a “patient advocate,” obtain prior approval from the patient advocate for all medical services and new prescriptions, and provide the patient advocate with copies of all medical bills. The “employees” are paid $7.50 per hour.

MEWA Includes Self-Employed

ERISA Sec. 3(40)(A) defines a MEWA as an employee welfare benefit plan established or maintained for the purposes of offering or providing “medical, surgical, or hospitial care or benefits, or benefits in the event of sickness, accident, disability” to the employees of “two or more employers (including one or more self-employed individuals), or their beneficiaries….” The Green Cross program is a MEWA under Sec. 3(40), the DOL stated, because it “is an arrangement that is established and maintained for the purpose of offering or providing health benefits to employees of more than one employer.”

The DOL states that the Depawix program is also a MEWA, but not because it employs the plan participants. Rather, the DOL ruled that the “employees” were actually self-employed individuals because they met the “common law of agency principles” for being an independent contractor set forth in Nationwide Mutual Insurance Co. v. Darden (503 US 318, 1992). Depawix did not have control over when or how the “employees” performed their work, among other things. Consequently, the “employees” were self-employed independent contractors.

Despite being MEWAs, the two entities did not present sufficient evidence that they were fully insured, the DOL ruled, and thus could be subject to all of a state’s laws regarding MEWAs. There was no evidence that any of the participants elected the insurance offered by Blue Cross Blue Shield of Georgia.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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