Employee Benefits:

States Need Labor's Help Regulating Multiple Employer Welfare Arrangements

HRD-92-40: Published: Mar 10, 1992. Publicly Released: Mar 10, 1992.

Additional Materials:


Cynthia Maher Fagnoni
(202) 512-7202


Office of Public Affairs
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Pursuant to a congressional request, GAO reviewed multiple employer welfare arrangements (MEWA), an alternative to traditional insurance in which businesses pool funds to pay for benefits or buy group insurance, focusing on: (1) the nature and extent of MEWA failures to pay bills and other problems; (2) hindrances to state regulation and enforcement of MEWA; and (3) Department of Labor (DOL) actions to prevent MEWA problems, protect MEWA participants and their beneficiaries, and assist state enforcement efforts.

GAO found that: (1) officials in the 46 states that MEWA have served since 1988 stated that some MEWA failed to pay medical claims, did not comply with insurance laws, and violated state criminal laws; (2) states reported that the number of MEWA problems increased between 1988 and 1990 when MEWA left at least 398,000 participants and their beneficiaries with over $123 million in unpaid claims and many other participants without insurance; (3) state officials attributed the increase in reported problems to more MEWA providing coverage to residents, more public participation in MEWA, and greater media coverage of MEWA problems and state insurance agency efforts; (4) efforts by state insurance officials to regulate MEWA, enforce state laws, and recover unpaid claims were hindered by such factors as an inability to identify MEWA, MEWA claims of exemption from state laws, and difficulty imposing criminal sanctions; (5) many states' enforcement were slowed because states were unable to identify MEWA until complaints were received, and because MEWA asserted that they were exempt from state regulation; (6) in October 1991, DOL provided a technical assistance booklet to state insurance offices, but some states indicated that the guidance did not completely answer all their questions about exemption from state law and regulatory authority; (7) in both 1990 and 1991, DOL sought legislative authority to establish a federal registration process to help states identify MEWA, but was not successful; and (8) according to DOL, MEWA investigations increased from 30 in December 1989 to 86 in September 1991.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Health Insurance Portability and Accountability Act of 1996 authorized DOL to require certain MEWAs to file annual reports. In February 2000, DOL issued an interim final rule implementing an annual filing requirement for such MEWAs effective May 1, 2000. DOL plans to make the information they receive from MEWAs available to state insurance regulators.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Pension and Welfare Benefits Administration to develop a mechanism to help states identify MEWA.

    Agency Affected: Department of Labor

  2. Status: Closed - Not Implemented

    Comments: Because of limited resources, DOL plans no further action on this recommendation. DOL considers it closed.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Pension and Welfare Benefits Administration to improve procedures to quickly answer questions about such issues as ERISA preemption and state regulatory authority, thus enabling states to more aggressively deal with problem MEWA.

    Agency Affected: Department of Labor


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