The Office of General Counsel issued the following opinion on November 12, 2003, representing the position of the New York State Insurance Department.
Re: Multiple Employer Welfare Associations (MEWA)
1. Are MEWAs permitted to operate in New York?
2. Is membership in MEWAs restricted to related businesses?
3. Must the MEWA be a non-profit organization?
4. Is a fully funded MEWA with small employer members subject to small group insurance laws?
5. How is a self-funded MEWA treated for the purpose of small group insurance laws?
6. Are there any additional restrictions on MEWAs in New York?
1. A fully funded MEWA seeking to purchase a group accident and health insurance policy in New York must be a group that would be eligible to purchase group accident & health insurance under the New York Insurance Law (McKinney 2000 and 2003 Supplement). A self-funded MEWA must be licensed as an insurer.
2. The employer members of a New York based MEWA must have the requisite affinity as set forth in the New York Insurance Law.
3. There is no requirement that the MEWA be a non-profit organization.
4. Such a MEWA would be subject to New Yorks small group insurance laws.
5. Such a MEWA, once licensed, would be subject to New Yorks small group insurance laws.
6. There are no additional restrictions applicable to MEWAs under the New York Insurance Law.
Since this was a general inquiry, no facts were furnished.
New York Insurance Law § 4235(c)(1) (McKinney 2000 and 2003 Supplement) authorizes the issuance of group health insurance policies and contracts to those types of entity listed therein. Among the entities that are authorized to have group health insurance policies and contracts issued to them are: employer members of a trade association, subparagraph (B}; joint employer-employee organizations, subparagraph (D); associations whose members have the same profession, trade, or occupation, subparagraph (H); other associations organized for a purpose other than purchasing insurance, subparagraph (K); any other group approved by the Superintendent of Insurance (Discretionary Group), subparagraph (M).
A MEWA may purchase a group health insurance policy in New York to be fully funded if it meets the requirements of New York Insurance Law § 4235c)(1). The provisions of the above-cited subparagraphs of New York Insurance Law § 4235(c)(1) are available on the Departments website. If MEWA were to purchase a group health insurance policy outside of New York from an insurer licensed in New York that covered, among others, New York employers, such a MEWA would, as far as the Department is concerned, be fully funded.
If, however, the insurer were not licensed in New York, New York Insurance Law § 1101(b)(2) would apply:
Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state . . . (B) transactions with respect to . . . group accident and health . . . (i) where such groups conform to the definitions of eligibility contained in . . . (II) the following subparagraphs of paragraph (1) of subsection (c) of section four thousand two hundred thirty-five of this chapter: (aa) subparagraph. . . (B), . . . or (D); . . . (cc) subparagraphs . . . (H). . . . and (ii) where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business . . . .
The insurer could, therefore only deal with New York employers through the mail. In addition, New York Insurance Law § 2117(a) (McKinney 2000) provides:
No person, firm, association or corporation shall in this state act as agent for any insurer . . . organization which is not licensed or authorized to do an insurance . . . business in this state. . . or shall in this state in any way or manner aid any such insurer . . . in effecting any insurance. . . contract.
The MEWA, therefore, could not solicit New York employers.
New York Insurance Law § 1101(a) (McKinney 2000 and 2003 Supplement) defines the doing of an insurance business:
(1) Insurance contract means any agreement or other transaction whereby one party, the insurer, is obligated to confer benefit of pecuniary value upon another party, the insured or beneficiary, dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
(2) Fortuitous event means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.
New York Insurance Law § 1102(a) (McKinney 2000) requires that, unless otherwise exempted, anyone doing an insurance business in New York must be licensed by the Department.
The provision of health care by an employer to employees and dependents constitutes an employee welfare benefit plan under ERISA. 29 U.S.C.A. § 1002(1) (West 1999). Pursuant to 29 U.S.C.A. § 1144(a) (West 1999), all state laws relating to employee welfare benefit plans are preempted by ERISA, except that, pursuant to 29 U.S.C.A. § 1144(b)(2)(A) (West 1999), laws regulating insurance are not preempted. Finally, pursuant to 29 U.S.C.A. § 1144(b)(2)(B), a self-funded employee welfare benefit plan is not deemed to be an insurer.
There is an exception, however, to the general preemption of state laws with relation to MEWAs. A MEWA is defined, 29 U.S.C.A. § 1002(40)(A):
The term multiple employer welfare arrangement means an employee welfare benefit plan, or any other arrangement (other than an employee welfare benefit plan), which is established or maintained for the purpose of offering or providing any benefit described in paragraph (1) to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries, except that such term does not include any such plan or other arrangement which is established or maintained-- (i) under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements, (ii) by a rural electric cooperative, or (iii) by a rural telephone cooperative association.
The extent of state jurisdiction over a MEWA is set forth in 29 U.S.C.A. § 1144(b)(6):
(A) Notwithstanding any other provision of this section-- (i) in the case of an employee welfare benefit plan which is a multiple employer welfare arrangement and is fully insured (or which is a multiple employer welfare arrangement subject to an exemption under subparagraph (B)), any law of any State which regulates insurance may apply to such arrangement to the extent that such law provides-- (I) standards, requiring the maintenance of specified levels of reserves and specified levels of contributions, which any such plan, or any trust established under such a plan, must meet in order to be considered under such law able to pay benefits in full when due, and (II) provisions to enforce such standards, and (ii) in the case of any other employee welfare benefit plan which is a multiple employer welfare arrangement, in addition to this title, any law of any State which regulates insurance may apply to the extent not inconsistent with the preceding sections of this title.
(B) The Secretary may, under regulations which may be prescribed by the Secretary, exempt from subparagraph (A)(ii), individually or by class, multiple employer welfare arrangements which are not fully insured. . . .
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(D) For purposes of this paragraph, a multiple employer welfare arrangement shall be considered fully insured only if the terms of the arrangement provide for benefits the amount of all of which the Secretary determines are guaranteed under a contract, or policy of insurance, issued by an insurance company, insurance service, or insurance organization, qualified to conduct business in a State.
Although the Secretary of Labor has promulgated a Regulation, 29 CFR § 2510.3-40 (2003), to provide guidance in determining what constitutes a collectively bargained plan, she has not promulgated a regulation exempting any class of self-funded MEWAs from state regulation.
Unlike some other jurisdictions, New York has not established a regulatory scheme for self-funded MEWAs. Accordingly, unless the self-funded MEWA is otherwise exempt from the requirement to secure a license, it may not operate in New York without a license.
There is no requirement in ERISA that a MEWA must be a non-profit organization. There is nothing in the New York Not-For Profit Corporation Law (McKinney 1997 and 2003 Supplement) that would either preclude or require such a form of organization.
As part of a major reform of health insurance, 1992 N.Y. Laws 501, the New York Legislature enacted New York Insurance Law § 3231 (McKinney 2000 and 2003 Supplement):
(a) No individual health insurance policy and no group health insurance policy covering between two and fifty employees or members of the group exclusive of spouses and dependents, hereinafter referred to as a small group, providing hospital and/or medical benefits . . . shall be issued in this state unless such policy is community rated and, notwithstanding any other provisions of law, the underwriting of such policy involves no more than the imposition of a pre-existing condition limitation as permitted by this article. Any individual, and dependents of such individual, and any small group, including all employees or group members and dependents of employees or members, applying for individual health insurance coverage. . . or small group health insurance coverage, including . . . must be accepted at all times throughout the year for any hospital and/or medical coverage offered by the insurer to individuals or small groups in this state. Once accepted for coverage, an individual or small group cannot be terminated by the insurer due to claims experience. . . . Group hospital and/or medical coverage . . . obtained through an out-of-state trust covering a group of fifty or fewer employees or participating persons who are residents of this state must be community rated regardless of the situs of delivery of the policy. . . . For the purposes of this section, community rated means a rating methodology in which the premium for all persons covered by a policy or contract form is the same based on the experience of the entire pool of risks covered by that policy or contract form without regard to age, sex, health status or occupation.
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(h)(1) Notwithstanding any other provision of this chapter, no insurer, subsidiary of an insurer, or controlled person of a holding company system may act as an administrator or claims paying agent, as opposed to an insurer, on behalf of small groups which, if they purchased insurance, would be subject to this section. No insurer, subsidiary of an insurer, or controlled person of a holding company may provide stop loss, catastrophic or reinsurance coverage to small groups which, if they purchased insurance, would be subject to this section.
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In order to effectuate the strictures of New York Insurance Law § 3231(a), the Department has promulgated N.Y. Comp. Codes R. & Regs. tit. 11, § 360.8 (2000) (Regulation 145):
(b) Rules relating to insurers enrolling individuals and small groups through association groups. (1) For the purposes of this Part, insurers may issue small group health insurance policies in New York State only to or through groups specifically recognized as groups under subparagraphs (B), (D), (H), (K), (L) and (M) of paragraph (1) of subsection (c) of Section 4235 of the Insurance Law. Where there is no statutory authority recognizing the group, insurers should issue individual health insurance policies in New York State.
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(e) Community rates based on the size of the association groups. (1) A policy issued to an association group covering at least one participating group member with 50 or fewer employees or members exclusive of spouses and dependents requires the insurer to charge the same community rate to all association members. (2) An insurer may issue an experience rated policy to an association group so long as all member employers or member groups covered by that policy exceed 50 persons exclusive of spouses and dependents. A second separate community rated policy may be issued by an insurer to the same association group covering all those member employers or member groups with 50 or fewer persons exclusive of spouses and dependents.
Accordingly, all employers with 50 or fewer employees who are New York residents and are part of a fully insured MEWA must be community rated. If a self-funded MEWA were to become licensed as an insurer in New York, again, all employers with 50 or fewer employees who are New York residents would have to be community rated. If a self-funded MEWA were to completely operate outside of New York, and thus not be subject to the New York Insurance Law, it could not secure any stop-loss insurance in New York.
While a fully insured MEWA and a self-funded MEWA that is licensed as an insurer would be subject to the full panoply of the restrictions and limitations of the New York Insurance Law, other than the statutes and regulations mentioned above, there are no other statutes or regulations which are enforced by the Department which specifically regulate MEWAs.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.