OGC Op. No. 04-02-26
The Office of General Counsel issued the following opinion on February 25, 2004, representing the position of the New York State Insurance Department.
Re: Multiple Employer Welfare Arrangements (MEWA), Insurance Department Requirements
Does the New York Insurance Department impose any requirements on fully insured MEWAs covering more than 50 employees in New York?
While no requirements are directly imposed by the Department upon the MEWA, if any participating employer in New York has 50 or fewer employees, the insurance policy or contract must comply with New Yorks requirements relating to community rating.
Since this was a general inquiry, no facts were supplied.
The Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. (West 1999 and 2003 Supplement), regulates employee welfare benefit plans, as that term is defined in ERISA. 29 U.S.C.A. § 1002(1) (West 1999). ERISA, 29 U.S.C.A. § 1144(b)(2)(B) (West 1999), generally provides that self-funded employee welfare benefit plans shall not be deemed to be insurers within the meaning of any state insurance law.
A MEWA is defined in ERISA. 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 . . . .
One of the exceptions to the ERISA general rule concerning preemption of state insurance laws is found 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 . . . 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.
. . .
(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 [of Labor] 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.
New York does not impose any levels of reserves or mandate minimum contributions upon fully insured employee welfare benefit plans, whether or not they are MEWAs. However, with respect to small group insurance, which may include MEWAs, New York does impose requirements upon insurers.
The groups that may accept delivery of a group health insurance policy are set forth in New York Insurance Law § 4235(c)(1) (McKinney 2000 and 2004 Supplement). MEWAs would appear to fall within the group described in New York Insurance Law § 4235(c)(1)(D):
A policy issued to a trustee or trustees of a fund established, or participated in, by two or more employers . . . which trustee or trustees shall be deemed the policyholder, to insure employees of the employers . . . subject to the following requirements: (i) The persons eligible for insurance shall be all of the employees of the employers . . . or all of any class or classes thereof determined by conditions pertaining to their employment. . . .(ii) The premium for the policy shall be paid by the trustee or trustees either wholly from funds contributed by the employer or employers of the insured person . . . or jointly from such funds and funds contributed by the insured persons specifically for their insurance or from contributions by the insured persons. . . . .(iii) The policy shall insure at least fifty persons at date of issue, except that if part of the premium is to be derived from funds to be contributed by the insured persons specifically for their insurance the policy shall insure at least one hundred employees or members at date of issue. (iv) The insurance coverage under the policy shall be based upon some plan precluding individual selection either by the insured persons or by the policyholders, employers, or unions. . . .
New York Insurance Law § 3231(a) (McKinney 2000 and 2004 Supplement), regulating health insurance policies issued by commercial insurers, provides:
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. . . . Once accepted for coverage, a . . . 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. Notwithstanding any other provisions of law, the underwriting of such policy may involve no more than the imposition of a pre-existing condition limitation as permitted by this article, and once accepted for coverage, an individual or small group cannot be terminated due to claims experience. . . . 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.
New York Insurance Law § 4317(a) (McKinney 2000 and 2004 Supplement), regulating health insurance contracts of not-for-profit insurers and all Health Maintenance Organizations, has a similar restriction.
In order to effectuate New York Insurance Law §§ 3231(a) and 4317(a), the Department has promulgated a regulation, (Regulation 145), N.Y. Comp. Codes R. & Regs. tit. 11, Part 360. As part of that regulation, the Department imposed specific requirements on association groups, which term includes those policies and contracts issued to groups defined in New York Insurance Law § 4235(c)(1)(D). N.Y. Comp. Codes R. & Regs. tit. 11, § 360.8(e) (2000) provides:
(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.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.