The Office of General Counsel issued the following opinion on December 10, 2004, representing the position of the New York State Insurance Department.
Re: Self-Funded Multiple Employer Welfare Arrangements
May a self-funded Multiple Employer Welfare Arrangement (MEWA) operate in New York?
While such an entity could operate in New York, it would have to comply with all relevant statutory and regulatory requirements.
No facts were furnished other than that the inquirer is an insurance agent licensed in accordance with New York Insurance Law § 2103(a) (McKinney 2000 & Supp. 2004).
New York Insurance Law § 4235(c)(1) (McKinney 2000 & Supp. 2003) authorizes the issuance of group health insurance policies and contracts to those types of entities 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); labor unions, subparagraph (C); 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).
New York Insurance Law § 1101(a) (McKinney 2000 & Supp. 2003) 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. There is an exception, however, to the general preemption of state laws with relation to MEWAs. 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.
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 and, thus being subject to all applicable requirements, including mandated benefits.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.