For many years, trade and professional associations were able to offer individual health insurance to their members at special rates based on the association group’s claim experience. The association, in turn, received revenue from insurers for their administrative and marketing role. The arrangement was a win-win. Association members had access to good benefits at a favorable premium, and the association developed a healthy non-dues revenue stream. The Affordable Care Act changed all that by eliminating the ability to form these industry-based risk pools and forcing all individuals into one giant risk pool with the goal of smoothing rates for everyone.
Time will tell whether that theory proves true. But meanwhile, people who were in these association-sponsored plans have been forced into the individual insurance marketplace to buy ACA-compliant plans, and associations are smarting from the resulting lost revenue. But some associations have been able to implement an alternative means of providing health benefits for their members. They have established a multiple employer welfare arrangement, or a MEWA, to provide group health plans for their members and their members’ employees.
What is a MEWA?
Simply stated, a MEWA can provide various employee benefits such as medical, surgical, hospital care, accident, disability or life insurance to people who work for an employer who is part of a MEWA. A MEWA is regulated by the state in which it is created. In Michigan, a MEWA is formed by an organization that is established to serve the general needs of a specific industry or profession—not just to provide employee benefits. It is approved and regulated by the Department of Insurance and Financial Services, which exerts strict oversight in its formation and ongoing administration. It isn’t easy to set up a MEWA. It requires a substantial financial reserve to ensure there are adequate funds immediately available to pay claims. This is a major stumbling block for most organizations attempting to form MEWAs.
Here’s an example of how a MEWA works.
MDA Health Plan: For more than 30 years, the Michigan Dental Association offered a proprietary health insurance plan to its members. The ACA made it impossible for that plan to continue. Craig Start, president of MDA Insurance, a for-profit subsidiary of the MDA, initiated the establishment of a MEWA in order to offer MDA members (employers) and their employees an alternative for health benefits apart from plans offered by commercial insurers.
The MDA-sponsored MEWA, called the MDA Health Plan, is a self-insured program with six plan designs that were inspired by the coverages that were popular with members in the past. Because the plan is self-insured (meaning the members of the MEWA are responsible for paying the claims through their monthly contributions to the plan), the plans do not have to conform to all aspects of the ACA. For example, the MDA Health Plan does not require its participants to purchase pediatric dental or vision insurance.
Members of the MDA are able to join the MDA Health Plan if they meet group participation requirements. This video explains what they are. By joining the MDA Health Plan and choosing a plan or two to offer to their employees, dentists can help their employees meet the requirement to have health insurance. However, if the dental office has fewer than 50 employees, offering the plans to employees does not mean the dentist has to pay anything toward the health plan for their employees. Of course, many pay a flat-dollar amount or a percentage of the monthly fee. Employees pay their share, whatever it may be, through payroll deduction. Some employers set up a Section 125 premium only plan that allows employees to pay their health plan contribution using pre-tax dollars. That minimizes the impact on an employee’s take-home pay. Like any group health plan, the employer may not discriminate with regard to how much they contribute to their employees’ plan: the rules must be the same for everyone who is eligible and participates in the plan.
A new win-win
Establishing a MEWA can be a win-win for association members and their association. Members can have access to health plans designed with their needs in mind, with participation rules developed by their own organization, and often at lower prices than they would pay for commercially available plans. The MEWA earns money by charging an administration fee. And the association provides a unique service to its members that they cannot obtain elsewhere. A MEWA can be a great solution for organizations with the knowledge and financial resources to build and administer it properly. There are many more aspects to a successful MEWA than are discussed here. But this provides food for thought about how to address the thorny problem of providing health care benefits to association members in the age of the ACA.
How to Join the MDA Health Plan
If you are a member of the Michigan Dental Association and an employer, you are eligible to participate in the MDA Health Plan. Call MDA Insurance at 877-906-9924 to find out how to get a quote, or visit the MDA Health Plan web page by clicking here.