MEWA is an acronym for a multiple employer welfare arrangement. Its primary definition is found in ERISA. It means an employee welfare benefit plan, or any other arrangement, that provides a welfare benefit, (such as health insurance) to the employees of two or more employers (including one or more self-employed individuals).  ERISA exempts certain arrangements from this definition. Excluded are plans maintained:

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The Advantages of Being in a Plan that Exists at the MEWA Level

Statutory MEWAs

Association Based Plans – Conventional MEWAs

Association-Based Plans – AHPs

Compliance Obligations

Employers that participate in a MEWA may have regulatory and compliance obligations that are different from those that would apply if they sponsor a plan outside of the MEWA.  In many cases, these obligations depend on whether the plan is deemed to exist at the MEWA level or whether the MEWA is simply a collection of single employer plans.

Broadly speaking, the advantages of being in a MEWA are only realized if the plan is deemed to exist at the MEWA level.  A plan will be deemed to exist at the MEWA level if the sponsoring association and its health plan are structured in such a way that the association meets ERISA’s definition of the term “employer”.

Historically, the Department of Labor has provided rules for determining when a plan exists at the MEWA level through a series of advisory rulings and other sub-regulatory guidance.  More recently, the DOL has expanded the rules regarding sponsorship of and participation in MEWAs.  MEWAs organized under the expanded rules are called Association Health Plans or AHPs and the expanded rule is called the AHP rule.  All AHPs are MEWAs but not all MEWAs are AHPs.

To add to the complications, the pre-AHP guidance is still good.  A MEWA can be organized and operated under the old rules or under the new AHP rule.  The AHP rule itself incorporates much – but not all – of the previous guidance.

One more thing: while most MEWAs are organized around an association of some kind, it is possible for a single employer to create a MEWA.  Frequently, this happens unintentionally.

We’ll elaborate on all of these things in due course.

In the discussion that follows, we will:

The Advantages of Being in a Plan that Exists at the MEWA Level

Earlier, we noted that the advantages of being in a MEWA are only realized if the sponsoring association is considered to be an employer for purposes of ERISA.  Those advantages accrue most heavily to small employers.  (Large employers have better ways to effectively and efficiently manage health benefits.) Those advantages can be boiled down to four categories.

The first is administrative convenience.  Establishment and maintenance of a health benefit plan carries with it numerous compliance obligations.  An employer that does not want to devote time and resources to those obligations can offload them to the MEWA.

The second is market clout.  A small employer has little ability to negotiate with insurers and other vendors for better rates or services.  Participation in a MEWA plan that covers a large number of employees, gives the employer the benefit of leverage that it could not exert on its own.

The third advantage is the ability to participate in a self-insured arrangement.  Small employers are not prohibited from establishing a self-insured plan but most chose not to do so because of the risk as well as the enormous administrative overhead that comes with such an arrangement. Participation in a self- insured MEWA affords an employer the ability to enjoy the generally lower costs that self-insurance offers as well as greater flexibility in plan design (though with some increase in risk.)

We have not yet bothered to define what a small employer is because there is no magic number that applies to the first three advantages.  It will mean different things to different employers depending on their circumstances.

The fourth advantage does have a magic number:  50.  If an employer with 50 or fewer employees wants to offer a fully-insured health plan, it will have to purchase a policy that is substantially constrained by the ACA’s insurance mandates, including the offering of ten essential health benefits and small group community rating rules.  A small employer in a fully-insured MEWA (with 51 or more participants) will be deemed to be a large employer and therefore can be covered under a group policy that is not subject to the insurance mandates, community rating and federal rate increase review.

Note, however, that depending upon the arrangement, the MEWA may complete administrative duties such as form filing, the DOL has expressed the view that “each participating employer is acting as a fiduciary with respect to its decision to join the MEWA and provide ERISA-covered benefits through a MEWA. [The employer] has ongoing fiduciary obligations to monitor the plan and confirm that continued participation in the plan is prudent and in the best interests of its employees who are covered participants in the plan.”

Statutory MEWAs

ERISA governs benefit plans that are established or maintained by an employer for its employees.  The “term” employer has three possible meanings in ERISA, one intuitive, the others not so much.  The intuitive meaning is simply a person or entity that has one or more common law employees.  If a given employer provides coverage under its health plan to the employees of another employer or to anyone who is self-employed, it may have created a statutory MEWA.  This happens because the employer has created an arrangement that meets the technical definition of a MEWA, even though the employer has not intended to become a MEWA and generally is not even aware that it has done so.  There are a variety of scenarios where this can occur.  For example:

Employers in these situations are likely not meeting the compliance obligations particular to MEWAs (discussed later under the heading Compliance Obligations) and are therefore subject to substantial penalties at both the state and federal levels.

Association Based Plans – Conventional MEWAs

Conventional MEWAs and AHPs are arrangements that are created by associations of one sort or another.  Previously, we stated that ERISA governs benefit plans established or maintained by an employer for its employees.  An association may have employees, but the plan it establishes is intended to benefit someone else’s employees.  This naturally raises the question of how an association can be considered an employer for purposes of ERISA and it leads to the first non-intuitive meaning of the term “employer”.

ERISA defines the term employer to mean a common law employer or an entity “acting indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.”  ERISA does not elaborate on what it takes for an association to act indirectly for a common law employer.  This is where the pre-AHP guidance from the DOL comes into play.

This guidance establishes three primary requirements:

The practical upshot of the way that this test is applied is that only associations that are limited to employers in the same line of business (commonly referred to as “trade associations”) are likely to meet these qualifications.

Association-Based Plans – AHPs

*Please Note: The 2018 AHP rule is currently under litigation. However, employers may continue to form AHPs discussed above. Click here to view a timeline of this litigation. 

The 2018 AHP rule broadened the criteria available to an association by which it can be considered an employer and brings us to the second non-intuitive meaning of that term.

Solely for purposes of the AHP rule (and for no other purpose under ERISA or any other federal statute or regulation), a “working owner” is considered an employer, even if he or she has no employees. To qualify as a working owner, an individual must:

A working owner is also considered an employee of the trade or business (again solely for the purposes of the AHP rule.)

As a result, sole proprietors who qualify as working owners can participate in a MEWA organized under the AHP rules.  Verification of an individual’s status as a working owner is a fiduciary obligation although the verification process itself is not prescribed.  The DOL has indicated that it might be as simple as requiring a sworn statement for the individual unless a reasonable fiduciary would have cause to question the accuracy of the statement.

The second major change wrought by the AHP rule impacts the concept of commonality of interest.  It does this in two ways.  Previously, we had noted that under the guidance for conventional MEWAs, the main purpose of the association must be to advance the business interests of the members and not to provide insurance.  Under the AHP rule, the sponsoring entity can have the provision of insurance as its primary purpose, provided that it has at least one other substantial business purpose unrelated to the provision of insurance.  Although the AHP rule does not define “substantial business purpose”, the DOL has given some helpful examples.  These include:

The other business purpose should be substantial enough that the association could be a viable entity even if it did not sponsor an AHP. The DOL notes that if the association had operated with an active membership before sponsoring an AHP, that would be compelling evidence of such a substantial business purpose.

In addition, the AHP rule expressly recognizes geography as a basis for commonality.  Employers that have a principal place of business in the same geographic area are deemed to meet the commonality of interest requirements provided that the geographic area does not exceed the boundaries of a single State or a metropolitan area (even if the metropolitan area includes more than one State).

This opens the door to AHPs sponsored by local groups such as chambers of commerce.  By the same token, such AHPs are, by definition, geographically limited.  An AHP that wishes to extend its reach beyond those limitations must revert to the same-line-of-business rules applicable to conventional MEWAs.

The rule  also opens the door to entrepreneurial arrangements that exist primarily for the purpose of providing insurance.  The DOL has recognized that these types of plans have a natural incentive to minimize risk and thereby maximize profit for the association’s owners.  This could result in discriminatory practices that would be inconsistent with – but not prohibited by – the HIPAA non-discrimination rules.

Briefly, the non-discrimination rules prevent a health plan (including a MEWA) from discriminating against an individual with respect to eligibility, benefits, or premiums based on the individual’s health status.  However, they do not prevent a plan from experience rating an employer as a whole.  The expansion of the MEWA rules to allow for AHPs could potentially undercut these protections. Accordingly, the AHP rule prohibits AHPs from treating different employers differently based on the health status of their employees.

Compliance Obligations

A MEWA that is a health plan is subject to the same ERISA requirements as any other ERISA plan.  This includes disclosure and reporting requirements such as the SPD, SBC and SMM and Form 5500; continuation of coverage requirements, HIPAA non-discrimination, and various benefits mandated under federal law.  If the MEWA is not a health plan, these obligations remain with each employer in the arrangement.

Other obligations such as compliance with HIPAA privacy and security rules, filing of Form M-1s, and various duties relating to the handling of plan assets apply–regardless of whether the MEWA is a health plan.

There are a few particulars that deserve special mention.

Form 5500

A MEWA that is itself a health plan is required to file a Form 5500; participating employers are not required to file.

If the MEWA is not a health plan then the filing obligation remains with each individual employer.  Moreover, filing exemptions that are normally available to small employers will no longer apply if the employer is part of a MEWA that is not a health plan.  However, the MEWA can file for individual employers if it is group insurance arrangement (GIA).  A MEWA can be GIA if it (a) fully insures one or more welfare plans of each participating employer; (b) uses a trust or other entity as the holder of the insurance contracts; and (c) uses a trust as the conduit for payment of premiums to the insurance company.

Form M-1

All MEWAs (regardless of their status as health plans) must file a Form M -1 no later than 30 days before operating in any State.  “Operating” means conducting any activity, including but not limited to: marketing, soliciting, providing, or offering to provide benefits consisting of medical care.

Thereafter, the form M-1 must be filed annually by March 1.

Additional M-1s must be filed:

There are a few exceptions to the M-1 filing obligations.  These include:

HIPAA Privacy and Security

A MEWA is considered a “health plan” under the HIPAA privacy and security rules regardless of whether it is a health plan for purposes of ERISA.  The MEWA must institute processes and technical safeguards as described in those rules to ensure that PHI is not inappropriately used or disclosed and (in the case electronic PHI) to ensure that the confidentiality, integrity, and accessibility of the PHI is maintained.

A MEWA that is an ERISA group health plan is also subject to the special privacy rules for such plans.  This includes limitations on the ability to disclose PHI to plan sponsors and various administrative and documentation requirements.

Fiduciary Duties and Plan Assets

Contributions made by employers to a MEWA are plan assets.  The MEWA is therefore a fiduciary by virtue of the fact that it is exercising authority or control respecting the management or disposition of plan assets.  The MEWA is obligated to maintain those assets in a trust and the trustees are tasked with fiduciary responsibility and are required to maintain fidelity bonds to ensure their compliance with that responsibility.

As noted above, the DOL considers “each participating employer . . . as a fiduciary with respect to its decision to join the MEWA and provide ERISA-covered benefits through a MEWA. [The employer] has ongoing fiduciary obligations to monitor the plan and confirm that continued participation in the plan is prudent and in the best interests of its employees who are covered participants in the plan.”

Coverage Requirements

While a MEWA that is a health plan and covers more than 50 employees is not subject to many of the ACA’s coverage requirements, various other requirements remain.


PCORI fees are intended to fund the Patient-Centered Outcomes Research Institute.  The fees are assessed against health insurers and the sponsors of self-insured health plans. [3] In the case of a self-insured MEWA, the fee must be paid by the “committee” that sponsors the plan.  Plan assets may not be used to pay the PCORI fees.

Health Insurance Provider Fee

Self-insured MEWAs are subject to the federal Insurance Provider Fee.  However, due to tinkering by Congress, this fee is not due for the 2017 and 2019 fee years.  It is due, however, for the 2018 fee year.

Marketing Regulations

ERISA prohibits making a knowingly false statement or false representation of fact in connection with the marketing or sale of a MEWA, to any employee, beneficiary, employer, or the government (among others) concerning:

Doing so is a criminal matter and is punishable by substantial fines and up to 10 years in prison. Note that for the purpose of identifying, preventing, or prosecuting fraud and abuse, the Department of Labor is also authorized to enforce applicable state laws against MEWA operators.

Regulation by the States

Although ERISA generally preempts State law as it applies to health plans, it permits the States to regulate the health insurers that provide coverage to MEWAs. Additionally, (to the extent not inconsistent with ERISA [4]), States can regulate MEWAs that are health plans as if they were insurance companies. This includes regulation of things such as licensing, registration, certification, financial reporting, examination, and audit rules, as well as reserve, contribution, and funding requirements.  There are no constraints on State regulation of MEWAs that are not health plans.

In practice, there is little uniformity among the States in the way they regulate MEWAs.  Oversight ranges from little or no regulation to flat prohibition on the formation of self-insured MEWAs.  Many states permit fully-insured MEWAs, but some of those will not permit an insurer to provide coverage to a working owner without employees.  This, of course, obviates one of the main attractions of AHPs.

The question of which States have jurisdiction over MEWAs that operate in two or more States has not been clearly answered and is likely to evoke varying responses among the States.

In short, employers contemplating the use of a MEWA to provide coverage to their employees should be aware of the risks that arise from uncertainty and variability in the regulatory environment.

[1] The question of who employs a worker provided by a PEO is not always a straight-forward determination.  The DOL has indicated that consideration should be given to factors such as who has the right to control and direct the individual performing the services, whether the person for whom the services are performed has the right to discharge the individual and whether the individual, as a practical matter, is dependent on the business to which he or she renders the services.

[2] The IRS has not yet provided clear guidance on how COBRA applies to employers with fewer than 20 employees within a MEWA.

[3] Note that this fee applies only for plan years that end on or after October 1, 2012, and before October 1, 2029.

[4] This should be read narrowly.  A State can’t require a health plan to do something that ERISA forbids and can’t forbid a health plan from doing something that ERISA requires.