Employee Benefits

Rising health care costs during the last decade have made it hard for small companies to obtain health insurance for their workers, and more and more businesses have been turning to pooled funds, known as multiple employer welfare arrangements (MEWA), to provide health benefits. Many MEWAs have reneged on their obligations, however, leaving millions of dollars in medical bills unpaid and many people stranded without any insurance at all. This report focuses on (1) the nature and extent of MEWA failures to pay bills and other problems; (2) hindrances to state regulation and enforcement of MEWAs; and (3) Department of Labor efforts to prevent MEWA problems, protect MEWA participants and their beneficiaries, and assist state enforcement.

GAO found that: (1) officials in the 46 states that MEWA have served since 1988 stated that some MEWA failed to pay medical claims, did not comply with insurance laws, and violated state criminal laws; (2) states reported that the number of MEWA problems increased between 1988 and 1990 when MEWA left at least 398,000 participants and their beneficiaries with over $123 million in unpaid claims and many other participants without insurance; (3) state officials attributed the increase in reported problems to more MEWA providing coverage to residents, more public participation in MEWA, and greater media coverage of MEWA problems and state insurance agency efforts; (4) efforts by state insurance officials to regulate MEWA, enforce state laws, and recover unpaid claims were hindered by such factors as an inability to identify MEWA, MEWA claims of exemption from state laws, and difficulty imposing criminal sanctions; (5) many states' enforcement were slowed because states were unable to identify MEWA until complaints were received, and because MEWA asserted that they were exempt from state regulation; (6) in October 1991, DOL provided a technical assistance booklet to state insurance offices, but some states indicated that the guidance did not completely answer all their questions about exemption from state law and regulatory authority; (7) in both 1990 and 1991, DOL sought legislative authority to establish a federal registration process to help states identify MEWA, but was not successful; and (8) according to DOL, MEWA investigations increased from 30 in December 1989 to 86 in September 1991.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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