The Office of General Counsel issued the following informal opinion on December 5, 2002, representing the position of the New York State Insurance Department.
Re: Multiple Employer Welfare Arrangements (MEWA)
Do Circular Letter 8 of 1991, dated July 11, 1991, and Office of General Counsel Opinion 93-124, dated December 23, 1993, still reflect the position of this Department relative to the licensing requirements applicable to MEWAs?
The above-cited documents are still in effect. However, there are several recent opinions of the Office of General Counsel concerning MEWAs.
Since this is a general inquiry, no specific facts were furnished.
Health benefits provided by employers or labor unions constitute a Employee Welfare Benefit Plan, as defined in the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1002(a) (West 1998):
The terms "employee welfare benefit plan" and "welfare plan" mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability . . . .
Such benefits may be provided either through the purchase of insurance or through self-funding by the employer or labor union. Although other types of groups may qualify for health insurance, policies of insurance covering employees and union members are most often issued in accordance with New York Insurance Law § 4235(c)(1)(A), (C), or (D) (McKinney 2000 and 2002 Supplement), which authorize:
(A) A policy issued to an employer or to a trustee or trustees of a fund established by an employer, which employer or trustee or trustees shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. However, such a plan may permit a limited number of selections by employees if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable . . . . If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees.
(C) A policy issued to a labor union, which shall be deemed the policyholder, insuring, with or without evidence of insurability satisfactory to the insurer, members of such union and insuring, except as hereinafter provided all of such members or of any class or classes thereof determined by conditions pertaining to their employment or membership in the union or both for amounts of insurance on each person insured based on a plan precluding individual selection, provided however, such a plan may permit a limited number of selections by members if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable, and not less than fifty percent of all eligible union or, if less, fifty or more of such eligible members are insured.
(D) A policy issued to a trustee or trustees of a fund established, or participated in, by two or more employers or by one or more labor unions, or by one or more employers and one or more labor unions, which trustee or trustees shall be deemed the policyholder, to insure employees of the employers or members of the unions for the benefit of persons other than the employers or the unions . . . .
New York Insurance Law § 1101(a) (McKinney 2000 and 2002 Supplement) defines doing an insurance business:
In this article: (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 (McKinney 2000) prohibits the doing of an insurance business without a license from this Department, unless the entity is otherwise exempt from the requirement of obtaining a license.
The payment of health benefits to an employee or union member, if the employee or union member has to contribute to the cost of the benefit, would be an insurance contract within the meaning of New York Insurance Law § 1101. One of the entities exempt from securing an insurance license, which exemption was pursuant to New York Insurance Law Article 3-A (McKinney 1985), since recodified as New York Insurance Law Article 44 (McKinney 2000), was a jointly administered welfare fund
Most employee welfare benefit plans are exempted by ERISA, 29 U.S.C.A. § 1144(a) (West 1998) from state law. Accordingly, only those employee welfare benefit plans that are excluded from ERISA, governmental plans and church plans, 29 U.S.C.A. § 1103(b)(1) & (2) (West 1998), are now subject to regulation pursuant to New York Insurance Law Article 44.
A special rule, however, applies to MEWAs, as 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, 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 [of Labor] finds to be collective bargaining agreements . . . .
The special rule applicable to MEWAs is set forth in 29 U.S.C.A. § 1144(b)(6) (West 1998):
(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 . . . .
(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 . . . .
In 2000, the Secretary proposed a regulation concerning what would constitute a bona fide collective bargaining arrangement, 65 Fed. Reg. 64482 (October 27, 2000). No regulation to confer class exemptions in accordance with 29 U.S.C.A. § 1144(b)(6)(B) has been proposed.
The proposed regulation sets forth 8 criteria, the meeting of 4 of which would create a rebuttable presumption that a bona fide collective bargaining arrangement exists. Proposed 29 C.F.R. § 2510.3-40(b)(4). In addition, the regulation, proposed 29 C.F.R. § 2510.3-40(c) would provide:
An employee welfare benefit plan shall not be deemed to be "established or maintained under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements for any plan year in which: . . . (2) The agreement under which the plan is established or maintained is a scheme, plan, stratagem or artifice of evasion, a principal intent of which is to evade compliance with state law and regulations applicable to insurance . . . .
Since the 1993 Opinion, the Office of General Counsel has issued several opinions on the issue of MEWAs, which may be accessed on this Departments web site, and also may be available from the National Insurance Law Service, either in hard copy or electronically.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.