What is an MEWA and can it help us with the cost of health insurance?
The Employers Association – a century-old but rather low-profile trade group – has been holding meetings around the state recently to introduce smaller businesses to the concept of a Multiple Employer Welfare Association, or MEWA, which it touts as a potential alternative to traditional employer-sponsored health plans.
As the name implies, an MEWA starts out like a group purchasing plan. If successful, the program should evolve into a self-funded group – managed in much the same way the most sophisticated large employers manage this key expense.
The large company’s human resources staff is replaced by an outsourced contract with a consulting firm having this specific expertise, and the expenses associated with the MEWA are presumably assessed to participating companies on a pro-rata basis. Naturally, the expenses are expected to be dwarfed by the savings benefit of participation.
If you were to assume that our current employer-sponsored, insurance-funded system of health coverage is the only alternative, and that government-sponsored reform is unlikely or undesirable, then the MEWA idea has much merit.
A large self-insured, skillfully managed health plan in which smaller companies could participate is surely an attractive option. Lacking both the resources and expertise to manage health expenses, not to mention the claims data that would make management possible, small employers are essentially powerless to influence this key expense except by shifting costs onto their employees.
In much larger firms, a more rational and organized approach to health care costs is possible. By identifying and managing the relatively small percentage of workers who represent the preponderance of claims expense, effective self insurers can and have achieved dramatic savings results. At the same time they can have a most positive impact on the health and welfare of the work force, improving productivity and worker satisfaction.
So why haven’t you heard about the MEWA option before? Perhaps the easiest answer is found on the U.S. Department of Labor fact sheet (available at
www.dol.gov) on the subject.
“The Department has devoted significant resources to investigating and litigating issues connected with abusive MEWAs created by unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations,” the Labor Department says.
Still, the Employers Association and its proposed consultant are recognized and reputable organizations. And MEWAs would be subject to regulation by the R.I. Office of the Health Insurance Commissioner, and presumably would be required to establish appropriate reserves in the event of insolvency or lawsuits.
The preliminary but necessary transitional phase – during which the MEWA operates essentially like an Association Health Plan (AHP) – is also potentially problematic. Group purchasing of this type, although still practiced in some areas, has largely fallen victim to cherry-picking by insurers and subsequent adverse selection. Employer participants might shift to lower-cost alternatives, subjecting the plans to constantly shifting risk profiles.
To its credit, The Employers Association was quite forthright in stating clearly that MEWAs are not intended to reform the health care system. Properly executed, however, they could improve the lot of some small businesses.
Unfortunately, perhaps, it seemed to me and some others in the audience that the death spiral of our present system had gone too far already to be saved by MEWAs.
In health care, we have reached a point where we cannot solve anyone’s problem unless we solve everyone’s problem. The principles of a well-managed MEWA, however, are clearly part of that solution.
In fact, perhaps the State of Rhode Island should consider setting up a large MEWA for all its citizens. •
Ted Almon is president and CEO of The Claflin Co., a medical equipment supplier, and is an active participant in the debate over health care in Rhode Island.
