The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) announced two proposed rules under the Affordable Care Act (ACA) to protect businesses and workers whose health benefits are provided through a multiple employer welfare arrangement (MEWA).

In a press release, the agency explained that MEWAs can be used to defraud consumers, resulting in an inability to pay medical claims. When such MEWAs become insolvent, they may leave consumers with substantial unpaid medical bills. For employers or employee organizations that have paid premiums or made contributions to a MEWA, and thought they were doing the right thing for their workers and their families, the impact also can be significant.

The proposed rules call for MEWAs to adhere to enhanced reporting requirements. The rules also will increase the Labor Department's enforcement authority to protect participants in such plans and allow the department to shut down MEWAs engaged in fraud or other activities that present an immediate danger to the public safety or welfare.

Under the proposals issued today:

• MEWAs must register with the Department of Labor prior to operating in a state or be subject to substantial penalties. This step will allow the department to track MEWAs as they move from state to state and to identify their principals, which will provide the department with important information regarding potentially fraudulent MEWAs.
• The secretary of labor will be able to issue a cease and desist order when it appears that fraud is taking place or an arrangement is causing immediate danger to the public safety or welfare.
• The secretary of labor could seize assets from a MEWA when there is probable cause that the plan is in a financially hazardous condition.

Complete details on all provisions will be published in the December 6 Federal Register. The press release is available here.