Turbulent Past, Uncertain Future: Is It Time to Re-evaluate Regulation of Self-Insured Multiple Employer Arrangements?

Journal of Insurance Regulation - Spring 2005
Vol. 27, No. 3
Spring 2005
Kofman, M. and J. Libster

Many small businesses finance health coverage through multiple employer arrangements, also called association health plans (AHPs) and MEWAs.  However, in the past 30 years, many such groups have become insolvent.  Since 2000, four AHPs left 66,000 people without health insurance and with an estimated $48 million in medical claims. 

When a self-insured AHP becomes insolvent, the impact on consumers is significant.  Some small businesses and individuals file for bankruptcy or end-up with bad credit.  Some lose access to medical care or have treatments disrupted.  Many become uninsured. 

This article helps inform federal and state policymakers looking to encourage growth of self-insured AHPs as a way to cover uninsured people and to help small businesses.  This article is a result from a first of its kind study of state consumer protections in every state applicable to multiple employer groups, focusing on solvency.  It examines the troubled history of self-insured multiple employer arrangements and their regulation, comparing their regulation to traditional insurance companies.  Some of the recommendations to state policymakers on how to better protect small businesses and their workers who rely on such arrangements for their health coverage include: requiring self-insured multiple employer arrangements to meet the solvency standards that apply to insurers, expanding state safety-nets liek state guarantee funds to cover arrangements in cases of insolvency, and clarifying authority of recieverships to ensure that recievers woudl be able to help consumers in financially unstable or insolvent multiple employer arrangements.  If federal policymakers were to allow self-insured associations to operate nationally, such arrangements may pose even higher risk of insolvency.  Federal policymakers should establish strong financial requirements similar to state requirements for insurers and set up a federal fund to pay claims of insolvent arrangements to protect businesses and their employees in cases of association insolvency. 

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