The insurance industry is full of acronyms. As a business owner, there is a new acronym on the street that you must learn: MEWA (Multiple Employer Welfare Arrangement). Whether you are a sole proprietor or a business with up to 50 employees, this is for you. Learning about MEWA’s is one of the first steps you should be taking if you are looking to save money on health insurance
Once you know you have enough employees to qualify for group health insurance, many business owners and operators struggle with one important question - "Where do I find affordable health insurance?" With premiums rising faster than the desert heat, both workers and employers have trouble trying to fit health insurance plans into their respective budgets.
Providing quality health insurance for employees is often the difference between attracting high achievers and losing the best workers to the competition. Many agree health insurance is the most important benefit a business can offer employees, but it comes at a high cost. In fact, health insurance is typically an employer’s second highest cost behind payroll. Offering health insurance to employees is crucial because “group” health insurance is more affordable and richer in benefits than individual health insurance. Having a group health insurance plan available to employees can save them thousands of dollars every year. And, as previously mentioned, it can help you recruit and retain top tier talent.
According to an eHealth study in 2018, the average per employee cost of a small group insurance plan was $409/month. In comparison, individual plans ran around $440/month with much less coverage. The average per person deductible for a small group plan was $3,140 while the average per person deductible for individual health plans was about $4,600. This gap continues to grow bigger and bigger.
Plus, employees enrolled in group coverage typically experience broad, national networks. Employees enrolled in individual coverage typically have narrow, limited networks. In today’s marketplace, it can be nearly impossible for employees to find reasonable health insurance unless their employer offers it as a benefit.
Lastly, a significant injury or illness puts workers thousands of dollars into a financial hole. This is troubling when considering a majority of our nation’s workers live paycheck to paycheck. With workers living on the thinnest of margins, health insurance provided by businesses can make a tremendous difference in employees’ lives. According to the United States Department of Labor, MEWA health insurance programs have the potential to put more money into the bank accounts of both workers and employers.
So, What Is a MEWA?
A MEWA is formed by many small businesses joining together from different industries to share in the overall claims risk of the larger pool. By being part of a large, self-funded pool, businesses can spread their claims risks while having financial protection from the insurance carrier’s stop loss coverage.
A MEWA allows multiple employers to band together to leverage purchasing power as a group. Although numerous employers participate in MEWA health insurance programs as a whole, employers still have flexibility. They can choose plans that fit their individual needs.
MEWA health insurance programs surged in popularity shortly after the passage of the Patient Protection and Affordable Care Act (ACA). ACA plans are community rated and based on the ages of those enrolling in coverage (without asking medical questions).
Therefore, insurance carriers take on unknown risks with ACA plans. This causes them to charge extremely high rates, which is one of the reasons the ACA has been shrinking.
On the other hand, MEWAs require employees at a particular business to go through a health questionnaire to obtain rates. The health questionnaire then allows MEWA underwriters to properly rate a business. Doing so often saves the employer and employees up to 50% on their monthly health insurance premiums. There has been a mass exodus of businesses leaving ACA plans for MEWA or level-funded insurance for this exact reason. In most scenarios, businesses will see significantly lower rates through a MEWA in comparison to the ACA. However, if a business has major medical concerns, then an ACA plan may be the better option.
How Does It Work?
According to the definition presented by ERISA, multiple employer welfare arrangements work as an employee benefits plan to provide employees with better health insurance options. Several employers agree to pool resources together to purchase group health insurance for workers at all levels. If these employers went solo when purchasing health insurance (e.g. purchasing an ACA plan), they could be priced out of the health insurance market. Economies of scale is the economic principle that makes MEWA group health insurance programs work. Dental, vision and life insurance are are some of the additional benefits available to companies that pool resources through a MEWA.
With economic conditions rapidly changing, as well as unexpected health care crises like the COVID-19 pandemic, MEWA medical plans give smaller employers more flexibility to cover changing worker health care needs.
Reasons the MEWA Insurance Model Benefits Businesses.
MEWA medical plans have several distinct advantages over other forms of employer-sponsored health insurance policies.
Pooling together financial resources allow businesses to acquire a much more affordable health insurance policy for their employees. In fact, the larger the pool of employers, typically the lower amount of money each member of co-op has to pay for employee health insurance.
2. Fixed Monthly Payments
Traditionally, “self-funded” health plans have varying premium payments from month to month. However, MEWA insurance presents employers the ability to have a fixed rate from policy inception to renewal. Once a business’s rates have been established, they will not change until their renewal, which is key for budgeting purposes.
3. Wide variety of plan designs
Although a MEWA is composed of many different businesses, each individual business chooses their own plan or plans. This allows businesses to offer health insurance plans that fit their employees’ specific needs. Workers have access to a prescription drug network that is administered by the guidelines set up by the Medicare prescription drug program (for more info, check out this Medicare Cincinnati guide). From low deductible co-pay plans to high deductible Health Savings Account (HSA) plans, MEWAs offer a wide variety of options.
4. Broad networks
Another advantage of obtaining health insurance through a MEWA is the ability to choose a plan with a broad, national network. The network of coverage in the plan is a major factor. Employees will greatly appreciate having access to a large network of hospitals and doctors both locally and nationally.
Employers Best Suited for MEWA Insurance
Businesses with 1-50 employees (including sole proprietors and self-employed individuals) can join MEWAs. There are no business industry restrictions to join a MEWA. However, there can be certain minimal tax requirements to participate in a MEWA. For assistance, reach out to Wilson Insurance Group to find out if your business is eligible.
Can you obtain Dental or Vision Benefits through a MEWA?
Health care goes well beyond preventing standard aches, pains, and illnesses. Companies that join MEWAs have the option to offer employees dental and vision benefits. Dental coverage frequently focuses on preventive care, such as scheduling at least two visits per year for teeth cleaning procedures. Other preventive measures that can be included in typical MEWA dental insurance policies are orthodontic treatments to straighten teeth and tooth extraction to prevent nerve damage.
Vision care emphasizes the importance of receiving regularly scheduled tests to detect the onset of vision impairment. Employees covered by MEWA vision insurance have access to doctors that prescribe the correct type of eyewear to improve vision. MEWA vision insurance can cover corrective eye procedures that help employees function optimally in the workplace.
Employers that have just one worker on payroll (even if the worker is self employed) can qualify to participate in a MEWA medical plan. MEWAs give small businesses the opportunity to obtain affordable and comprehensive health insurance coverage. This allows them to compete with much larger corporations for attracting the best group of workers. Knowing that providing health insurance is one of the most important job perks for a vast number of workers, MEWA medical plans can be your business’s solution.
This is a great option if you run a small business and you want to offer health insurance that covers your entire team of workers at an affordable cost. The time has come to act by participating in a program that pools the financial resources of several other businesses similar in size. With that being said, your business may be an even better fit for level-funded health insurance plans. To get help, fill out our contact form. Then, a Wilson Insurance Group consultant will reach out and help you decide on the right plan for your company.