insurance

Multiple Employer Welfare Arrangement

A group health insurance arrangement where multiple unrelated employers join together to provide employee benefits, sharing costs and administrative responsibilities. These arrangements allow smaller employers to access group insurance rates typically available only to larger companies.

Example

“Five small manufacturing companies formed a Multiple Employer Welfare Arrangement to provide health insurance benefits to their 200 combined employees at rates comparable to large corporations.”

Memory Tip

Remember MEWA = 'Many Employers Working Altogether' for better benefits.

Why It Matters

MEWAs help small businesses offer competitive employee benefits they couldn't afford independently, improving recruitment and retention. They provide access to better rates through increased bargaining power and risk spreading across multiple employer groups.

Common Misconception

Many employers believe MEWAs are automatically safer and more regulated than other group insurance options, but some MEWAs operate with less oversight than traditional insurance. Not all MEWAs are fully insured, and some are self-funded arrangements that carry additional financial risks for participating employers.

In Practice

A MEWA includes 8 small companies with 15-30 employees each, totaling 180 covered lives. Individual employer health insurance would cost each company $850 per employee monthly. Through the MEWA, costs drop to $650 per employee monthly, saving each company $3,000-$6,000 annually. The MEWA negotiates with insurers as a group of 180 employees rather than separate small groups, accessing better rates and plan options.

Etymology

This term originated from the Employee Retirement Income Security Act (ERISA) of 1974, which formally defined and regulated these collaborative employer arrangements. The concept developed to help small businesses access affordable group insurance.

Common Misspellings

multiple employer welfare arangementmultiple employer wellfare arrangementmulti employer welfare arrangementmultiple emploer welfare arrangement

Related Terms

Group Health Insurance

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