Facebook Twitter LinkedIn Google Plus RSS

Bill aims to open up health plans to outside investors

By ,

A bill that allows outside investors to finance multiemployer health plans, allowing the investors to share in financial gains that a successful plan might generate, is headed for final legislative approval in Trenton on Monday.

Legislation changing the rules for “multiemployer welfare associations,” or MEWAs passed the Assembly unanimously on June 26 (A3421) and the Senate version, S2220, is posted for a vote during the Senate session scheduled to convene 2 p.m. Monday.

Currently a handful of MEWAs operate in New Jersey, including one that the managed health care company QualCare has run for more than a decade and currently has more than 14,000 members.

The Employers Association of New Jersey, through a partnership with QualCare, enables its members to join QualCare’s MEWA, the Affiliated Physicians and Employers Health Plan.  Employers and workers who belong to a MEWA pay assessments to cover medical claims and the MEWA purchases “stop-loss” or reinsurance to protect it from runaway claims.

The bill permits the MEWA to obtain its minimum $300,000 claims-paying reserve from “a third-party source, such as a financial institution or investor,” and permits MEWAs to share in the plan’s underwriting gains.

The bill stipulates that gain-sharing “is allowable only if the MEWA has first demonstrated two consecutive years of positive operating results.” A distribution of gains cannot take place if the MEWA incurred an operating loss in the immediately preceding year.

QualCare supports the legislation.

“We feel that these changes to expand the MEWA law are long overdue,” said Dawn L. Wright, vice president, insurance operations for QualCare. “The recent health reform changes provide significant federal oversight on self-funded health plans and MEWAs are subject to those new regulations. The changes to the MEWA law now allow MEWAs to be able to compete more effectively and to provide alternatives to the limited number of carriers offering coverage in New Jersey.”

Joel Cantor, director of the Rutgers Center for State Health Policy, said, “Care needs to be taken in crafting MEWA regulation not to encourage small groups from taking on more financial risk than they can absorb.” And he said the state should guard against creating “an un-level playing field between small groups buying regulated insurance coverage and those buying through MEWAs. Small group insurance regulations are intended to protect the small businesses, their employees, and to assure a well-functioning market. MEWAs should not be a back door to opt out of these rules.”

John Sarno, president of EANJ, said the legislation appears to conflict with federal law requiring that MEWAs be operated for the benefit of the participants in the plan.

“The idea of allowing third-party investors to invest in a MEWA and to get a return based on MEWA surpluses undermines federal law, which requires the MEWA to be run as a trust with a fiduciary duty owed to the participants,” he said.

ALSO ON NJBIZ:

$350M logistics center coming to Linden

Jersey City apartment tower aims to blend arts with luxury living

Despite incentive package, Dietz & Watson facility and jobs will leave N.J.

Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

Leave a Comment

test

Please note: All comments will be reviewed and may take up to 24 hours to appear on the site.

Post Comment
View Comment Policy

Comments

close
Subscribe to Our Newsletters!
Click Here to Subscribe for Free Now!