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News Release

For Immediate Release: December 5, 2011
Contact: Jason Surbey or Mike Trupo
Phone: 202-693-4668/202-693-6588
Email: Surbey.jason@dol.gov/Trupo.michael@dol.gov
Release Number: 11-1677-NAT

US Labor Department proposes rules under Affordable Care Act to crack down on health care fraud, protect workers and small businesses
New rules to help prevent multiple employer welfare arrangements from defrauding consumers

WASHINGTON The U.S. Department of Labor's Employee Benefits Security Administration today announced two proposed rules under the Affordable Care Act to protect businesses and workers whose health benefits are provided through a multiple employer welfare arrangement. MEWAs frequently have been used by scam artists and criminals 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 so that employers, workers and their families will not unexpectedly be cut off from needed health care services. 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.

"Too many MEWAs are taking advantage of good employers who want to make health insurance available to their workers, and too many hardworking Americans have suffered," said Secretary of Labor Hilda L. Solis. "These proposed rules under the Affordable Care Act will crack down on those who want to use MEWAs to defraud American families."

Through MEWAs, unrelated employers, typically small businesses, seek to provide health care and other benefits to their workers at what is represented to be a lower cost than other traditional forms of coverage.

The promoters, marketers and operators of MEWAs often have taken advantage of gaps in the law to avoid state insurance regulations, such as a requirement to maintain sufficient funding and adequate reserves to pay the health care claims of workers and their families. In the worst situations, operators of MEWAs have drained their assets through excessive administrative fees or outright embezzlement, resulting in harm to participants and their families. In some cases, individuals incur significant medical bills before they learn that claims are not being paid and that they are liable and need to pay their medical bills themselves. The Affordable Care Act includes provisions designed to remedy these gaps.

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 Dec. 6 Federal Register and also are available at http://www.dol.gov/ebsa/healthreform/.

Since President Obama signed the Affordable Care Act in March 2010, more than 22.6 million people with Medicare have received free preventive care benefits such as screenings and vaccinations, and another 2.2 million have saved more than $1.2 billion on their prescription drugs an average savings of $550 per person. Additionally, adults under the age of 26 are now able to remain on a parent's health insurance plan, small businesses and tax-exempt organizations are eligible for tax credits and the denial of coverage to those with pre-existing conditions is coming to an end. For more information about the Affordable Care Act, visit http://www.healthcare.gov/index.html.

EBSA protects the retirement, health and other workplace-related benefits of America's workers and retirees, and their families. The agency oversees approximately 718,000 private sector retirement plans, 2.5 million health plans and a similar number of other benefit plans that cover roughly 140 million workers, retirees and dependents. Learn more at http://www.dol.gov/ebsa/.

U.S. Department of Labor news materials are accessible at www.dol.gov. The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.