Group Purchasing Arrangements: Implications of MEWAs

Publication Date: July 2003

Publisher: California HealthCare Foundation

Author(s): Kevin Lucia; Eliza Bangit; Mila Kofman

Research Area: Health

Type: Brief

Coverage: California

Abstract:

Policymakers and small businesses have long been interested in establishing and promoting group purchasing arrangements for health insurance based on the premise that pooling risk and purchasing power can reduce premiums and increase access to coverage.

In 1995, the California Legislature authorized self-insured multiple employer welfare arrangements (MEWAs) -- a type of group purchasing arrangement -- to improve access to health insurance for small businesses, self-employed individuals, and people with seasonal jobs, such as agricultural workers. MEWAs cover a small fraction of Californians, but legislative activity at the state and federal level could increase their significance both in California and nationally. Many of the issues raised in this issue brief -- licensing criteria, regulatory oversight, solvency issues, consumer protections -- are relevant to the policy discussions related to association health plans and other group purchasing arrangements. This July 2003 issue brief discusses MEWAs, particularly those that self-insure, and their role in the California insurance market. It summarizes state and federal laws protecting consumers covered by such arrangements, identifies lessons from MEWA management and state oversight, and discusses market problems such as insolvency, fraud, and unauthorized MEWAs.