Rules would boost Labor's antifraud powers

Two new proposed rules aim to cut off revenue (PDF) for small employer self-funded insurance pools that are suspected of illegal activity.

The proposed rules would give regulators new tools to move more aggressively to shut down the insurance pools, known as multiple employer welfare arrangements, which frequently become insolvent—either through mismanagement or by design—according to federal officials. Such arrangements are attractive to some small employers because they offer lower-cost health insurance coverage and other benefits to workers.

“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,” Labor Secretary Hilda Solis said Monday in an announcement of the proposed regulations.

In order to prevent such entities from leaving consumers with substantial unpaid medical bills, the proposed rules would increase Labor's enforcement authority and allow federal regulators to shut down any engaged in fraud or other activities that present an immediate danger to the public safety or welfare.

The proposed rules—issued under authority provided by the Patient Protection and Affordable Care Act—would require the entities to register with the Labor Department before operating in a state or face “substantial” penalties; authorize the Labor secretary to issue a cease-and-desist order if it appears that fraud is taking place or an arrangement is causing immediate danger to the public safety or welfare; and allow the secretary to seize assets from such entities if there is probable cause that the plan is in a financially hazardous condition.