In A Comparison of Self-Funded and Insured Health and Welfare Plans, health benefits expert witness Mark Johnson, J.D., Ph.D., ERISA Benefits Consulting, Inc., writes:
By working around the state insurance reserve, contribution, and other requirements applicable to insurance companies, MEWAs typically market their coverage at a lower rate than those of regulated companies. This is primarily why a MEWA is an attractive alternative for small businesses who find it difficult to obtain affordable health care coverage for their employees. In reality, however, a number of MEWAs have been unable to pay claims as a result of insufficient funding and inadequate reserves.
Sometimes MEWAs are operated by individuals who drain the assets through excessive administrative fees and embezzlement. Since 1983 a MEWA that constitutes an ERISA-covered plan is required to comply with the provisions of Title I of ERISA applicable to employee welfare benefit plans, in addition to state insurance laws and regulations.