Hassle-Free Health Coverage: Multiple Employer Trusts

Multiple employer trusts provide health insurance benefits to small businesses through a series of trusts usually established based on specific industries such as manufacturing, sales and service, real estate, etc. Most states have group size eligibility requirements for employer groups to qualify for group insurance.

Generally, states may require a minimum of five to ten participants for a group to be eligible for group benefits. METs typically have no such requirements and in reality a group of one could be eligible for group benefits.

METs are formed by insurance companies or third-party administrators who are called sponsors. The sponsor develops the plan, sets the underwriting rules and administers the plan.

To help prevent the possibility of adverse selection, the underwriter must make sure that the sponsor's underwriting rules are adequate and that he or she adheres to them.

This is necessary because an employer with only two, three or five employees could elect to join an MET because they know of the poor health condition of one of the employees.

The underwriting standards must be able to prevent this from happening.

If state law allows, METs may be noninsured. A noninsured plan is a self-funded plan; that is, a plan that operates without the services and funds of an insurance company. The trustee has charge of the funds and the policies and all financial activities occur through the trust.

As with a traditional group insurance plan, a master policy is issued to a trustee who is operating under a trust agreement. The master contract has its own policy effective date and renewal dates which the insurance company may use for changing rates on the MET's entire block of business. Also, every employer under the MET has its own effective dates and anniversary dates. Rates are generally changed on an employer's anniversary date, but usually not more than once a year.