How do MEWAs typically manage the risks associated with employee benefit plans?

MEWAs, or Multiple Employer Welfare Arrangements, manage the risks associated with employee benefit plans primarily by pooling risks to self-insure. This approach allows a group of employers to come together to provide benefits to their employees, effectively sharing the financial risk associated with healthcare costs among all participants.

When MEWAs pool their resources, they can create a larger risk base, which helps to reduce the volatility of claims and spreads the costs more evenly. This self-insurance model can lead to potential cost savings for the member employers, as they are not reliant on traditional insurance companies for coverage and can have more control over their plan design and funding.

In contrast, eliminating self-insured companies, hiring third-party insurers, or creating individual policies for each member do not enhance the risk management aspects that define the cooperative nature of MEWAs. Instead, these options could lead to less flexibility and higher costs for employers, which is contrary to the purpose of a MEWA. By leveraging the collective nature of the arrangement, MEWAs can better navigate the risks inherent in employee benefit plans.