PRELIMINARY-PLEASE DO NOT
QUOTE
Trends & Determinants of Selfinsuring Health Benefits
1997-2004
Philip F. Cooper
Kosali I. Simon
Why do Firms Self-Insure (and Why
Should We Care)?
 Firms self-insure to lower costs for economic and
legal reasons
– Over 50% of all insured employees in 1990s received self
insured benefits (Jensen, Gabel, Hawkins 2001)
 States ability to regulate insurance limited when firms
self insure
– Mandates on benefits or workers, premium tax, coverage
continuation, community rating etc.
Prior ResearchPrevalence and trends in self insurance
McDonnell et al (1986)
–
Over 50% of employees with ESI are in selfinsured plans in 1984, varies by firm size


Acs, Long and Marquis (1996)
–
42% of employees with ESI are in self-insured
plans in 1987, 32% in 1991, 41% in 1993


33% of employees with ESI are in self insured
plans in 1997, down from 40% in 1993

1993 and 1997 RWJF
Park (2000)
–
% of employees in firms that self insure at
least one plan in 1993, large variation by states


NMES 1987, HIAA 1991, RWJF 1993
Marquis and Long (1999)
–

Prevalence Summary: % of Insured Employees in Self-insured
Plans, by Year
HCFA survey of employers, 1984
1993 NEHIS
60%
% of insured employees in
self-insured plans

50%
40%
30%
20%
10%
0%
1980
1985
1990
1995
2000
2005
Year
Gabel, Jensen and Hawkins (2003)
–
% of workers in self insured plans 55% in
1993, 57% in 1996, 52% in 1999, 50% in 2001

HIAA/KPMG/HRET surveys of employers
93,96,99,01
•Caution: survey designs vary across studies so numbers not directly comparable
•Many of these studies show prevalence and trends by firm size, industry,
plan type (HMO vs PPO etc), premiums
Influence of State Regulations on Self
Insurance
 Cross sectional studies
–
–
–
Morrisey and Jensen (1993)
Garfinkel (1995)
Park (2000)
 Studies covering more than one year
–
Gabel and Jensen (1989)
– Jensen and Morrisey (1990) finds that mandates are expensive; so is
self insurance
–
–
Jensen, Cotter and Morrisey (1995)
Studies on effect of state mandates and other regulations on decision to insure
 Jensen and Gabel (1992)
 Gruber (1994)
 Kaestner and Simon (2002)
–
Buchmueller et al (2007)
 Overall picture-firm size matters, but state regulations do not appear
important, at least not in more recent years.
Our contributions
 Uses rich data new to this literature
 Multiple years of the same survey, recent
years
 We examine
– A) Recent trends in self insurance (descriptive)
– B) Regression models to consider impact of state
regulations, establishment, and local market
characteristics on decision to self insure
Data
 Medical Expenditure Panel Survey – Insurance
Component (MEPS-IC) 1997-2004
– Large nationally representative annual employer survey ~
–
–
–
–
25,000 establishments
Health insurance plan info – type, self-insured/ purchased
Establishment characteristics
State level estimates
Response rate ~ 78 percent
 ARF
 State mandates
State Mandates
 State regulation mandated benefits
 Small group reform
 Premium taxes
 Stop loss regulation
Number of Workers Enrolled in Selfinsured Plans
40,000,000
30,000,000
20,000,000
10,000,000
0
1997
1998
1999
Source MEPS-IC 1997-2004
2000
2001
2002
2003
2004
Percent of Active Enrollees in Selfinsured Plans
60
50
40
30
20
10
0
1997
1998
1999
2000
Source MEPS-IC 1997-2004
2001
2002
2003
2004
Percent of Establishments that offer a
Self-insured Plan
40
30
20
10
0
1997
1998
1999
2000
Source MEPS-IC 1997-2004
2001
2002
2003
2004
Percent of Establishments that Offer a
Self-Insured Plan by Firm Size
100
80
Less than 50
More than 50
500 or more
60
40
20
0
1997 1998 1999 2000 2001 2002 2003 2004
Source MEPS-IC 1997-2004
Percent of Establishments that Offer a
Self-Insured Plan by Whether Multiple
Location Firm
80
60
One
More than one
40
20
0
1997 1998 1999 2000 2001 2002 2003 2004
Source MEPS-IC 1997-2004
Average Single Premium
$4,000
$3,000
Purchased
Self-Insured
$2,000
$1,000
$0
1999
2000
2001
2002
Source MEPS-IC 1997-2004
2003
2004
Average Family Premium
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Purchased
Self-Insured
1999
2000
2001
Source MEPS-IC 1997-2004
2002
2003
2004
Percent of Establishments that Self-Insure
and Offer a Purchased Plan
25
20
15
10
5
0
1997
1998
1999
2000
Source MEPS-IC 1997-2004
2001
2002
2003
2004
Logit Results Probability of Offering A
Self-Insured Plan(significant)
 Increase likelihood
 Decrease likelihood
– Firms size
– Low wage
– Multiple locations
– Retail trade, services
relative to manufacturing
Conclusion
 No statistically significant effects from mandated
– Suggests they don’t drive the decision to self-insure
 Multiple location and size matter
 Future work will add more state regulation (re-
insurance limits)