Self-Insuring Employee Health Benefits

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Abstract
Self-insurance is a popular way to fund employee health benefits, but it presents a potential barrier to state health insurance reform initiatives because self-insured health plans are able to avoid state regulation. Thus it is important to understand why employers self-insure. This study tests an explanatory model of self-insurance, using data from the 1989 Survey of Health Insurance Plans. Models predicting self-insurance are estimated for private employers and for all health plan sponsors, including public employers, unions, and trade associations. The author found a threshold for self-insuring among private employers at about 100 employees and another at about 200 workers when all health plan sponsors were considered. Plans with union members are more likely to be self-insured. Self-insurance is more likely in the presence of alcohol treatment mandates but less likely with mental health mandates.

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