State Insurance Regulation and Employers' Decisions to Self-Insure uri icon


  • With their tremendous growth over the last decade, self-insured health plans now enroll the majority of people who have employer-sponsored health insurance. This article devel- ops a model of an employer's choice of funding method for workers' health insurance benefits that predicts that self-insurance is more likely as the burden of state insurance regulation increases. We then test the hypothesis that employers' decisions to adopt self-insurance during the 1980s were motivated by desires to avoid state premium taxes and the increasing number of state-mandated benefits. Using data on 274 firms observed between 1981 and 1984/1985 and 219 firms observed between 1984 and 1987, we estimate two logit models for an employer's decision to convert to self-insurance (one for each data set). We find evidence that state insurance regulation spurred the adoption of self-insurance in the early 1980s, but by the mid-1980s firms were converting for reasons other than the avoidance of regulation.

altmetric score

  • 6

author list (cited authors)

  • Jensen, G. A., Cotter, K. D., & Morrisey, M. A.

citation count

  • 25

complete list of authors

  • Jensen, GA||Cotter, KD||Morrisey, MA