PRELIMINARY-PLEASE DO NOT QUOTE Trends & Determinants of Self- insuring Health Benefits Philip F. Cooper Kosali I. Simon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 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 States ability to regulate insurance limited when firms self insure – Mandates on benefits or workers, premium tax, coverage continuation, community rating etc.

Prior Research- Prevalence and trends in self insurance McDonnell et al (1986) McDonnell et al (1986) – Over 50% of employees with ESI are in self- insured plans in 1984, varies by firm size HCFA survey of employers, 1984 HCFA survey of employers, 1984 Acs, Long and Marquis (1996) Acs, Long and Marquis (1996) – 42% of employees with ESI are in self-insured plans in 1987, 32% in 1991, 41% in 1993 NMES 1987, HIAA 1991, RWJF 1993 NMES 1987, HIAA 1991, RWJF 1993 Marquis and Long (1999) Marquis and Long (1999) – 33% of employees with ESI are in self insured plans in 1997, down from 40% in and 1997 RWJF 1993 and 1997 RWJF Park (2000) Park (2000) – % of employees in firms that self insure at least one plan in 1993, large variation by states 1993 NEHIS 1993 NEHIS Gabel, Jensen and Hawkins (2003) 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 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 Cross sectional studies – Morrisey and Jensen (1993) – Garfinkel (1995) – Park (2000) Studies covering more than one year 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) Jensen and Gabel (1992) Gruber (1994) Gruber (1994) Kaestner and Simon (2002) 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. 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 Uses rich data new to this literature Multiple years of the same survey, recent years Multiple years of the same survey, recent years We examine 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) Medical Expenditure Panel Survey – Insurance Component (MEPS-IC) – 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 ARF State mandates State mandates

State Mandates State regulation mandated benefits State regulation mandated benefits Small group reform Small group reform Premium taxes Premium taxes Stop loss regulation Stop loss regulation

Number of Workers Enrolled in Self- insured Plans Source MEPS-IC

Percent of Active Enrollees in Self- insured Plans Source MEPS-IC

Percent of Establishments that offer a Self-insured Plan Source MEPS-IC

Percent of Establishments that Offer a Self-Insured Plan by Firm Size Source MEPS-IC

Percent of Establishments that Offer a Self-Insured Plan by Whether Multiple Location Firm Source MEPS-IC

Average Single Premium Source MEPS-IC

Average Family Premium Source MEPS-IC

Percent of Establishments that Self-Insure and Offer a Purchased Plan Source MEPS-IC

Logit Results Probability of Offering A Self-Insured Plan(significant) Increase likelihood Increase likelihood – Firms size – Multiple locations Decrease likelihood Decrease likelihood – Low wage – Retail trade, services relative to manufacturing

Conclusion No statistically significant effects from mandated No statistically significant effects from mandated – Suggests they don’t drive the decision to self-insure Multiple location and size matter Multiple location and size matter Future work will add more state regulation (re- insurance limits) Future work will add more state regulation (re- insurance limits)