Why do employers self-insure new explanations for the choice of self-insurance vs. purchased health insurance

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Abstract

This paper proposes that an employer's choice of self-insurance vs. purchased health insurance can be explained by a trade-off between administrator moral hazard, the incentive for third-party administrators to be inefficient managers of self-insured employers medical claims and employer moral hazard, the insured employer's failure to invest in reducing health risks among its workers. These explanations have not been analysed in the literature but they are broadly consistent with data and they can explain the increasing popularity of self-insurance over the past 10 years.

Original languageEnglish (US)
Pages (from-to)696-711
Number of pages16
JournalGeneva Papers on Risk and Insurance: Issues and Practice
Volume37
Issue number4
DOIs
StatePublished - Oct 2012

Keywords

  • Aanalysis of health-care markets
  • Asymmetric and private information
  • Insurance
  • Insurance companies

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