The Geneva Papers on Risk and Insurance Issues and Practice

, Volume 37, Issue 4, pp 696–711

Why Do Employers Self-insure? New Explanations for the Choice of Self-insurance vs. Purchased Health Insurance

  • Roger Feldman
Original Article

DOI: 10.1057/gpp.2012.23

Cite this article as:
Feldman, R. Geneva Pap Risk Insur Issues Pract (2012) 37: 696. doi:10.1057/gpp.2012.23


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.


asymmetric and private informationinsuranceinsurance companiesanalysis of health-care markets

Copyright information

© The International Association for the Study of Insurance Economics 2012

Authors and Affiliations

  • Roger Feldman
    • 1
    • 2
  1. 1.Division of Health Policy and Management, University of MinnesotaMinneapolisU.S.A.
  2. 2.Department of Economics, Carlos III UniversityMadrid