8
The Self-Insurance Decision
A reasonable hypothesis is that larger firms would tend to self-insure more than
smaller firms. This relationship between the relative size of a firm and its policy
on self-insurance has been established in a study conceived and sponsored in the
United States by the National Association of Accountants. Conder and Hopkins
(1981) surveyed 400 companies randomly selected and the response rate was
49.5%. The most important factor affecting the decision was found to be the
financial capacity of the firm to withstand losses (Table 10.3).
They found a significant statistical evidence that firms with larger assets tend
to have higher levels of involvement in self-insurance than smaller firms. On the
other hand, the other size measure, the number of employees, surprisingly, had a
much weaker impact on involvement in self-insurance. The results also revealed
that the important self-insurance programs were in the transportation/public utility
industries, followed closely by the manufacturing industries.
A more recent survey of health care plans has shown an important increase
of self-funded plans in the 1980s from 43% in 1982 to 67% in 1986.
10
A 1986
survey conducted by the firm Johnson & Higgins reported that on average self-
funded programmes represented 46% of the decisions of the firms. For larger
employers (10,000 to 20,000 employees) the percentage was 70% and 95% of the
Fortune 500 largest corporations have self-funded plans.
11
Table 10.3
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