Employee cost-sharing and the welfare effects of flexible spending accounts
AbstractFlexible Spending Accounts (FSAs) subsidize out-of-pocket health expenses not covered by employer-provided health insurance, making health care cheaper ex post, but also reducing the incentive to insure. We use a cross section of .rm-level data to show that FSAs are indeed associated with reduced insurance coverage, and to evaluate the welfare consequences of this shift. Correcting for selection effects we find that FSAs are associated with insurance contracts that have coinsurance rates about 7 percentage points higher, relative to a sample average coinsurance rate of 17 percent. Meanwhile, coinsurance rates net of the subsidy are approximately unchanged, providing evidence that FSAs are welfare-neutral. These results show that FSAs may explain a significant fraction of the shift in health care costs to employees that has occurred in recent years.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 90 (2006)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- William Jack (Georgetown University), Arik Levinson (Georgetown University), and Sjamsu Rahardja (World Bank), 2005. "Employee cost-sharing and the welfare effects of Flexible Spending Accounts," Working Papers gueconwpa~05-05-12, Georgetown University, Department of Economics.
- William Jack & Arik Levinson & Sjamsu Rahardja, 2005. "Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts," NBER Working Papers 11315, National Bureau of Economic Research, Inc.
- D60 - Microeconomics - - Welfare Economics - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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