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Employee choice of flexible spending account participation and health plan

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Author Info
Barton H. Hamilton (John M. Olin School of Business, Washington University in St. Louis, St. Louis, MO, USA)
James Marton (Department of Economics, Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA, USA)
Abstract

Despite the fact that flexible spending accounts (FSAs) are becoming an increasingly popular employer-provided health benefit, there has been very little empirical study of FSA use among employees at the individual level. This study contributes to the literature on FSAs using a unique data set that provides three years of employee-level-matched benefits data. Motivated by the theoretical model of FSA choice presented in Cardon and Showalter (J. Health Econ. 2001; 20(6):935-954), we examine the determinants of FSA participation and contribution levels using cross-sectional and random-effect two-part models. FSA participation and health plan choice are also modeled jointly in each year using conditional logit models. We find that, even after controlling for a number of other demographic characteristics, non-whites are less likely to participate in the FSA program, have lower contributions conditional on participation, and have a lower probability of switching to new lower cost share, higher premium plans when they were introduced. We also find evidence that choosing health plans with more expected out-of-pocket expenses is correlated with participation in the FSA program. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1296
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 7 ()
Pages: 793-813
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:hlthec:v:17:y:2008:i:7:p:793-813

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. James H. Cardon & Mark H. Showalter, 2003. "Flexible Spending Accounts as Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(1), pages 43-51. [Downloadable!] (restricted)
  2. Cardon, James H. & Showalter, Mark H., 2007. "Insurance choice and tax-preferred health savings accounts," Journal of Health Economics, Elsevier, vol. 26(2), pages 373-399, March. [Downloadable!] (restricted)
  3. Cardon, James H. & Showalter, Mark H., 2001. "An examination of flexible spending accounts," Journal of Health Economics, Elsevier, vol. 20(6), pages 935-954, November. [Downloadable!] (restricted)
  4. Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November. [Downloadable!] (restricted)
  5. Dranove, David & Spier, Kathryn E. & Baker, Laurence, 2000. "'Competition' among employers offering health insurance," Journal of Health Economics, Elsevier, vol. 19(1), pages 121-140, January. [Downloadable!] (restricted)
  6. Harris, Katherine & Schultz, Jennifer & Feldman, Roger, 2002. "Measuring consumer perceptions of quality differences among competing health benefit plans," Journal of Health Economics, Elsevier, vol. 21(1), pages 1-17, January. [Downloadable!] (restricted)
  7. Bhattacharya, Jayanta & Schoenbaum, Michael & Sood, Neeraj, 2002. "Optimal contributions to flexible spending accounts," Economics Letters, Elsevier, vol. 76(1), pages 129-135, June. [Downloadable!] (restricted)
  8. Jonathan Gruber & Robin McKnight, 2002. "Why Did Employee Health Insurance Contributions Rise?," NBER Working Papers 8878, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Jack, William & Levinson, Arik & Rahardja, Sjamsu, 2006. "Employee cost-sharing and the welfare effects of flexible spending accounts," Journal of Public Economics, Elsevier, vol. 90(12), pages 2285-2301, December. [Downloadable!] (restricted)
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