Employee cost-sharing and the welfare effects of Flexible Spending Accounts
AbstractIn recent years, employees have been shouldering an increasing share of the costs of traditional employer-provided health insurance. At the same time, more and more employers have been allowing employees to pay their out-of-pocket health care costs using pre-tax earnings, through tax-subsidized flexible spending accounts (FSAs). We use a cross-section of firm-level data from 1993 to show empirically that these FSAs can explain a significant fraction of the shift in health care costs to employees, and to evaluate the welfare impact of this shift. Correcting for selection effects, we find that FSAs are associated with insurance contracts with coinsurance rates that are 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. Classification-JEL Codes: D60, H21, I18
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Bibliographic InfoPaper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~05-05-12.
Date of creation: 12 May 2005
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Postal: Georgetown University Department of Economics Washington, DC 20057-1036
Web page: http://econ.georgetown.edu/
Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036
Other versions of this item:
- 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.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-30 (All new papers)
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