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Impact of health savings accounts on precautionary savings, demand for health insurance and prevention effort

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  • Steinorth, Petra

Abstract

Abstract The paper examines the influence of health savings accounts (HSAs) on optimal savings, insurance demand and prevention effort over the course of a lifetime. This paper adds to the literature by investigating HSAs as both a form of insurance and as saving vehicle in an expected utility framework. Assuming no regulatory constraints on the deductible, we show that individuals voluntarily choose a positive deductible and increase their savings with HSAs. If the government-imposed minimum deductible becomes too great, however, individuals may instead choose to remain in traditional insurance. We determine the effect of HSAs on prevention effort. We find that an increased tax subsidy may worsen moral hazard issues. Assuming partial risk aversion to be less than or equal to one, individuals will either invest less in the health preservation effort and more money in the HSA or vice versa. However, they will never increase both effort and savings simultaneously as was intended when HSAs were introduced.

Suggested Citation

  • Steinorth, Petra, 2011. "Impact of health savings accounts on precautionary savings, demand for health insurance and prevention effort," Journal of Health Economics, Elsevier, vol. 30(2), pages 458-465, March.
  • Handle: RePEc:eee:jhecon:v:30:y:2011:i:2:p:458-465
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    References listed on IDEAS

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    Cited by:

    1. Song Chen & Anthony Lo Sasso & Aneesh Nandam, 2013. "Who funds their health savings account and why?," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 219-232, December.
    2. Ghislando, S & Manachotphong, W & Perego, VME, 2013. "The impact of Universal Health Coverage on healthcare consumption and risky behaviours: evidence from Thailand," Working Papers 11200, Imperial College, London, Imperial College Business School.

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