Employee cost-sharing and the welfare effects of flexible spending accounts
In 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.
(This abstract was borrowed from another version of this item.)
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Pauly, Mark V, 1986. "Taxation, Health Insurance, and Market Failure in the Medical Economy," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 629-75, June.
- Jonathan Gruber & Robin McKnight, 2002.
"Why Did Employee Health Insurance Contributions Rise?,"
NBER Working Papers
8878, National Bureau of Economic Research, Inc.
- Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November.
- Barton H. Hamilton & James Marton, 2008. "Employee choice of flexible spending account participation and health plan," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 793-813.
- Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
- Farber, Henry S. & Levy, Helen, 2000.
"Recent trends in employer-sponsored health insurance coverage: are bad jobs getting worse?,"
Journal of Health Economics,
Elsevier, vol. 19(1), pages 93-119, January.
- Henry S. Farber & Helen Levy, 1998. "Recent Trends in Employer-Sponsored Health Insurance Coverage: Are Bad Jobs Getting Worse?," NBER Working Papers 6709, National Bureau of Economic Research, Inc.
- Jack, William & Sheiner, Louise, 1997. "Welfare-Improving Health Expenditure Subsidies," American Economic Review, American Economic Association, vol. 87(1), pages 206-21, March.
- Helen Levy, 1998. "Who Pays for Health Insurance? Employee Contributions to Health Insurance Premiums," Working Papers 777, Princeton University, Department of Economics, Industrial Relations Section..
- 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.
- Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
- Dowd, Bryan & Feldman, Roger & Maciejewski, Matthew & Pauly, Mark V., 2001. "The Effect of Tax-Exempt Out-of-Pocket Premiums on Health Plan Choice," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 741-56, December.
- Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
- repec:fth:prinin:398 is not listed on IDEAS
- repec:pri:indrel:398 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:90:y:2006:i:12:p:2285-2301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.