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.
|Date of creation:||12 May 2005|
|Contact details of provider:|| Postal: Georgetown University Department of Economics Washington, DC 20057-1036|
Web page: http://econ.georgetown.edu/
|Order Information:|| Postal: Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036|
Web: http://econ.georgetown.edu/ Email:
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- repec:fth:prinin:398 is not listed on IDEAS
- 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(4), pages 741-756, December.
- 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.. Full references (including those not matched with items on IDEAS)
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