Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts
37 Pages Posted: 25 May 2006 Last revised: 4 Dec 2022
There are 2 versions of this paper
Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts
Date Written: May 2005
Abstract
Flexible Spending Accounts (FSAs) subsidize out-of-pocket health expenses not covered by employer-provided health insurance, making health care cheaper ex post, but also reducing the incentive to insure. We use a cross section of .rm-level data to show that FSAs are indeed associated with reduced insurance coverage, and to evaluate the welfare consequences of this shift. Correcting for selection effects we find that FSAs are associated with insurance contracts that have coinsurancerates 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. These results show that FSAs may explain a significant fraction of the shift in health care costs to employees that has occurred in recent years.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Health Insurance, Labor Supply, and Job Mobility: A Critical Review of the Literature
-
Recent Trends in Employer-Sponsored Health Insurance Coverage: are Bad Jobs Getting Worse?
By Henry S. Farber and Helen Levy
-
Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed
By Jonathan Gruber and James M. Poterba
-
Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?
-
Subsidies to Employee Health Insurance Premiums and the Health Insurance Market
-
How Elastic is the Firm's Demand for Health Insurance?
By Jonathan Gruber and Michael Lettau
-
Limited Insurance Portability and Job Mobility: The Effects of Public Policy on Job-Lock
-
Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage
-
Why Did Employee Health Insurance Contributions Rise?
By Jonathan Gruber and Robin Mcknight