Download This PaperFlexible Spending Accounts as Insurance
9 Pages Posted: 21 Mar 2003
Abstract
We model flexible spending accounts (FSAs) as a special type of insurance policy. We prove the following results given losses drawn from a continuous distribution: (1) the optimal election amount, F*, is increasing in the consumer's level of risk aversion; (2) F* is increasing in the level of the maximum loss; If utility is decreasing in absolute risk aversion (DARA), then F* is (3) decreasing in income and (4) increasing in the marginal tax rate.
Suggested Citation: Suggested Citation
Cardon, James H. and Showalter, Mark H., Flexible Spending Accounts as Insurance. Available at SSRN: https://ssrn.com/abstract=388537
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