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Health Savings Accounts: Assessing their impact on Insurance and Coverage Costs


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Title: Health Savings Accounts: Assessing their impact on Insurance and Coverage Costs

Health Savings Accounts Assessing their impact
on Insurance and Coverage Costs
  • Stephen T Parente
  • Roger Feldman
  • Jean Abraham
  • Jon B ChristiansonFunded by the Robert Wood
    Johnson Foundation Health Care Financing and
  • Organization Initiative (HCFO) and the Department
    of Health and Human Services

Presentation Overview
  • Consumer Driven Health Plan Overview
  • Research Questions
  • Data Analytic Approach
  • Plan Choice Estimation Results
  • Policy Simulation Results
  • Implications
  • Next Steps

Classic CDHP Model Definity Health
  • Health Reimbursement Account (HRA)
  • Employer allocates HRA1
  • Member directs HRA
  • Roll over at year-end
  • Apply toward deductible2
  • Health Coverage
  • Preventive care covered 100
  • Annual deductible
  • Expenses beyond the HRA

  • Health Tools and Resources
  • Care management program
  • Internet enabled

1 Employer selects which expense apply toward the
Health Coverage annual deductible. 2 Paid out of
employers general assets.
The Health Savings Account (HSA) Model
HSAs legislated in MMA 2003. Pretty similar
to Definity Health HRA Design except the
consumers owns the account.
Economic Analysis Motivation
  • Donut hole and savings account are new prices
    to consider in the demand for health insurance
    with expected negative and positive responses,
  • Price sensitivity to different benefit options
    (i.e., premium, account, donut, coinsurance)
    could significantly affect take-up of CDHPs.
  • Builds on existing literature of high deductible
    health plans (HDHPs) (Keeler, Newhouse, Phelps,
    1977). HSAs introduce a new kink in the budget

Conceptual Model of CDHP
Data Sources
  • 2002 health plan choice data from 3 large
    employers participating in a Robert Wood Johnson
    Foundation funded study on CDHPs
  • Employee premium, deductible, coinsurance,
    workers age, gender, wage income, single/family
  • 2001 Medical Expenditure Panel Survey (MEPS)
  • Household Component
  • Linked Insurance Component
  • Individual HSA plan information

Plan Choice Model Analytic Approach
  • Plan Choices HMO, 3 PPOs (low, medium, high), 2
    CDHPs with Health Reimbursement Accounts (low and
  • Utility-maximization assumption where Uhj aj
    ??Zj ??Xhj ehj
  • Estimate a conditional logit model of plan choice
    using the pooled, employer data
  • Explanatory variables
  • Plan attributes (Z)
  • Annual tax-adjusted employee premium (1000s
  • Savings/reimbursement account size (1000s
  • Donut hole difference between annual deductible
    and account size (1000s dollars)
  • Coinsurance rate (i.e., .10 10 coinsurance)
  • Interactions between employee and plan attributes
  • Age, female, wage income, family contract
  • Plan-specific constants (aj )

Plan Choice Descriptive Statistics
Price elasticity estimates from the plan choice
Policy Simulations
  • Baseline take-up of HSAs from the Medicare
    Modernization Act of 2003
  • Simulation (1) Bush Administrations proposal
  • Refundable tax credit up to 90 of premium
    maximum of 1000/adult, 500/child (up to two)
  • Subsidy for singles with no dependents phased out
    at 30,000 adjusted gross income and 60,000 for
  • Simulation (2) Low income buy-in subsidy
  • Simulation (3) Full subsidy of HSA premium
  • Simulation (3a) Full subsidy of HSA premium for
    generous HSA policy
  • Simulation (4) Full subsidy of HSA premium for
    the non-working, non-public insurance population

Cross price-elasticity of uninsured take-up with
respect to HSA premium subsidy
Calculated as the MEPS survey-weighted average
of each persons -(pr uninsuredstatus quo - pr
uninsured? HSA premium) (HSA premium _at_status
quo/pr uninsuredstatus quo)
Cross price-elasticities of uninsured take-up
with respect to donut hole and account
Cost per newly insured
Policy Implications
  • Take-up elasticity comparisons
  • -.3 to -.4 in the non-offered population (Marquis
    et al, 2004) Ours are similar.
  • Take-up elasticity increases as income increases.
    This contrasts with the literature. Why?
  • Probability of HSA take-up is positively
    correlated to income (as opposed to an HMO, which
    is usually negatively correlated).
  • Implication is that lower income population need
    more inducement to take-up an HSA
  • Plan design matters.
  • Greater take-up from a reduction in the donut
    hole than an increase in the account size.

  • Premium, coinsurance and Donut can and ALL should
    be modeled when looking at CDHPs.
  • They different effects
  • Policy proposals will need to consider price
    effects to develop effective welfare improving
    social policy.

Next Steps
  • Refine the model to account for the following
  • Individual-level vs. Household-level
  • Premium inflation assumptions
  • Examine impact of other policy proposals and/or
    HSA plan designs on take-up.
  • Look at HSA take-up versus retirement saving

Thank YouFor more information go
towww.ehealthplan.orgor email
Price-Sensitivity Estimates from the Literature
  • Take-Up
  • Non-offered population Marquis and Long, 1995
    Marquis et al. 2004
  • -.3 to -.4
  • Offered population Chernew et al., 1997 Shiels
    et al., 1999 Blumberg et al., 2001 Gruber and
    Washington, 2005
  • -.01 to -.2

Impact of the Simulations by Income
SIM Prep3 - Simulation Calibration
  • Applied CDHP employer plan choice model estimates
    to predict probabilities of plan choices for MEPS
    sample respondents
  • Model Calibrations
  • of adults who turn down employer offers by
    income quartile
  • of adults in the individual market who are
    uninsured by income quartile
  • Applied national weights to the calibrated model
    to represent the population 19-64, excluding
    full-time students, those enrolled in public
    insurance, and non-offered dependents with
    employer coverage through their spouse
  • Approximately 121.5 million adults

Baseline Impact of MMA 2003
NOTE Population is 19-64, non public insurance
Sim1 Administrations Proposal
NOTE Population is 19-64, non public insurance.
Proposal as interpreted from February, 2004 U.S.
Treasury Blue Book.
Sim 3A Full Subsidy for Generous HSA
NOTE Population is 19-64, non public insurance
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