TY  - JOUR
AU  - Jack,William
AU  - Levinson,Arik
AU  - Rahardja,Sjamsu
TI  - Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11315
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11315
L1  - http://www.nber.org/papers/w11315.pdf
N1  - Author contact info:
William Jack
Georgetown University
E-Mail: wgj@georgetown.edu

Arik Levinson
Department of Economics ICC 571
Georgetown University
3700 O St., NW
Washington, DC 20057
Tel: 202/687-5571
Fax: 202/687-6102
E-Mail: aml6@georgetown.edu

Sjamsu Rahardja
Senior Economist
The World Bank Office in Jakarta
Indonesia Stock Exchange Building
Tower 2, 12th floor
Indonesia
E-Mail: srahardja@worldbank.org
AB  - 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 coinsurance
rates 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.
ER  -