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Health Savings Accounts: Assessing their impact on Insurance and Coverage Costs. Stephen T Parente Roger Feldman Jean Abraham Jon B Christianson Funded by the Robert Wood Johnson Foundation Health Care Financing and
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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
Health Toolsand Resources Health Coverage $$ Annual Deductible Definity HealthCareAdvantage Web- and Phone-Based Tools Preventive Care 100% Annual Deductible ‘Classic’ CDHP Model – Definity Health • Health Reimbursement Account (HRA) • Employer allocates HRA1 • Member directs HRA • Roll over at year-end • Apply toward deductible2 • Health Coverage • Preventive care covered 100% • Annual deductible • Expenses beyond the HRA HRA • Health Tools and Resources • Care management program • Internet enabled 1 Employer selects which expense apply toward the Health Coverage annual deductible. 2 Paid out of employer’s general assets.
Health Coverage $$ Annual Deductible Preventive Care 100% Annual Deductible The Health Savings Account (HSA) Model HSAs legislated in MMA 2003. Pretty similar to Definity Health HRA Design except the consumers owns the account. HSA
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, respectively. • 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 constraint.
Money b a CDHP Budget c Coinsurance Plan Budget Medical Care Low Use Medium Use High Use 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, worker’s age, gender, wage income, single/family coverage • 2001 Medical Expenditure Panel Survey (MEPS) • Household Component • Linked Insurance Component • eHealthinsurance.com • 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 high) • 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 dollars) • Savings/reimbursement account size ($1000s dollars) • Donut hole: difference between annual deductible and account size ($1000s dollars) • Coinsurance rate (i.e., .10 = 10% coinsurance) • Interactions between employee and plan attributes (X) • Age, female, wage income, family contract • Plan-specific constants (aj )
Policy Simulations • Baseline take-up of HSAs from the Medicare Modernization Act of 2003 • Simulation (1): Bush Administration’s 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 families • 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 person’s: -(pr uninsured|status quo - pr uninsured|Δ HSA premium) * (HSA premium @status quo/pr uninsured|status quo)
Cross price-elasticities of uninsured take-up with respect to “donut hole” and account
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.
Summary • 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 choice.
Thank YouFor more information go to:www.ehealthplan.orgor email sparente@csom.umn.edu
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
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
Sim#1: Administration’s* 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