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

1
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

2
Presentation Overview

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

3
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
employers general assets.
4
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
5
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.

6
Conceptual Model of CDHP
7
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
  coverage
• 2001 Medical Expenditure Panel Survey (MEPS)
• Household Component
• Linked Insurance Component
• eHealthinsurance.com
• Individual HSA plan information

8
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 )

9
Plan Choice Descriptive Statistics
10
Price elasticity estimates from the plan choice
model
11
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
  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

12
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)
13
Cross price-elasticities of uninsured take-up
with respect to donut hole and account
14
Cost per newly insured
15
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.

16
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.

17
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.

18
Thank YouFor more information go
towww.ehealthplan.orgor email
sparente_at_csom.umn.edu
19
Backup
20
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

21
Impact of the Simulations by Income
22
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

23
Baseline Impact of MMA 2003
NOTE Population is 19-64, non public insurance
24
Sim1 Administrations Proposal
NOTE Population is 19-64, non public insurance.
Proposal as interpreted from February, 2004 U.S.
Treasury Blue Book.
25
Sim 3A Full Subsidy for Generous HSA
NOTE Population is 19-64, non public insurance