PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG

This paper presents findings from the 2008 and 2009 EBRI/MGA Consumer Engagement in Health Care Survey and the 2006 and 2007 EBRI/Commonwealth Fund Consumerism in Health Care Surveys. It examines the availability of HRA and HSA-eligible plans (consumer-driven health plans or CDHPs), as well as employer and individual contribution behavior, time enrolled in such plans, account balances, and rollover behavior. The share of the adult population with private health insurance enrolled in account-based health plans (so-called “consumer-driven” health plans, or CDHPs) remains small but continues to grow. In 2009, 4 percent of the adult population with private health insurance was enrolled in a health reimbursement arrangement (HRA) or had a high-deductible plan with a health savings account (HSA), up 1 percentage point from the previous year. An additional 4.9 percent were eligible for an HSA but did not have such an account. Overall, 8.9 percent of adults with private insurance were either in a CDHP or were in a high-deductible plan that was eligible for an HSA, but had not opened an account. Among individuals with traditional employment-based health benefits and a choice of health plan, 39 percent were eligible for a CDHP in 2009, up from 33 percent in 2006. Workers with employee-only coverage have seen their annual employer contributions decrease, while those with family coverage have seen their annual employer contributions increase, such that nearly three-quarters of workers with family coverage receive a contribution of $1,000 or more. Both the amount of money that individuals have accumulated in their accounts and the amounts rolled over from year-to-year have grown: Those reporting a rollover of $1,500 or more increased from 13 percent in 2006 to 31 percent in 2009.

The PDF for the above title, published in the November 2009 issue of EBRI Notes, also contains the full text of another November 2009 EBRI Notes article abstracted on SSRN: “Retirement Plan Participation and Asset Allocation, 2007.”

JEAN-YVES DUCLOS, University of Laval, Institute for the Study of Labor (IZA)
Email: jyves@ecn.ulaval.ca
DAMIEN ECHEVIN, Ministere de l'Economie, des Finances et de l'Industrie - Direction de la Prevision
Email: damien.echevin@dp.finances.gouv.fr

This paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time. It is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques. The paper’s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes. We illustrate the approach by contrasting Canada and the US using comparable data. Canada dominates the US over the lower bi-dimensional welfare distribution of health and income, though not generally in terms of the uni-dimensional distribution of health or income. The paper also finds that welfare for both Canadians and Americans has not unambiguously improved during the last decade over the joint distribution of income and health, in spite of the fact that the uni-dimensional distributions of income have clearly improved during that period.

JUERGEN JUNG, Towson University, Indiana University
Email: jjung@towson.edu
CHUNG TRAN, University of New South Wales - Australian School of Business - School of Economics, Department of Economics, Indiana University Bloomington
Email: chtran@indiana.edu

In this paper we develop a general equilibrium overlapping generations (OLG) model with health shocks to analyze the life-cycle pattern of insurance choice and health care spending. We use data from the Medical Expenditure Panel Survey (MEPS) and show that our model is able to match the life-cycle trends of insurance take up ratios and average medical expenditures in the U.S. We then demonstrate how this model can be used to conduct health care policy analysis by evaluating the macroeconomic effects of a counter factual health care reform using a system of universal health insurance vouchers. Our results suggest that health insurance vouchers are able to extend insurance coverage to the entire population but they also increase aggregate spending on health. More importantly, we find that the positive insurance effect (efficient risk pooling) dominates the negative incentive effect (tax distortions and moral hazard) which results in significant welfare gains for all generations when a payroll tax is used to finance the voucher program. In addition, our results suggest that the choice of tax financing instrument and accounting for general equilibrium price adjustments are critical in determining the performance of the voucher program.

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG

This paper summarizes the literature on CDHP offer rates and enrollment. Since consumer-driven health plans (CDHPs) were first offered in 2001, estimates of how many workers would be enrolled in these plans have varied widely. The U.S. Treasury Department has predicted that 25-30 million people would be covered by a health savings account (HSA)-eligible plan and would have an account by 2010. The percentage of employers offering CDHPs has gone from virtually none in 2000 to 12 percent in 2009. When examining the entire employment-based market, what had been steady growth in offer rates appears to have slowed. Between 2008 and 2009, the percentage of small firms (3-199 workers) that offered a CDHP declined from 13 percent to 11 percent (although the change was not statistically significant). However, larger firms continued to add a CDHP as an option. The percentage of employers with 500-999 workers reporting that they were likely to offer a CDHP in 2009 was 20 percent, or 6 percentage points higher than the actual offer rate in 2008. The percentage of firms with 1,000 or more workers that offered a CDHP increased from 22 percent in 2008 to 28 percent in 2009. The overall trend rate did not change because employers with 1,000 or more employees account for about 15 percent of all employers. Based on the various sources of data on enrollment in health reimbursement arrangements (HRAs) and HSA-eligible plans, it appears that 15-19 million people were enrolled in these plans in 2009, representing 9-11 percent of the privately insured market.

The PDF for the above title, published in the December 2009 issue of EBRI Notes, also contains the fulltext of another December 2009 EBRI Notes article abstracted on SSRN: “Investment Behavior of Target-Date Fund Users Having Other Funds in 401(k) Plan Accounts.”

CALVIN H. JOHNSON, University of Texas at Austin School of Law
Email: cjohnson@law.utexas.edu

The proposal would impose a 50 percent tax on employers for the net cost of meals, entertainment, gyms, and dining facilities provided to employees and customers, unless the cost as included in the consumer’s income as indicated by their Form W-2 or Form 1099. The tax is a proxy tax on employee consumption equivalent to a rate of 331/3 percent as income tax is normally computed. The proxy tax would reduce the deadweight loss, which occurs as the parties replace cash payments with noncash transfers.

The proposal is made as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue, defend the tax base, follow the money, and improve the rationality and efficiency of the tax system. A longer description of the Shelf Project can be found at ‘‘The Shelf Project: Revenue-Raising Projects That Defend the Tax Base,’’ Tax Notes, Dec. 10, 2007, p. 1077 Shelf Project proposals follow the format of a congressional tax committee report in explaining current law, what is wrong with it, and how to fix it.

DAVID A. PRATT, Albany Law School
Email: dprat@albanylaw.edu

In December 2008, the House and Senate passed H.R. 7327, the Worker, Retiree, and Employer Recovery Act of 2008 (the Act), which includes the long-awaited technical corrections to the Pension Protection Act of 2006 (PPA), as well as other employee benefits provisions. The President signed the Act into law on December 23, 2008. This article will describe the employee benefits changes made by the Act.

DAVID J. WARNER, affiliation not provided to SSRN
Email: David.J.Warner@gmail.com

The U.S. healthcare system needs immediate fundamental reform. However, the current taxation of healthcare exacerbates this need - especially the taxation of employer-sponsored insurance, which excludes from an employee’s taxable income any health insurance premiums paid by an employer. While many of the current proposals for healthcare reform look to the tax code as merely a source of revenue, the tax system should be used as a means to facilitate fundamental healthcare reform. In this Article, David Warner suggests that the taxation of employer-sponsored insurance should be based on a “fixed-benefits cap.” This fixed-benefits cap could be used as a first step in fundamental reform - that is, once Congress has set the level of tax-preferred healthcare benefits, this same level could be imported into any system of fundamental healthcare reform to establish the baseline level of healthcare that each American should receive. Warner also discusses how a fixed-benefits cap could be developed, looking at previous healthcare reform proposals. Warner concludes that while tax reform could be used as a first step, further healthcare reform is necessary before the U.S. system of healthcare can provide access to quality healthcare at a price all can afford.