Health Insurance, Health Savings Accounts and Healthcare Utilization

Richard Peter, Sebastian Soika and Petra Steinorth

Health Economics, 2016, vol. 25, issue 3, 357-371

Abstract: Assuming symmetric information, we show that a high‐deductible health plan (HDHP) combined with a tax‐favored health savings account (HSA) induces more savings and less treatment compared with a full coverage plan under reasonable risk preferences. Furthermore, a higher tax subsidy increases savings in any case but decreases medical utilization if and only if treatment expenses are above the deductible. A larger deductible increases savings but does not necessarily decrease healthcare utilization. Whether an HDHP/HSA combination is preferred over a full coverage contract depends on absolute risk aversion. A higher tax advantage increases the attractiveness of an HDHP/HSA combination, whereas the effects of changes in the deductible are ambiguous. The paper shows that a potential regulator needs to carefully set the size of the deductible as only in a certain corridor of the probability of sickness, its effect on aggregate healthcare costs are unambiguously favorable. Copyright © 2015 John Wiley & Sons, Ltd.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:25:y:2016:i:3:p:357-371

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