Flexible Spending Accounts as Insurance

James Cardon and Mark Showalter ()

Journal of Risk & Insurance, 2003, vol. 70, issue 1, 43-51

Abstract: We model flexible spending accounts (FSAs) as a special type of insurance policy. We prove the following results given losses drawn from a continuous distribution: (1) the optimal election amount, F*, is increasing in the consumer's level of risk aversion; (2) F* is increasing in the level of the maximum loss; If utility is decreasing in absolute risk aversion (DARA), then F* is (3) decreasing in income and (4) increasing in the marginal tax rate.

Date: 2003
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https://doi.org/10.1111/1539-6975.00046

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:70:y:2003:i:1:p:43-51

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