Simulating the impact of medical savings accounts on small business.
OBJECTIVE
To simulate whether allowing small businesses to offer employer-funded medical savings accounts (MSAs) would change the amount or type of insurance coverage.


METHODS
Economic policy evaluation using a national probability sample of nonelderly non-institutionalized Americans from the 1993 Current Population Survey (CPS).


METHODS
We used a behavioral simulation model to predict the effect of MSAs on the insurance choices of employees of small businesses (and their families). The model predicts spending by each family in a FFS plan, an HMO plan, an MSA, and no insurance. These predictions allow us to compute community-rated premiums for each plan, but with firm-specific load fees. Within each firm, employees then evaluate each option, and the firm decides whether to offer insurance-and what type-based on these evaluations. If firms offer insurance, we consider two scenarios: (1) all workers elect coverage; and (2) workers can decline the coverage in return for a wage increase.


RESULTS
In the long run, under simulated conditions, tax-advantaged MSAs could attract 56 percent of all employees offered a plan by small businesses. However, the fraction of small-business employees offered insurance increases only from 41 percent to 43 percent when MSAs become an option. Many employees now signing up for a FFS plan would switch to MSAs if they were universally available.


CONCLUSIONS
Our simulations suggest that MSAs will provide a limited impetus to businesses that do not currently cover insurance. However, MSAs could be desirable to workers in firms that already offer HMOs or standard FFS plans. As a result, expanding MSA availability could make it a major form of insurance for covered workers in small businesses. Overall welfare would increase slightly.
Goldman
D P
DP
RAND, Santa Monia, CA 90407-2138, USA.
Buchanan
J L
JL
Keeler
E B
EB
D000293:Adolescent; D000328:Adult; D003132:Commerce / Q000191:economics* / Q000706:statistics & numerical data; D005192:Family Health; D005102:Health Expenditures / Q000706:statistics & numerical data; D006801:Humans; D007348:Insurance, Health / Q000191:economics / Q000706:statistics & numerical data; D020402:Medical Savings Accounts / Q000191:economics* / Q000706:statistics & numerical data; D017057:Medically Uninsured / Q000706:statistics & numerical data; D008875:Middle Aged; D018803:Models, Economic; D010342:Patient Acceptance of Health Care / Q000706:statistics & numerical data