An examination of flexible spending accounts.
This paper develops a framework for analyzing flexible spending account (FSA) participation and usage. We explore patterns of FSA usage using data from a benefits firm for 1996 including an examination of types of FSA expenditures and their timing. We estimate some simple econometric models of the participation decision and also the decision of how much to put into an FSA. Several pieces of evidence suggest that much of an FSA election amount is based on foreknowledge of expenditures. We also find that participants tend to spend their election amount early, thus obtaining an interest-free loan.
Cardon
J H
JH
Department of Economics, Brigham Young University, Provo, UT 84602, USA.
Showalter
M H
MH
D003256:Community Participation / Q000191:economics* / Q000706:statistics & numerical data; D006264:Health Benefit Plans, Employee / Q000191:economics*; D005102:Health Expenditures / Q000706:statistics & numerical data* / Q000639:trends; D006302:Health Services Research; D006801:Humans; D018854:Managed Competition / Q000191:economics; D020402:Medical Savings Accounts / Q000191:economics / Q000706:statistics & numerical data*; D017059:Models, Econometric; D012044:Regression Analysis; D020414:Risk Sharing, Financial; D019464:Tax Exemption; D014481:United States