Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. Baseline Simulation Results


Table 2 shows the results of the baseline simulation prior to iterations.  We predict that approximately 3.2 million people who are not eligible for employer-sponsored health insurance (ESI) will choose an individual HDHP.  This estimate was calibrated to be the same as our previous analysis in order to compare the proposed policy changes in 2004 to the 2006 State of the Union proposals.9 An additional 47,509 people will turn down their employers' offers of coverage to purchase an individual HDHP.  This is fewer than the 365,150 people who were predicted to "opt out" of ESI in our original simulation of the MMA effects (Parente, et al., 2005).  The large swing was attributable to a difference in the tax treatment of the premium in the original analysis that was clarified and corrected in the current study.  As a result, we believe our original analysis significantly overstated the likely opt-out of the employer market into individual HSAs.

We predict that only 67,812 people will choose an employer-sponsored HDHP.  This is also fewer than the 334,938 individuals who chose this option in the original simulations. Once again, this change was the result of an inaccurate assessment of the tax treatment of the employer sponsored HDHP.  We are confident our current model better reflects the actual economic incentives present in the group market.  However, both of these predictions are quite small in relation to the number of people who choose PPOs or HMOs in the group market, reinforcing our earlier result (Feldman, et al., 2005) that HDHPs will not be popular among employees with an employer health insurance offer, primarily because the employer's premium subsidy reduces the attractiveness of HDHPs compared with other types of health insurance plans.

Under both old and new simulations, approximately 13.3 million to 13.5 million people turn down their employers' offers of health insurance but do not purchase an individual HDHP.  They may pick one of the other individually-offered policies, but many of them will remain uninsured. There are two explanations for the large changes in the PPO market.  First additional employer information allowed us to more accurately identify the structure of low, medium and high PPOs more completely.  Second, the new premiums based on prior claims history are significantly different than previous premiums, which were largely adapted from several year-old surveys from secondary sources.  Thus the premiums used were a much closer match to results, estimated from claims data, of the actual incentives in place including coinsurance, copayments and provider panel access.  As a result, the differences between our current and previous work are not the impact of a policy change as much as they are a refinement of the inputs into the model with more accurate and appropriate data.

Individual Market Original Simulation of MMA Effects New Simulation of MMA Effects
Table 2: Comparing MMA Original and New Baseline Populations
H.S.A. 3,155,982 3,156,133
PPO High 4,651,023 37,591
PPO Low 310,041 6,046,777
PPO Medium 1,426,040 232,105
Uninsured 27,273,018 27,313,692
Group Market
HMO 26,330,531 19,036,514
HRA 1,838,559 2,250,267
Employer-sponsored H.S.A 334,938 67,812
Opt-out H.S.A (indivual fully funds) 365,150 47,509
PPO High 5,951,085 8,528,436
PPO Low 1,575,203 1,014,605
PPO Medium 35,001,278 40,289,118
Turned Down 13,322,842 13,515,131

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