Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. Current Study


In October of 2005, we contracted with OASPE to extend and refine the simulations that were performed under our prior contract.  There were three major aspects to this work:

  • First, we refined the baseline simulations with a more realistic approach for determining the amount of money that individuals and families contribute to their HSAs.  Specifically, we let HSA contributions vary by age and income of the policyholder, while constraining the overall average contribution to be the same as in our previous report.  We also refined the health plan choice model by incorporating the effect of prior health status on health plan choice - a necessary step if one wants to predict enrollment more accurately.
  • Second, we extended the simulation approach to include an "iterative" model for determining premiums and health plan choices.  Using the results of our baseline choice model, we predicted health care costs for the people who enrolled in each plan.  We turned costs into premiums by adding a loading fee and then predicted choices again with the new premiums.  We continued to "iterate" the model until the predicted premiums did not change from one round to the next.  The new outcomes in terms of premiums and enrollment represent a true equilibrium for the simulation model.
  • Third, we brought the simulations "up to date" by simulating the proposals outlined in the

President's 2006 State of the Union (SOTU) speech and explained in detail in the 2006 Treasury Blue Book.5 In this step we introduced a more sophisticated method for estimating the tax cost of various subsidy proposals by including an offsetting reduction in tax subsidies for people who drop subsidized employer-sponsored health insurance (ESI) to purchase an individual HDHP policy.

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