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B. 2006 State of the Union Simulation

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. 2006 State of the Union Simulation

The following example illustrates how the SOTU subsidies were simulated.  Suppose Joe is eligible for a $500 low-income premium tax credit. 18 After the credit, his net premium is $1,500 - $500 = $1,000.  Assuming his income tax rate is 20 %, he receives an income tax deduction on the net premium of $1,000 * .20 = $200.  He also receives an em
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A. Variable Construction

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Variable Construction

The variables used in the simulation are: "SCLUB" = contribution to HSA based on age and income, "SCUB" = gap between contribution and HDHP deductible (which can be negative if SCLUB exceeds the deductible), and "PREMIUM" = total premium.  The total premium is equal to the insurance premium plus the tax-adjusted SCLUB.  According to current la
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Data & Analytic Approach

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . Data & Analytic Approach

Three data sources were used to complete this analysis.  These data sources and the steps taken to prepare the database are described in Figure 1.  The data sources include:
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Appendix: Technical Notes

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . Appendix: Technical Notes

Original and Current Simulation Methods in Detail Below, we describe the methods used to complete the simulation.  Much of the original approach was used again.  However, we also made substantial revisions in the approach besides just modeling the 2006 Blue Book as opposed the 2004 Blue Book proposals.  Throughout this appendix, major
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VI. Summary

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . VI. Summary

Our revised simulation model is more complete and adaptable than our previous version.  It is better able to model the 2006 State of the Union policy proposals by taking into account health status as well as allowing for age and income-related contributions to HSAs.  Without this last change, we would have been unable to model the 2006 proposals
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B. New Caveats

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. New Caveats

There are two significant caveats to the new model.  The first is an adjustment we made to the HDHP benefit design.  For this analysis we chose to have the HDHP take-up match our previous analysis for comparison to previous proposed policies.  The adjustment we made was to increase the coinsurance rate of the HDHP from 0% to 5%.  This is also
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A. Old Caveats

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Old Caveats

While we have developed an improved model for this analysis, several of the old caveats remain from the original study.  The first is that we do not observe the uninsured in our plan choice estimation.  Thus we have to add intercept terms in our prediction equation to calibrate the level of uninsured to match that reported in the market for both
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V. Caveats

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . V. Caveats

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C. SOTU Results (Components)

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . C. SOTU Results (Components)

In Tables 5 through 7 we consider the independent effects of each of the proposed policy changes listed above.  Table 5 shows the results of providing favorable tax treatment of HDHP premiums.  The HDHP market grows to 7.2 million, a 4.0 million person increase.  The total subsidy cost, after netting out ESI subsidy savings, is $5.14 billion.
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B. SOTU Results (Combined)

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. SOTU Results (Combined)

Table 4 shows our estimate of HSA take-up from the 2006 SOTU compared with the 2003 MMA baseline.  We predict that an additional 12,420,002 people would take up individual HSAs, of whom 9,502,893 (approximately 77 percent) were previously uninsured.  Those who were already insured, but who switched in individual HAS, would be drawn from other
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A. Methods

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Methods

We simulated the impact of complete implementation of the SOTU proposals on health insurance take-up and taxes, as well as the impact of each part of the proposal (i.e. tax preferences for premiums, tax preferences for HSA contributions, and the low-income tax credit) if it were separately implemented.  This allows a comparison of the total impac
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IV. 2006 State of the Union Simulations

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . IV. 2006 State of the Union Simulations

We simulated the proposals outlined in the President's 2006 State of the Union (SOTU) address and explained in the 2006 Blue Book .  As we understand that proposal, it has three related parts:
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B. Iterative Simulation Results at Baseline

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

The results of the iterative simulations are displayed in Table 3.  The iteration results at baseline focus on the group market.
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A. Methods

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Methods

To use a specific hypothetical example, suppose the eHealthinsurance.com premium for a HDHP is $100 per month, but people who choose such plans are exceptionally healthy with actual medical expenses of only $50 per month.  Even after adding $15 (for example) per month for administrative costs, the premium for people who actually choose the HDHP i
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III. Iterative Simulation Approach

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . III. Iterative Simulation Approach

Our prior simulations used insurance premiums from MEPS, eHealthinsurance.com, or from the employers in our study, as described above.  However, that approach is incomplete because it does not account for health risk and other factors that would influence premiums for the individuals who actually choose each option.
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B. Baseline Simulation Results

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 200
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2. Health Plan Choice Model

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . 2. Health Plan Choice Model

In the new baseline simulations, we made an important improvement to the health plan choice model by including the effect of health status as a variable that affects plan choice.  This is important for two reasons.  First, health status may be an important factor in predicting plan choice, so the addition of this variable should improve the fit
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1. HSA Contributions

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . 1. HSA Contributions

To be consistent with our previous work, in the new baseline simulations we assumed that individual HDHP policies had deductibles of $3,500 per year for single coverage and $7,000 for family coverage, and no cost-sharing (i.e.
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A. Methods

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Methods

There are three major components to our methodological approach:  1) Model Estimation; 2) Choice Set Assignment and Prediction; and 3) Policy Simulation.  As illustrated in Figure 1, often more than one database was required to complete the task.  Integral to this analysis was the use of consumer directed health plan data from four large employ
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II. Refine Baseline Simulations

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . II. Refine Baseline Simulations

To complete our current study, we needed to revise and extend our methods.  We also used additional data sources and elements to more fully account for the health status of individuals in our models using claims data from the employers participating in our consumer driven health plan analysis.

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Form Approved OMB# 0990-0379 Exp. Date 9/30/2020