TY - JOUR AU - Eichner, Matthew J AU - McClellan, Mark B AU - Wise, David A TI - Insurance or Self-Insurance?: Variation, Persistence, and Individual Health Accounts JF - National Bureau of Economic Research Working Paper Series VL - No. 5640 PY - 1996 Y2 - June 1996 DO - 10.3386/w5640 UR - http://www.nber.org/papers/w5640 L1 - http://www.nber.org/papers/w5640.pdf N1 - Author contact info: Matthew Eichner U.S. Securities and Exchange Commission 450 Fifth Street, NW Mail Stop 10-01 Washington, DC 20549 Tel: 202/942-7170 Fax: 301/765-0791 E-Mail: Matthew.J.Eichner@frb.gov Mark B. McClellan Director, Duke-Margolis Center for Health Policy Robert J. Margolis MD Professor of Business, Medicine and Policy 100 Fuqua Drive Box 90120 Durham, NC 27708 Tel: 919.660.7963 Fax: NA E-Mail: mark.mcclellan@duke.edu David A. Wise NBER 1050 Massachusetts Avenue Cambridge, MA 02138 E-Mail: dwise72037@aol.com M1 - published as Matthew Eichner, Mark B. McClellan, David A. Wise. "Insurance or Self-Insurance? Variation, Persistence, and Individual Health Accounts," in David A. Wise, editor, "Inquiries in the Economics of Aging" University of Chicago Press (1998) AB - We explore the feasibility of catastrophic health insurance established in conjunction with individual health accounts (IHAs). Under this plan, the employer establishes both a high-deductible health insurance plan and an IHA. Employee health care costs below the deductible are then paid out of the IHA; costs above the deductible are paid by the insurance plan. Assets remaining in the account when the employee retires are available for other purposes. Although attractive because it helps to solve the moral hazard problem associated with conventional insurance plans, the scheme may be considered infeasible if medical expenditures over a working life are so persistent that certain individuals accumulate little in the IHA while others accumulate a great deal. Within the context of an illustrative IHA plan, we develop preliminary empirical evidence on the distribution of medical expenditures and hence savings under an IHA plan. Our analysis is based on longitudinal health insurance claims data from a large firm. We emphasize the balance in the IHA account at retirement. Although such a plan would produce a range of balances across employees, approximately 80% would retain over 50% of their contributions. Only about 5% would retain less than 20% of their contributions. The outcomes suggest to us that such a plan is feasible. And, we believe that such a plan could be structured to increase retirement savings. ER -