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on Contract Theory and Applications |
| By: | Juan Pablo Atal (University of Pennsylvania) |
| Abstract: | Long-term health insurance contracts have the potential to efficiently insure against reclassification risk, but at the expense of other limitations like provider lock-in. This paper empirically investigates the workings of long-term contracts which are subject to this trade-off. Individuals are shielded against premium increases and coverage denial as long as they stay with their initial contract, but those that become higher risk are subject to premium increases or coverage denials upon switching, potentially leaving them locked-in with their original network of providers. I provide the first empirical evidence on the importance of this phenomenon using administrative panel data from the universe of the private health insurance market in Chile, where competing insurers o?er long term contracts. I fit a structural model to yearly plan choices, and am able to jointly estimate evolving preferences for different insurance companies and supply-side underwriting in the form of premium risk-rating and coverage denial. To quantify the welfare effects of lock-in, I compare simulated choices under the current rules to those in a counterfactual scenario with no underwriting. The results show that consumers would be willing to pay around 13 percent more in yearly premiums to avoid lock-in. Finally, I study a counterfactual scenario where long-term contracts are replaced with community-rated spot contracts, and I find only minor general-equilibrium effects on premiums and on the allocation of individuals across insurers. I argue that these small effects are the result of large levels of preference heterogeneity uncorrelated to risk. |
| Keywords: | Health Insurance, Guaranteed-Renewability, Lock-in |
| JEL: | D82 G22 I11 |
| Date: | 2019–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:19-020&r=all |
| By: | Fang, F. (Tilburg University, School of Economics and Management) |
| Abstract: | This dissertation investigates how two different governances (contractual and relational) and performance affect each other in a public – private partnership (PPP). It contributes to the governance literature by providing an integrated view of the dynamic process, not only of how these two governances affect project performance, but also how project performance affects the use of the two mechanisms in a PPP. The research studies four PPPs formed between Dutch Water Authorities (DWAs) and their contractors. In all cases two parties (DWAs and contractors) encountered a performance shortfall (i.e. actual project performance being lower than contractually required performance). When a performance shortfall occurs, business relationship is slightly changed, it deteriorates and its outcome is uncertain. Contractual and relational strategies have been used to deal with this situation. The contractual strategy focuses on solving the performance shortfall through a formal and written contract which explicitly stipulates the responsibilities and obligations of each party, while the relational strategy focuses on solving the performance shortfall through informal relations and shared norms. The results shows that once a performance shortfall occurs, a relational strategy is likely to help enhance the project performance and this results in a good relational outcome. In turn, enhanced project performance and a better relationship promotes the continuous use of a relational strategy. In contrast, a contractual strategy is likely to have negative impact on project performance, thus leading to a bad relational outcome. As a result, it is likely to trigger the repeated use of the contractual strategy. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:473840ee-6945-4a93-9326-5345850bcaf3&r=all |