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on Insurance Economics |
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Issue of 2006‒04‒22
sixteen papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Pau Olivella; Marcos Vera-Hernandez (Institute for Fiscal Studies) |
| Abstract: | We develop a test for adverse selection and use it to examine private health insurance markets. In contrast to earlier papers that consider a purely private system or a system in which private insurance supplements a public system, we focus our attention on a system where privately funded health care is substitutive of the publicly funded one. Using a model of competition among insurers, we generate predictions about the correlation between risk and the probability of taking private insurance under both symmetric information and adverse selection. These predictions constitute the basis for our adverse selection test. The theoretical model is also useful to conclude that the setting that we focus on is especially attractive to test for adverse selection. Using the British Household Panel Survey, we find evidence that adverse selection is present in this market. |
| Keywords: | Contract theory, Testing, Health Insurance |
| JEL: | D82 I19 G22 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:06/02&r=ias |
| By: | Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of high-coverage policies, is used to estimate the role that premium subsidies play in farmers' crop insurance decisions. We use county data for corn, soybeans, and wheat to estimate regression equations that are then used to obtain insight into two policy scenarios. We first estimate that eventual adoption of actuarially fair incremental premiums, combined with current coupled subsidies, would increase farmers' purchase of high-coverage policies by almost 400 percent from 1998 levels across the three crops and two plans of insurance included in the analysis. We then estimate that a return to decoupled subsidies would decrease farmers' high-coverage purchase decisions by an average of 36 percent. |
| Keywords: | Agricultural Risk Protection Act, crop insurance, premium subsidies. |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:05-wp393&r=ias |
| By: | Lindbeck, Assar (Institute for International Economic Studies, Stockholm University); Palme, Mårten (Department of Economics); Persson, Mats (Institute for International Economic Studies, Stockholm University) |
| Abstract: | We analyze the consequences for sickness absence of a selective softening of job security legislation for small firms in Sweden in 2001. According to our differences-in-difference estimates, aggregate absence in these firms fell by 0.2-0.3 days per year. This aggregate net figure hides important effects on different groups of employees. Workers remaining in the reform firms after the reform reduced their absence by about one day. People with a high absence record tended to leave reform firms, but these firms also became less reluctant to hire people with a record of high absence. |
| Keywords: | Seniority rules; sick pay insurance; firing costs; moral hazard |
| JEL: | H53 I38 J22 J50 M51 |
| Date: | 2006–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iiessp:0743&r=ias |
| By: | Peter Birch Sørensen (Department of Economics, University of Copenhagen); Martin Ino Hansen (Statistics Denmark); A. Lans Bovenberg (Tilburg University) |
| Abstract: | Using Danish data, we find that about three fourths of the taxes levied to finance public transfers actually finance benefits that do not redistribute between people but redistribute income over the life cycle of individual taxpayers. This provides a rationale for financing part of social insurance via mandatory individual savings accounts. An account system that offers liquidity insurance and a lifetime income guarantee helps to alleviate the dilemma between insurance and incentives. To illustrate this, we analyse a specific proposal for reform of the Danish system of social insurance, involving the use of individual accounts. We estimate how the reform would affect the distribution of lifetime incomes, the public budget, and economic efficiency. Our analysis suggests that, even with conservative assumptions regarding labor supply elasticities, the proposed reform would generate a Pareto improvement and would imply only a minor increase in the inequality of lifetime income distribution. |
| Keywords: | social insurance; individual accounts; lifetime income distribution |
| JEL: | H53 H55 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:kud:epruwp:06-03&r=ias |
| By: | Mario JAMETTI; Thomas VON UNGERN-STERNBERG |
| Abstract: | It is widely recognized that "market failure" prevents efficient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks presenting public sector participation, often praised as public-private partnerships. We define risk selection as a situation where private companies pass insurance of high risk agents on to the public "partner", arguing that this is a potentially important issue in such situations. In order to illustrate our concerns we look at the case of France. We build a simple model that incorporates the main features of the system, such as the uniform premium rate in both high and low risk regions and the existence of a state reinsurer. We show that in our model, risk selection is likely to be present at equilibrium and discuss the policy options available. When comparing with the actual situation in France we find that the "stylized facts" of the system correspond to our results. Additionally, the policies implemented by the government correspond to policies characterized to reduce the potential of risk selection. |
| Keywords: | risk selection; property insurance; reinsurance; France |
| JEL: | G22 L11 Q54 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:06.02&r=ias |
| By: | Ambec, S. |
| Abstract: | People vote over risk-sharing rules to cope with random revenues. Risk-sharing rules are enforced through peer pressure : those who comply exert a negative externality on those who do not. People are differently affected by this externality. The author determines the elected risk-sharing rules and the level of compliance. It turns out that full risk-sharing is achieved only if everybody complies. Partial risk-sharing is more often achieved with, sometime, some level of non-compliance. In many cases, a majority of people votes over and complies with the risk-sharing rule that maximizes their own expected payoff. |
| Keywords: | RISK SHARING; MUTUAL INSURANCE; ENFORCEMENT; PEER PRESSURE; POLITICAL ECONOMY |
| JEL: | H21 O15 O17 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:200509&r=ias |
| By: | Christian Gollier (Université de Toulouse and Cesifo); Mark Ivaldi (Université de Toulouse and EHESS) |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:07&r=ias |
| By: | Anupa Bir; Karen Eggleston |
| Abstract: | Health economists and policymakers have long recognized that capitation gives insurers incentive to manipulate their offerings to deter the sick and attract the healthy. The shadow-price ap- proach to measuring such selection incentives was pioneered by Frank, Glazer and McGuire (2000). We extend their model to allow for partial capitation and nonfinancial concerns of insurers. We calculate three kinds of selection metrics using managed care medical and pharmacy spending data for fiscal years 2001 and 2002 from the Massachusetts state employee insurance program. Financial returns to risk selection are high, as indicated by all three selection indices as well as by the direct profits an insurer could earn if it could exclude unprofitable patients. Empirically, the financial temptation to distort service quality increases non- linearly with supply-side cost sharing. The more an insurer di- rectly values quality or patient benefit relative to profit, the less severe risk selection incentives become. |
| Keywords: | risk selection; managed health care; shadow price; mixed payment |
| JEL: | I11 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0605&r=ias |
| By: | Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | The Agricultural Risk Protection Act (ARPA) has largely met its objectives of inducing farmers to increase their use of the crop insurance program. Both insured acreage and coverage levels have increased dramatically in response to ARPA's large increase in premium subsidies. An unintended consequence of the larger subsidies is a dramatic increase in the incentive for farmers to insure their crops under optional units, that is, insurance at the field level rather than at the farm or crop level. The expected rate of return to farmers who choose to invest additional premium dollars to move to optional unit coverage ranges from a low of 61 percent at the 85 percent coverage level to 144 percent at the 65 percent coverage level. This explains why the majority of farmers choose optional unit coverage even though the alternative unit structures provide identical insurance guarantees at a substantially lower cost. We consider two policy options to eliminate the unintended consequences of ARPA subsidies. The first would simply eliminate the ability of farmers to insure their crops under optional units. This change would save taxpayers more than $300 million (if 90 percent of current acreage is insured under optional units) and would not decrease the insurance guarantee of any farmer. However, transfers to farmers, crop insurance companies, and crop insurance agents would all fall under this policy option, decreasing its political attractiveness. The second alternative would decouple per-acre premium subsidies from a farmer's choice of unit coverage. Farmers would benefit from the ability to capture all the premium savings that would occur as they move to other unit structures. It is likely that there is a level of decoupled subsidy that would make both farm groups and taxpayers better off. Splitting farm groups off the blocking coalition increases the likelihood of acceptance of this proposal. Program integrity would be increased by dramatically increasing the incremental cost of farmers insuring their crops under optional units. |
| Keywords: | Agricultural Risk Protection Act (ARPA), crop insurance, optional units. |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:05-bp45&r=ias |
| By: | Miguel Carriquiry; Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | The effect of sampling error in estimation of farmers' mean yields for crop insurance purposes is explored using farm-level corn yield data in Iowa from 1990 to 2000 and Monte Carlo simulations. We find that sampling error combined with nonlinearities in the insurance indemnity function will result in empirically estimated crop insurance rates that exceed actuarially fair values by between 2 and 16 percent, depending on the coverage level and the number of observations used to estimate mean yields. Accounting for the adverse selection caused by sampling error results in crop insurance rates that will exceed fair values by between 42 and 127 percent. We propose a new estimator for mean yields based on a common decomposition of farm yields into systemic and idiosyncratic components. The proposed estimator reduces sampling variance by approximately 45 percent relative to the current estimator. |
| Keywords: | actual production history (APH), crop insurance, mean yields estimation, sampling error. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:05-wp387&r=ias |
| By: | Miguel Carriquiry; Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | The effect of sampling error in estimation of farmers' mean yields for crop insurance purposes is explored using farm-level corn yield data in Iowa from 1990 to 2000 and Monte Carlo simulations. We find that sampling error combined with nonlinearities in the insurance indemnity function will result in empirically estimated crop insurance rates that exceed actuarially fair values by between 2 and 16 percent, depending on the coverage level and the number of observations used to estimate mean yields. Accounting for the adverse selection caused by sampling error results in crop insurance rates that will exceed fair values by between 42 and 127 percent. We propose a new estimator for mean yields based on a common decomposition of farm yields into systemic and idiosyncratic components. The proposed estimator reduces sampling variance by approximately 45 percent relative to the current estimator. |
| Keywords: | actual production history (APH), crop insurance, mean yields estimation, sampling error. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:ias:fpaper:05-wp387&r=ias |
| By: | Astrid Rosenschon |
| Abstract: | This paper takes stock of German public support measures in favour of families. The database comprises benefits from family-specific norms of tax law as well as cash and in-kind transfers both from public budgets (federal, states’ and local layer) and from the social insurance system (unemployment insurance, statutory pension fund, health, long term care, and accident insurance). Employers’ benefits and youth development schemes of the churches are included, too. Support measures defined that way actually amount to approximately 240 Bill. € in gross terms, i.e. without own contributions of families to tax and social security revenues. This sum equals 10.7 per cent of German gross domestic product. |
| Keywords: | Finanzpolitik, Familienpolitik |
| JEL: | H24 H53 H72 J13 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1273&r=ias |
| By: | Simona GRASSI |
| Abstract: | We characterise the conditions for the existence of a mixed syste m of finance and provision of health-care by a social planner and a private market coexists. Private insurance/provision and publ ic health-care provision cannot be consumed together, each indivi dual has a certain probability of being sick or healthy, they hav e different incomes and the richer they are, the more health-care services they are willing to buy. Everybody contributes through a general linear income taxation to the finance of the public pro vision of health-care. Implicitly income is not observable by the social planner. The selection of users is endogenous. The quanti ty of health-care service supplied by the public sector suffers f rom congestion. We derive the conditions for existence of a mixed system and we characterise the impact of an increase or decrease of resources directed to the public system. |
| Keywords: | Public provision of private goods, health care |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2006-14&r=ias |
| By: | Timothy Halliday (Department of Economics, University of Hawaii at Manoa; John A. Burns School of Medicine, University of Hawaii at Manoa) |
| Abstract: | In this paper, we investigate the impact of aggregate and idiosyncratic economic shocks on health using data on self-reported health status and mortality from the Panel Study of Income Dynamics. First, we document a large correlation between poor macroeconomic conditions and mortality for working-aged men. This correlation is robust to controls for baseline health which mitigates concerns that the correlation is the result of selection. There is no relationship between macroeconomic conditions and mortality for women. Next, to better understand how much of this correlation is the result of a causal impact of income shocks on health, we use methods from the literature on dynamic panel data models. Doing this, we find evidence of a causal impact of income shocks on health for working-aged men at the lowest parts of the income distribution. Finally, our analysis provides no evidence that recessions are good for your health. |
| Keywords: | gradient, recessions, health, dynamic panel data models |
| JEL: | I0 I12 J1 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:200606&r=ias |
| By: | Edward Kelley; Jeremy Hurst |
| Abstract: | This paper represents an attempt to set out a conceptual framework for the OECD’s Health Care Quality Indicator (HCQI) Project. Two main issues are tackled: what concepts, or dimensions, of quality of health care should be measured and how, in principle, should they be measured. The need for a conceptual framework for the Project was expressed by a large group of participating countries. In interviews by the OECD Secretariat with member countries in April and May 2005, country experts and delegates to the Group on Health reiterated the need for a framework for the OECD’s health care quality work. Countries stated that the framework should be: a) based on country experience and b) could be used to guide both current and future work by the OECD in health care quality measurement and monitoring. Ce document a pour objet de présenter le cadre conceptuel du projet de l’OCDE sur les indicateurs de la qualité des soins de santé (projet HCQI). Deux grandes questions y sont traitées : quels concepts, ou aspects, de la qualité des soins convient-il d’évaluer et comment ceux-ci doivent-ils en théorie être évalués. La nécessité d’élaborer un cadre conceptuel pour le projet a été exprimée par un grand nombre de pays participants. Lors des entretiens menés par le Secrétariat de l’OCDE avec les pays membres en avril et mai 2005, les experts et délégués nationaux auprès du Groupe sur la santé ont réaffirmé la nécessité d’élaborer un cadre pour les travaux de l’OCDE sur la qualité des soins de santé. Les pays ont indiqué que ce cadre devait a) être fondé sur l’expérience des pays et b) pouvoir être utilisé pour éclairer les travaux actuels et futurs de l’OCDE dans le domaine de l’évaluation et du suivi de la qualité des soins de santé. |
| Date: | 2006–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaad:23-en&r=ias |
| By: | Robert Fleetcroft (School of Medicine, Health Policy and Practice, University of East Anglia); Richard Cookson (Centre for Health Economics, University of York) |
| Abstract: | The new contract for primary care in the UK offers fee-for-service payments for a wide range of activities in a quality outcomes framework, with payments designed to reflect likely workload. This study aims to explore the link between these financial incentives and the likely population health gains. The study examines a subset of eight preventive interventions covering 38 of the 81 clinical indicators in the quality framework. The maximum payment for each service was calculated and compared with the likely population health gain in terms of lives saved per 100,000 population based on evidence from McColl et al. (1998). Maximum payments for the eight interventions examined make up 57% of the sum total maximum payment for all clinical interventions in the quality outcomes framework. There appears to be no relationship between pay and health gain across these eight interventions. Two of the eight interventions (warfarin in atrial fibrillation and statins in primary prevention) receive no incentive. Payments in the new contract do not reflect likely population health gain. There is a danger that clinical activity may be skewed towards high-workload activities that are only marginally effective, to the detriment of more cost effective activities. If improving population health is the primary goal of the NHS, then fee-for-service incentives should be designed to reflect likely health gain rather than likely workload. |
| Keywords: | health policy, incentive payments, primary care, quality, UK |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:chy:respap:3&r=ias |