nep-ias New Economics Papers
on Insurance Economics
Issue of 2006‒06‒03
twelve papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Contributions to Health Insurance Premiums: When Does the Employer Pay 100 Percent? By Alice Zawacki; Amy Taylor
  2. Prudential Supervision of Lenders Mortgage Insurance – Amendments to Proposed Reforms By Australian Prudential Regulation Authority
  3. Using the MEPS-IC to Study Retiree Health Insurance By Alice Zawacki
  4. The Economics of a Two Tier Health System: A Fairer Medicare? By Patricia Apps; Ray Rees; Elizabeth Savage
  5. Using Census Business Data to Augment the MEPS-IC By Kristin McCue; Alice Zawacki
  6. The Work Disincentive Effects of the Disability Insurance Program in the 1990s By Susan Chen; Wilbert van der Klaauw
  7. State Government Cash and In-kind Benefits: Intergovernmental Fiscal Transfers and Cross-Program Substitution By James Marton; David E. Wildasin
  8. American Insurance Association v. Garamendi and Executive Preemption in Foreign Affairs By Brannon Denning; Michael Ramsey
  9. An analysis of money ' s worth ratios in Chile By Morales, Marco; Rocha, Roberto; Thorburn, Craig
  10. The risk-adjusted performance of US buyouts By Groh, Alexander; Gottschalg, Oliver
  11. The Impact of Minimum Quality Standards on Firm Entry, Exit and Product Quality: The Case of the Child Care Market By V. Joseph Hotz; Mo Xiao
  12. Empirisk studie av ett prestationsbaserat bonussystem i SPP Livförsäkring AB By Arvidsson, Per

  1. By: Alice Zawacki; Amy Taylor
    Abstract: We identify the characteristics of establishments that paid 100 percent of health insurance premiums and the policies they offered from 1997-2001, despite increased premium costs. Analyzing data from the MEPS-IC, we see little change in the percent of establishments that paid the full cost of premiums for employees. Most of these establishments were young, small, singleunits, with a relatively high paid workforce. Plans that were fully paid generally required referrals to see specialists, did not cover pre-existing conditions or outpatient prescriptions, and had the highest out-of-pocket expense limits. These plans also were more likely than plans not fully paid by employers to have had a fee-for-service or exclusive provider arrangement, had the highest premiums, and were less likely to be self-insured.
    Keywords: employer-sponsored health insurance, contributions, premiums
    Date: 2005–12
  2. By: Australian Prudential Regulation Authority (Australian Prudential Regulation Authority)
    Date: 2005–02–01
  3. By: Alice Zawacki
    Abstract: This paper discusses using the restricted-access Medical Expenditure Panel Survey- Insurance Component (MEPS-IC) to study employer-sponsored retiree health insurance (RHI). This topic is particularly interesting given current events such as the aging of baby boomers, rising health care costs, new prescription drug coverage under Medicare, and changes in accounting standards for reporting liabilities related to RHI offerings. Consequently, employers are grappling with an aging workforce, evaluating Medicare subsidies to employers for offering retiree drug plans, facing rising premium costs as a result of rising health care costs, and trying to show profitability on financial reports. This paper provides technical information on using the MEPS-IC to study RHI and points out data issues with some of the measures in the database. Descriptive statistics are provided to illustrate the types of retiree estimates possible using the MEPS-IC and to show some of the trends in this subject area. Not surprising, these estimates show that employer offers of RHI have declined, greater numbers of retirees are enrolling in these plans, and expenditures for employer-sponsored RHI have been rising.
    Date: 2006–04
  4. By: Patricia Apps; Ray Rees; Elizabeth Savage
    Abstract: This paper analyses a recent proposal of the Australian Government to reform the existing Medicare system. It develops models of the physician’s behaviour and of a household’s demand for medical insurance under the proposed system, and then proceeds to characterise the equilibrium under the new proposals. It argues that those most likely to be made worse off are low income households with children, though a full evaluation of the effects of the proposal requires it to be analysed in a public finance framework.
    Keywords: health care, government policy, medical insurance
    JEL: I11 I18
    Date: 2004–09
  5. By: Kristin McCue; Alice Zawacki
    Abstract: This paper has two aims: first to describe methods, issues, and outcomes involved in matching data from the Insurance Component of the Medical Expenditure Panel Survey (MEPSIC) to other business microdata collected by the U.S. Census Bureau, and second to present some simple results that illustrate the usefulness of such combined data. We present the results of linking the MEPS-IC with data from the 1997 Economic Censuses (EC), but also discuss other possible sources of business data. An issue in any linkage is whether the linked sample remains representative and large enough to be useful. The EC data are attractive because, given the survey’s broad coverage and large sample, most of the MEPS-IC sample can be matched to it. We use the combined EC/MEPS-IC data to construct productivity measures that are useful auxiliary data in examining employers’ health insurance offering decisions.
    Date: 2005–12
  6. By: Susan Chen; Wilbert van der Klaauw
    Abstract: In this paper we evaluate the work disincentive effects of the Disability Insurance program during the 1990s. To accomplish this we construct a new large data set with detailed information on DI application and award decisions and use two different econometric evaluation methods. First, we apply a comparison group approach proposed by John Bound to estimate an upper bound for the work disincentive effect of the current DI program. Second, we adopt a Regression-Discontinuity approach that exploits a particular feature of the DI eligibility determination process to provide a credible point estimate of the impact of the DI program on labor supply for an important subset of DI applicants. Our estimates indicate that during the 1990s the labor force participation rate of DI beneficiaries would have been at most 20 percentage points higher had none received benefits. In addition, we find even smaller labor supply responses for the subset of ’marginal’ applicants whose disability determination is based on vocational factors.
    Date: 2006–02
  7. By: James Marton (Martin School of Public Policy and Administration, University of Kentucky); David E. Wildasin (Martin School of Public Policy and Administration and Department of Economics, University of Kentucky)
    Abstract: US states provide both cash and health insurance benefits for the poor, partially financed by fiscal transfers from the Federal government. The 1996 welfare reform drastically reduces Federal support for cash transfers at the margin, lowering the relative price to states of providing benefits to the poor through Medicaid. This paper analyzes the comparative-statics response of state governments to such changes in intergovernmental transfers, showing (in central cases) that they can contribute not only to reductions in state expenditures on cash benefits but to increases in expenditures on Medicaid, whether or not beneficiary populations are mobile among states. Length: 27 pages
    Keywords: Intergovernmental Transfers, Welfare Reform, Medicaid
    JEL: H77
    Date: 2006–01
  8. By: Brannon Denning (Cumberland School of Law); Michael Ramsey (University of San Diego)
    Abstract: In American Insurance Association v. Garamendi, the U.S. Supreme Court invalidated California's Holocaust Victim Insurance Relief Act (HVIRA), which required insurance companies doing business in California to disclose all policies they or their affiliates sold in Europe between 1920 and 1945. According to the Court, the state's law unconstitutionally interfered with the foreign affairs power of the national government. The decision was easily overlooked in a Term filled with landmark cases dealing with affirmative action and sexual privacy. What coverage the case did receive emphasized its federalism aspects, and excited little reaction because the result seemed intuitively appropriate given the federal government's interest in conducting foreign affairs. We argue in this paper, however, that Garamendi is more important - and problematic - when seen as a case about separation of powers. In particular, we argue that the decision expands presidential control over foreign affairs, not only at the expense of the states, but also and more critically at the expense of Congress and the Senate. This arises from the Court's invention of a novel constitutional power of executive preemption - that is, an independent ability of the President to override state laws that interfere with executive branch policies in foreign affairs. Until Garamendi, no one had thought that a mere executive branch policy, unsupported by the formal or even tacit approval of any other branch, could have the effect of preemptive law. As a result, one need not be a defender of foreign policy federalism, nor a critic of executive foreign affairs powers, to have grave reservations about the decision's implications for separation of powers, federalism and constitutional theory. It is uncontroversial that state laws and policies must give way to the foreign affairs objectives of the national government. The critical question, though, is how these overriding federal goals are developed and identified. We argue that the Garamendi decision has at least three separate and substantial ill-effects upon this process. First,executive preemption conveys to the President the power to decide which state laws affecting foreign affairs survive and which do not. This concentrates foreign affairs power in the President in a way not contemplated by the Constitution's Framers, who sought to separate executive power from legislative power. Second, Garamendi seemed to make executive agreements the functional equivalents of congressional statutes; this functional equivalency may hasten the decline of the treaty as a foreign policy-making tool, with a concomitant decline in the opportunities for Congress - the Senate, in particular - to shape foreign policy. Third, the decision implicated the relationship between the states and the federal government in foreign affairs, but did so in a way that provided essentially no guidance for the future. Part I of this Article discusses the factual setting of the Holocaust insurance claims that formed the background of the case. Part II outlines the constitutional law of federal-state relations in foreign affairs as it stood before the Garamendi decision. Part III describes the Supreme Court's decision, and points out its discontinuity with prior decisions. In Part IV we turn to the troubling structural implications of Garamendi, which we regard as occurring primarily in the field of separation of powers. We conclude that the Court ended up far from the text, structure and history of the Constitution. In Part V we address the decision's implications for federalism, particular the dangers of concentrating preemptive power in the executive branch. Part VI relates the Garamendi case to the wider theoretical debates of modern foreign affairs law and constitutional interpretation. In contrast to other federalism and separation of powers cases, the Garamendi Court paid little attention to text or structure in analyzing the constitutional questions presented. More surprising, perhaps, is the Court's complete lack of interest in what light history might shed on the foreign affairs issues before it. But neither is Garamendi an exercise in common law doctrinal evolution, because it owes essentially nothing to prior cases or practice, except as rhetorical cover. Garamendi's near-exclusive attention to loose interpretations of prior case law and its lack of sensitivity to text, history, and structure, suggest to us a danger in common law constitutional interpretation as a preferred approach to constitutional interpretation and adjudication in foreign affairs controversies.
  9. By: Morales, Marco; Rocha, Roberto; Thorburn, Craig
    Abstract: Empirical analyses of annuities markets have been limited to a few industrial countries and restricted by data limitations. Chile provides excellent conditions for research on annuities because of the depth of its market and the availability of data. The authors use an extensive dataset on individual annuities to examine econometrically a measure of market performance-money ' s worth ratios (MWRs)-or the ratio of the expected present value of annuity payments to the premium. The results show that annuitants in Chile have generally a good deal for their premiums, as indicated by MWRs higher than one, and also higher than those estimated for other countries. The difference between Chile and other countries is striking considering that annuities in Chile are indexed to prices. The wide range of indexed instruments in Chile, allowing providers to hedge their risks while extracting higher returns, helps explain the difference. The high degree of market competition has also contributed to this outcome. Efforts to improve market transparency through a new electronic quotation system have decreased the dispersion of MWRs. Finally, MWRs tend to decrease for contracts with longer durations, reflecting pricing for higher longevity and reinvestment risks. These results are consistent with separate research on the annuity rate, and indicate the need to ensure competition and market transparency, as well as to develop appropriate financial instruments for providers to ensure good outcomes for annuitants.
    Keywords: Pensions & Retirement Systems,Insurance & Risk Mitigation,Non Bank Financial Institutions,Investment and Investment Climate,Contractual Savings
    Date: 2006–05–01
  10. By: Groh, Alexander; Gottschalg, Oliver
    Abstract: This paper assesses the risk-adjusted performance of US buyouts.
    Keywords: risk-adjusted performance; US buyouts; risk; investment
    JEL: E22 G11 G32
    Date: 2006–01–01
  11. By: V. Joseph Hotz; Mo Xiao
    Abstract: We examine the impact of minimum quality standards on the supply side of the child care market, using a unique panel data set merged from the Census of Services Industries, state regulation data, and administrative accreditation records from the National Association of Education for Young Children. We control for state-specific and time-specific fixed effects in order to mitigate the biases associated with policy endogeneity. We find that the effects of quality standards specifying the labor intensiveness of child care services are strikingly different from those specifying staff qualifications. Higher staff-child ratio requirements deter entry and reduce the number of operating child care establishments. This entry barrier appears to select establishments with better quality into the market and alleviates competition among existing establishments: existing establishments are more likely to receive accreditation and higher profits, and are less likely to exit. By contrast, higher staff-education requirements do not have entry-deterrence effects. They do have the unintended effects of discouraging accreditation, reducing owners’ profits, and driving firms out of businesses.
    JEL: L5 L8
    Date: 2005–12
  12. By: Arvidsson, Per (Dept. of Business Administration, Stockholm School of Economics)
    Abstract: Empirisk studie av ett prestationsbaserat bonussystem i SPP Livförsäkring AB <p> Denna studie visar att ett prestationsbaserat bonussystem i livförsäkringsbolaget SPP innebar ett förändrat beteende hos de anställda med ökat grupptänkande samt att prestationerna överträffade målen. <p> Förfatare: Per Arvidsson, Företagsekonomiska institutionen, Handelshögskolan i Stockholm. <p> SPPs verksamhetsidé är att erbjuda föräskringslösningar på den konkurrensutsatta delen av tjänstepensionsmarknaden. Företaget drivs enligt ömsesidiga principer. Premieinkomsten uppgick 2001 till 12 627 MSEK och antalet anställda var 673. Verksamheten styrs sedan några år tillbaka med ett styrkort. SPPs bonussystem infördes i en situation då tidigare bonussystem, som funnits under flera år och byggde på vissa försäljningsmål, saknade mål på enhetsnivå, upplevdes som orättvisa och gav inget önskat beteende för företaget. <p> SPPs prestationsbaserad bonussystem utgick från målen i affärsplanen samt från mål och parametrar i det existerande styrkortet. Själva bonusmodellen utgjordes av en matris där fyra målområden - ekonomi, process, kund och utveckling/medarbetare viktades i relation till varandra. Bonussystemet omfattade två nivåer: företagsnivå och enhetsnivå. Maximal bonusersättning uppgick till en extra månadslön på respektive nivå (säljarnas bonusersättning kunde som mest uppgå till fyra extra månadslöner). Bonussystemet omfattade ett år och bonusersättningen skulle betalas ut efter årets slut. Studien omfattar detta år. De forskningsmetoder som används i studien är djupintervjuer (sammanlagt 32 personer intervjuades: företagsledning, chefer, controllers,övriga medarbetare), analys av verksamhetsdata (ett 60-tal bonuskor analyserades) samt aktörsorienterad aktionsforskning. <p> Studiens interna analys visar att bonussystemet hade tydliga effekter på verksamheten - framför allt på enhetsnivå. Effekterna avsåg bl a att målen tydliggjordes, vilket gav chefer och medarbetare möjlighet att påverka prestationer och mål, att önskvärda prestationer utfördes, att strukturer och beteende förändrades, att utvecklingsplaner och kompetensprofiler upprättades i större omfattning än förr samt att grupptänkandet ökade. Intervjuutsagorna gör gällandeatt syftet med bonussystemet hade god acceptans i företaget. Analysen av verksamhetsdata visar att målen på företagsnivå upplevdes som svårpåverkbara. Medarbetarna kunde endast indirekt påverka målen, förutom andelen utvecklingsplaner som beräknades genom att summera alla planer inom företaget. Målen på enhetsnivå var lättare att påverka, även om vissa enheter hade svårigheter att sätta realistiska och uppnåeliga mål. De dysfunktionella effekter som förekom, avsåg uppdelningen på två bonusdelar, att bonussystemet kom igång senare än planerat samt att vissa mål forcerades fram. Dessutom fanns kritik mot att företagsledningen varit passiv och inte oftare "pratat bonus". <p> Slutsatsen är att bonussystemet hade den funktion som var syftet. Bonussystemet ledde till att prestationerna överträffade målen samt ett ändrat beteende hos de anställda med ökat grupptänkande. I studien identifieras flera faktorer som bidrog till att bonussystemet ledde till funktionella effekter: styrning mot verksamhetens mål i flera dimensioner, formulering av mått på prestationer och påverkbarhet, samspel mellan monetära och icke-monetära belöningar samt acceptans för belöning för alla. Resultaten hade dock behövt analyseras över en längre tidsperiod för att kunna identifiera långsiktiga effekter.
    Keywords: Management Control; Incentive; Compensation Systems; Insurance Industry
    Date: 2005–03–30

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