nep-ias New Economics Papers
on Insurance Economics
Issue of 2006‒08‒26
five papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Health Insurance Enrollment Decisions: Preferences for Coverage, Worker Sorting, and Insurance Take Up By Alan C. Monheit; Jessica Primoff Vistnes
  2. Employment and Adverse Selection in Health Insurance By Jayanta Bhattacharya; William B. Vogt
  3. Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis By Patrick Bajari; Han Hong; Ahmed Khwaja
  4. Policy Options for Financing the Future Health and Long-Term Care Costs in Japan By Tadashi Fukui; Yasushi Iwamoto
  5. Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland Revised By Tomi Kyyrä; Ralf A. Wilke

  1. By: Alan C. Monheit; Jessica Primoff Vistnes
    Abstract: The weak response by the uninsured to policy initiatives encouraging voluntary enrollment in health insurance has raised concerns regarding the extent to which the uninsured value health insurance. To address this issue, we use data from the 2001 Medical Expenditure Panel Survey to examine the association between health insurance preferences and coverage status. We also consider the role of such preferences in decisions to seek out and enroll in employment-based coverage. We find that adults with weak or uncertain preferences for health insurance are more likely than persons with strong preferences to be uninsured and less likely to acquire coverage. Our econometric work indicates that workers with weak or uncertain preferences are less likely to obtain job offers with insurance, reinforcing prior evidence that workers sort among jobs according to preferences for coverage. We also find that workers with weak or uncertain preferences are less likely to enroll in offered coverage and we estimate the subsidy necessary to compensate such workers for the utility loss were they to enroll. Our results suggest a dual approach to expanding coverage that includes both subsidies and educational efforts to inform targeted groups among the uninsured about the value of health insurance.
    JEL: I1 J3
    Date: 2006–08
  2. By: Jayanta Bhattacharya; William B. Vogt
    Abstract: We construct and test a new model of employer-provided health insurance provision in the presence of adverse selection in the health insurance market. In our model, employers cannot observe the health of their employees, but can decide whether to offer insurance. Employees sort themselves among employers who do and do not offer insurance on the basis of their current health status and the probability distribution over future health status changes. We show that there exists a pooling equilibrium in which both sick and healthy employees are covered as long as the costs of job switching are higher than the persistence of health status. We test and verify some of the key implications of our model using data from the Current Population Survey, linked to information provided by the U.S. Department of Labor about the job-specific human capital requirements of jobs.
    JEL: I1 J10 J33
    Date: 2006–08
  3. By: Patrick Bajari; Han Hong; Ahmed Khwaja
    Abstract: Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care. We empirically study this question by using data from the Health and Retirement Study to estimate a structural model of the demand for health insurance and medical care. Using a two-step semi-parametric estimation strategy we find significant evidence of moral hazard, but not of adverse selection.
    JEL: C14 D82 I11
    Date: 2006–08
  4. By: Tadashi Fukui; Yasushi Iwamoto
    Abstract: As the Japanese population structure changes, health care and long-term care costs will steadily increase. The current style of financing (pay-as-you-go) will create a large increase in future burden of these costs. This paper studies an alternative policy that prefunds the social insurance benefits for the elderly. During a transition process, the proposed scheme maintains a higher contribution rate in order to accumulate sufficient funds. Under our baseline scenario, the sum of the contribution rates toward health insurance and long-term care insurance increases from 5.06 percent of earnings to 12.41 percent of the same. The rate of increase in overall burdens, including taxes and subsidies, is 63 percent. Our sensitivity analysis has shown that the quantitative implications of the increase in total burdens depend on social cost scenarios, the labor force, and the interest rate. However, labor force scenarios do not have a considerable impact on the rate of burden. As against this, the setting of social costs has a significant impact on the same. Even under the most optimistic scenario, the rate of increase in total burden is 34 percent. Even though we cannot predict the exact amount of the necessary contribution rate that is capable enough to transfer the funded system, what we are sure of is that a significant increase in the contribution rate is inevitable.
    JEL: H55 I10
    Date: 2006–08
  5. By: Tomi Kyyrä; Ralf A. Wilke
    Abstract: In several European countries the elderly unemployed are allowed to collect unemployment benefits up to a certain age limit, after which they can retire via some early retirement scheme. In Finland the eligibility age of persons benefiting from this kind of scheme was raised from 53 to 55 in 1997. We consider layoff risks, unemployment durations, and the exit states before and after the reform. In the duration analysis a flexible treatment design is adopted by allowing for quantile treatment effects. Since the reform the group aged 53-54 has had a lower risk of unemployment, shorter unemployment durations, and higher exit rates to employment, and it is almost indistinguishable from the group aged 50-52. We estimate that the amount of unemployment benefits saved due to the reform is close to 100 million euros for each age cohort turning 53.
    Keywords: Unemployment insurance reform, quantile treatment effect, duration analysis, Finnish register data
    Date: 2006–06–28

This nep-ias issue is ©2006 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.