nep-ias New Economics Papers
on Insurance Economics
Issue of 2007‒05‒26
three papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Incentives in Obesity and Health Insurance By Inas Rashad; Sara Markowitz
  3. Economic Policy in Health Care: Sickness Absence and Pharmaceutical Cost By Granlund, David

  1. By: Inas Rashad; Sara Markowitz
    Abstract: The percentage of those uninsured in the U.S. has risen in recent years, although out-of-pocket expenditures have declined. At the same time, the obesity rate has significantly risen. We look at obesity in the context of a model in which the status of health insurance might play a role in influencing body weights. In this context, adverse selection is likely to be an issue, as those with ailments are more likely to sort themselves into being covered by insurance, or to be shut out of the health insurance market. At the same time, those who are insured might be more likely to be negligent when it comes to their health, or to be more careful due to the services they are receiving. Using 1993-2002 BRFSS data, we aim to isolate these opposing factors in determining the potential effect of health insurance status on obesity. We control for a variety of confounding factors that may influence obesity prevalence and address the endogenous nature of health insurance. We focus on isolating the effect of ex ante moral hazard rather than ex post moral hazard, and find little evidence of moral hazard in this context.
    JEL: I0
    Date: 2007–05
  2. By: ZHANG, AIHUA; Korn, Ralf; Ewald, Christian-Oliver
    Abstract: Due to the increasing risk of inflation and diminishing pension benefits, insurance companies have started selling in°ation-linked products. Selling such products the insurance company takes over some or all of the inflation risk from their customers. On the other side financial derivatives which are linked to inflation such as inflation linked bonds are traded on financial markets and appear to be of increasing popularity. The insurance company can use these products to hedge its own inflation risk. In this article we study how to optimally manage a pension fund taking positions in a money market account, a stock and an inflation linked bond, while financing investments through a continuous stochastic income stream such as the plan member's contributions. We use the martingale method in order to compute an analytic expression for the optimal strategy and express it in terms of observable market variables.
    Keywords: Pension mathematics; in°ation; long-term investment; stochastic optimal control; martingale method
    JEL: E44 G12 C61
    Date: 2007
  3. By: Granlund, David (Department of Economics, Umeå University)
    Abstract: This thesis consists of a summary and four papers. The first two concerns health care and sickness absence, and the last two pharmaceutical costs and prices. <p> Paper [I] presents an economic federation model which resembles the situation in, for example, Sweden. In the model the state governments provide health care, the federal government provides a sickness benefit and both levels tax labor income. The results show that the states can have either an incentive to under- or over-provide health care. The federal government can, by introducing an intergovernmental transfer, induce the state governments to provide the socially optimal amount of health care. <p> In Paper [II] the effect of aggregated public health care expenditure on absence from work due to sickness or disability was estimated. The analysis was based on data from a panel of the Swedish municipalities for the period 1993-2004. Public health care expenditure was found to have no statistically significant effect on absence and the standard errors were small enough to rule out all but a minimal effect. The result held when separate estimations were conducted for women and men, and for absence due to sickness and disability. <p> The purpose of Paper [III] was to study the effects of the introduction of fixed pharmaceutical budgets for two health centers in Västerbotten, Sweden. Estimation results using propensity score matching methods show that there are no systematic differences for either price or quantity per prescription between health centers using fixed and open-ended budgets. The analysis was based on individual prescription data from the two health centers and a control group both before and after the introduction of fixed budgets. <p> In Paper [IV] the introduction of the Swedish substitution reform in October 2002 was used as a natural experiment to examine the effects of increased consumer information on pharmaceutical prices. Using monthly data on individual pharmaceutical prices, the average reduction of prices due to the reform was estimated to four percent for both brand name and generic pharmaceuticals during the first four years after the reform. The results also show that the price adjustment was not instant.
    Keywords: vertical fiscal externalities; sickness absence; sickness benefits; health care expenditure; fixed budgets; pharmaceuticals; cost containment; dynamic panel data models; endogeneity; propensity score matching
    JEL: D80 D83 H21 H42 H51 H77 I11 I12 I18 J22 L65
    Date: 2007–05–16

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