nep-ias New Economics Papers
on Insurance Economics
Issue of 2007‒11‒24
seven papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Health Insurance and Life Style Choices: Identifying the Ex Ante Moral Hazard By Stanciole, Anderson
  2. Outsourcing, Unemployment and Welfare Policy By Christian Keuschnigg; Evelyn Ribi
  3. On the Emergence of Private Insurance in Presence of Mutual Agreements By Bourlès, Renaud
  4. Reaching the goal: expanding health insurance coverage in New England: current strategies and new initiatives By Alicia Sasser
  5. Public and Private Health Care Financing with Alternate Public Rationing By Katherine Cuff, Jeremiath Hurley, Stuart Mestelman, Andrew Muller, and Robert Nuscheler
  6. Measuring annual price elasticities in Dutch health insurance: A new method By Rudy Douven; Harm Lieverdink; Marco Ligthart; Ivan Vermeulen
  7. Unemployment Insurance Savings Accounts and Collective Wage Determination By Laszlo Goerke

  1. By: Stanciole, Anderson (The University of York)
    Abstract: There is extensive debate in the literature about the practical significance of the concept of ex-ante moral hazard. This paper uses data from the 1999-2003 PSID waves to estimate a structural model of individual choice of insurance coverage and four life style related decisions: heavy smoking, heavy drinking, sedentarism and obesity. The results show that health insurance has significant incentive effects on life style choices, increasing the propensity to heavy smoking, sedentarism and obesity. Somewhat surprisingly, however, health insurance decreases the propensity to heavy drinking. There is also significant correlation among the errors of each equation. The results might also have implications for the design of health financing policies.
    Keywords: Ex ante moral hazard; Insurance ; Life Style ; Max Simulated Likelihood
    JEL: I11 I11 I11 C15
    Date: 2007–11
  2. By: Christian Keuschnigg; Evelyn Ribi
    Abstract: Outsourcing of labor intensive activities challenges the welfare state and undermines the protection of low-skilled workers. The stylized facts are that profits are concentrated among the high-skilled, involuntary unemployment is mostly among the low-skilled, and private unemployment insurance is missing. This paper analyzes the effectiveness of redistribution and insurance policies when heterogeneous firms can outsource labor intensive components to low-wage economies. The main results are: (i) Social insurance props up wages, leading to more outsourcing and unskilled unemployment. (ii) Redistribution from the skilled to the working poor acts as a wage subsidy to unskilled workers, thereby reducing gross wages, outsourcing and unemployment. (iii) A trend to outsourcing, induced by lower transport costs of imported components, depresses low-skilled wages, raises unemployment, and boosts profits. The resulting polarization of society and the increased income risk of unskilled workers emphasize the social gains from redistribution and insurance and thus call for a more active role of the welfare state in more open economies.
    Keywords: Outsourcing, unemployment, social insurance, redistribution
    JEL: F23 H21 J64 J65 L23
    Date: 2007–11
  3. By: Bourlès, Renaud
    Abstract: The aim of this paper is to analyze the impact of the existence of mutual firms on the behavior of an insurance company and more precisely to study in which situations a private insurance firm may emerge in presence of an incumbent mutual firm. Our approach differs from the existing literature as we integrate the investment choices of the company and the fact that, because it commits on a fix contract, it can become insolvent. In such a situation we are able to characterize the unique optimal choices of an entrant company and the conditions favoring or preventing its appearance.
    Keywords: Insurance market, Mutual firms, Commitment, Insolvency
    JEL: G22 D8 L1
    Date: 2007–06–29
  4. By: Alicia Sasser
    Abstract: As the number and percentage of people without health insurance continues to climb, the goal of expanding such coverage is even more pressing. Traditional strategies have had only limited success. And with little movement at the federal level, states have chosen to enact their own bold initiatives. Four New England states - Maine, Massachusetts, Rhode Island, and Vermont - have recently passed or implemented programs to expand health insurance coverage, some with the goal of achieving near-universal coverage. By combining different strategies from across the political spectrum, the new initiatives represent a unique amalgam approach to expanding health care coverage. This paper examines existing strategies that have taken a more incremental approach to expanding coverage and also explores the new initiatives in New England, comparing and contrasting their designs and strategies.
    Keywords: Insurance, Health - New England ; Health care reform - New England ; Medically uninsured persons - New England
    Date: 2007
  5. By: Katherine Cuff, Jeremiath Hurley, Stuart Mestelman, Andrew Muller, and Robert Nuscheler
    Abstract: We develop a model to analyze health care nancing arrangements and under alternative public sector rationing rules. Health care is demanded by individuals varying in income and severity of illness. There is a limited supply of health care resources used to treat individuals, causing some individuals to go untreated. We examine outcomes under full public finance, full private finance, and mixed, parallel public and private finance under two rationing rules for the public sector: needs-based rationing and random rationing. Insurers (both public and private) must bid to obtain the necessary health care resources to treat their beneficiaries. While the public insurer's ability-to-pay is limited by its (fixed) budget, the private insurer's willingness-to-pay re ects the individuals' willingness-to-pay for care. When permitted, the private sector supplies supplementary health care to those willing and able to pay. The introduction of private insurance diverts treatment from relatively poor to relatively rich individuals. Moreover, if the public insurer allocates care according to need, the average severity of the untreated is higher in a mixed system than in a pure public system. While we can unambiguously sign most comparative static effects for a general set of distribution functions for income and severity, a complete analysis of the relationship between public sector rationing and the scope for a private health insurance market requires distributional assumptions. For a bivariate uniform distribution function we nd that the private health insurance market is smaller when the public sector rations according to need as compared to random allocation of health care.
    Keywords: health care financing, rationing rules
    JEL: I11 I18
    Date: 2007–11
  6. By: Rudy Douven; Harm Lieverdink; Marco Ligthart; Ivan Vermeulen
    Abstract: This paper proposes a new method for estimating annual price elasticities from market share data of health insurers. In contrast to traditional methods the elasticity is derived from bilateral price elasticities which relate the net share of switchers between two health insurers not only to their premium difference but also to the market share and premium of the higher priced health insurer. Our new method explains the annual variation in the Dutch market share data better than the traditional methods. We find in the Dutch social health insurance for the period 1996- 2005 rather low negative annual price elasticities ranging between -1 and 0. In that period stickiness of insurer choices was high and less than 5% of the population switched annually from health insurer. This result, however, was in sharp contrast with an exceptional high price elasticity of -7 for the year 2006, where after a major health care reform about 18% of the population switched mostly to lower priced health insurers. Besides large media coverage, one important difference with previous years was that many consumers holding an individual contract could switch to a lower priced group contract.
    Keywords: health plan choice; premium elasticities; switching costs
    JEL: D12 I11 I18 L11
    Date: 2007–11
  7. By: Laszlo Goerke (University of Tübingen, CESifo and IZA)
    Abstract: Unemployment Insurance Savings Accounts (UISAs) entitle workers to unemployment benefits at the expense of future pension payments. Therefore, such accounts make unemployment less attractive, intensify job search, and raise employment. In the present paper the wage and employment consequences of UISAs are investigated in a model of collective wage determination. In the basic set-up, UISAs induce a trade union to lower wages. This effect can also arise if (1) balanced-budget repercussions are taken into account, (2) individual job search is incorporated, and (3) wage-dependent pensions are allowed for. However, the requirements for negative wage effects to arise become stricter than in the base model. Thus, collective bargaining creates additional impediments for the positive employment consequences of UISAs.
    Keywords: employment, trade union, unemployment accounts, unemployment benefits, wages
    JEL: J38 J51 J65 J68
    Date: 2007–11

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