nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒01‒05
ten papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Health Insurance Status and Physician-induced Demand for Medical Services in Germany : New Evidence from Combined District and Individual Level Data By Hendrik Jürges
  2. Business cycle synchronization and insurance mechanisms in the EU By António Afonso; Davide Furceri
  3. Our Troubled Health Care System: Why Is It So Hard to Fix? Nineteenth Annual Herbert Lourie Memorial Lecture on Health Policy. By Judy Feder
  4. The distortionary effect of health insurance on health demand By Nathalie Fombaron; Carine Milcent
  5. Benefit-Entitlement Effects and the Duration of Unemployment : An Ex-ante Evaluation of Recent Labour Market Reforms in Germany By Hendrik Schmitz; Viktor Steiner
  6. Does Medicare Save Lives? By David Card; Carlos Dobkin; Nicole Maestas
  7. Coordinating to Eradicate Animal Disease, and the Role of Insurance Markets By David A. Hennessy
  8. Social Interaction and Sickness Absence By Lindbeck, Assar; Palme, Mårten; Persson, Mats
  9. Best of Both Worlds - Preparatory Steps in Matching Survey Data with Administrative Pension Records : The Case of German Socio-Economic Panel and the Scientific Use File Completed Insurance Biographies 2004 By Anika Rasner; Ralf K. Himmelreicher; Markus M. Grabka; Joachim R. Frick
  10. Pensionsverpflichtungen: Ein unternehmerischer Risikofaktor? By Stefan Hubrich; Thusnelda Tivig; Hans-Dieter Stubben

  1. By: Hendrik Jürges
    Abstract: Germany is one of the few OECD countries with a two-tier system of statutory and primary private health insurance. Both types of insurance provide fee-for-service insurance, but chargeable fees for identical services are more than twice as large for privately insured patients than for statutorily insured patients. This price variation creates incentives to induce demand primarily among the privately insured. Using German SOEP 2002 data, I analyze the effects of insurance status and district (Kreis-) level physician density on the individual number of doctor visits. The paper has four main findings. First, I find no evidence that physician density is endogenous. Second, conditional on health, privately insured patients are less likely to contact a physician but more frequently visit a doctor following a first contact. Third, physician density has a significant positive effect on the decision to contact a physician and on the frequency of doctor visits of patients insured in the statutory health care system, whereas, fourth, physician density has no effect on privately insured patients' decisions to contact a physician but an even stronger positive effect on the frequency of doctor visits than the statutorily insured. These findings give indirect evidence for the hypothesis that physicians induce demand among privately insured patients but not among statutorily insured.
    Keywords: Supplier-induced demand, Health care utilization
    JEL: I11
    Date: 2007
  2. By: António Afonso (Directorate General Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Davide Furceri (University of Illinois at Chicago, Department of Economics (M/C 144), University of Illinois at Chicago, 601 S. Morgan Street, Chicago, 60607, Illinois, USA.)
    Abstract: In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have well synchronized business cycles, for some of the other countries, business cycles are not yet well synchronized with the euro area’s business cycle, and risk-sharing mechanisms may not provide enough insurance against shocks. JEL Classification: E32, E42, F41, F42.
    Keywords: EU, optimum currency areas, business cycle synchronization, insurance mechanisms.
    Date: 2007–12
  3. By: Judy Feder (Georgetown Public Policy Institute, Georgetown University)
    Abstract: This brief draws heavily on Judith Feder, 2004, "Crowd-Out and the Politics of Health Reform," The Journal of Law, Medicine, and Ethids 32(3): 461-464. We all know that affordable health care is now back on the political agenda, and it's about time! Because all of us--families, businesses, and governments--are struggling with the ever-increasing costs of care. Every year about a million people are added to the rolls of the uninsured. In 2006, it was even more, over 2 million. The number of people without health insurance coverage has reached more than 47 million. People *with* insurance are seeing their benefits dwindle and their health care costs consume their wabes. Even people with health insurance find themselves unable to pay their medical bills and going without needed care. The bottom line is that, increasingly, our health insurance system fails to protect us when we get sick.
    Keywords: health insurance, uninsurance, cost of medical care
    JEL: D14 H51 I10 I18 L33
    Date: 2008–01
  4. By: Nathalie Fombaron; Carine Milcent
    Abstract: This paper presents a general framework for modeling the impact of insurance on healthcare demand extending some of the results of the two-risk model of Rothschild and Stiglitz (1976), but including the latter as a special case. Rothschild and Stiglitz's approach assumes equivalence between the price of treatment and the discomfort caused by the disease. Relaxing this assumption turns out to be key in understanding participation in the insurance and healthcare markets. The demands for insurance and healthcare are modeled simultaneously, under symmetric and asymmetric information. Four main results arise from the relaxation of this assumption. First, only the presence of an insurance market can produce healthcare consumption at higher prices than the discomfort. Second, adverse selection may lead healthcare to be sold at a price lower than that under perfect information. Third, the potential non-participation of one type risk arises despite competition, depending on the degree of information. Last, in a public voluntary regime, one type risk may prefer to be uninsured and still consume healthcare.
    Date: 2007
  5. By: Hendrik Schmitz; Viktor Steiner
    Abstract: We analyse benefit-entitlement effects and the likely impact of the recent reform of the unemployment compensation system on the duration of unemployment in Germany on the basis of a flexible discrete-time hazard rate model estimated on pre-reform data from the German Socioeconomic Panel. We find (i) relatively strong benefit-entitlement effects for the unemployed who are eligible to means-tested unemployment assistance after the exhaustion of unemployment benefit, but not for those without such entitlement; (ii) that benefit-entitlement effects on hazard rates are not monotonic in time to benefit-exhaustion but rather occur around the month of benefit-exhaustion, and (iii) relatively small marginal effects of the amount of unemployment compensation on the duration of unemployment. Simulation results show that the recent labour market reform is unlikely to have a major impact on the average duration of unemployment in the population as a whole, but will significantly reduce the level of long-term unemployment among older workers.
    Keywords: unemployment duration, unemployment insurance, benefit-entitlement effects, German labour market reforms, ex-ante evaluation, hazard rate model
    JEL: J64 J65 H31
    Date: 2007
  6. By: David Card; Carlos Dobkin; Nicole Maestas
    Abstract: The health insurance characteristics of the population changes sharply at age 65 as most people become eligible for Medicare. But do these changes matter for health? We address this question using data on over 400,000 hospital admissions for people who are admitted through the emergency room for "non-deferrable" conditions -- diagnoses with the same daily admission rates on weekends and weekdays. Among this subset of patients there is no discernible rise in the number of admissions at age 65, suggesting that the severity of illness is similar for patients on either side of the Medicare threshold. The insurance characteristics of the two groups are much different, however, with a large jump at 65 in the fraction who have Medicare as their primary insurer, and a reduction in the fraction with no coverage. These changes are associated with significant increases in hospital list chargers, in the number of procedures performed in hospital, and in the rate that patients are transferred to other care units in the hospital. We estimate a nearly 1 percentage point drop in 7-day mortality for patients at age 65, implying that Medicare eligibility reduces the death rate of this severely ill patient group by 20 percent. The mortality gap persists for at least two years following the initial hospital admission.
    JEL: H51 I11
    Date: 2007–11
  7. By: David A. Hennessy (Center for Agricultural and Rural Development (CARD))
    Abstract: Farmed animal production has traditionally been a dispersed sector. Biosecurity actions relevant to eradicating infectious diseases are generally non-contractible, and might involve inordinately high transactions costs if they were contractible. If an endemic disease is to be eradicated within a region, synchronized actions need to be taken to reduce incidence below a critical mass so that spread can be contained. Using a global game model of coordination under public and private information concerning the critical mass required, this paper characterizes the success probability in an eradication campaign. As is standard in global games, heterogeneity in private signals can support a unique equilibrium. Partly because of strategic interactions, concentrated production is found to facilitate eradication whenever unit participation costs are decreasing. Policies to manipulate the critical mass have both a direct effect and a strategic coordination effect. Policies to manipulate information can have subtle and non-intuitive consequences. A program to keep disease out can be modeled similarly. It is shown, too, that coordination problems may lead to multiple equilibria in animal disease insurance markets, so that these markets may complicate a disease eradication program by creating opportunities for multiple inefficient equilibria. The presence of private insurance markets may facilitate coordination and, for good or ill, can seal the fate of a program.
    Keywords: biosecurity, coordination failure, disease insurance, endemic disease, global games, market access, public information, veterinary public health.
    JEL: D8 H4 Q1
    Date: 2007–11
  8. By: Lindbeck, Assar (Research Institute of Industrial Economics (IFN)); Palme, Mårten (Stockholm University); Persson, Mats (Institute for International Economic Studies)
    Abstract: Does the average level of sickness absence in a neighborhood affect individual sickness absence through social interaction on the neighborhood level? To answer this question, we consider evidence of local benefit-dependency cultures. Well-known methodological problems in this type of analysis include avoiding the so-called reflection problem and disentangling the causal effects of group behavior on individual behavior from the effects of individual sorting on neighborhoods. Based on data from Sweden, we adopt several different approaches to deal with these problems. The results are robust in the sense that regardless of approach and identifying assumptions, we obtain statistically significant estimates indicating group effects.
    Keywords: Sick-pay Insurance; Work Absence; Moral Hazard; Social Norms
    JEL: H56 I38 J22 Z13
    Date: 2007–12–17
  9. By: Anika Rasner; Ralf K. Himmelreicher; Markus M. Grabka; Joachim R. Frick
    Date: 2007
  10. By: Stefan Hubrich (University of Rostock and Rostock Centre for the Study of Demographic Change, Germany); Thusnelda Tivig (University of Rostock and Rostock Centre for the Study of Demographic Change, Germany); Hans-Dieter Stubben (Bundes-Versorgungs-Werk GmbH, Hamburg)
    Abstract: Das Eingehen von Pensionsverpflichtungen ist für Unternehmen mit vielfältigen Risiken verbunden. In diesem Papier werden am Beispiel der Pensionszusage die Auswirkungen zweier Risikofaktoren auf die Pensionsrückstellungen von Unternehmen untersucht: Des vorzeitigen Rentenbezugs und des für die Steuerbilanzierung gesetzlich festgelegten Rechnungszinses gemäß § 6a EStG. Ausgangspunkt der Überlegungen bildet die Fragestellung, ob die gesetzlich zulässigen Pensionsrückstellungen auch den tatsächlichen Kostenaufwand aus Betriebsrenten abbilden. Dazu wird ein erstes Grundmodell zur Bestimmung von Pensionsrückstellungen entwickelt, auf dessen Basis für konkrete Annahmeszenarien Berechnungen durchgeführt werden. Es zeigt sich, dass ein vorzeitiger Rentenzugang mit 62 Jahren mit Einsparungen, ein Rentenzugang ab 65 Jahren hingegen mit Mehrkosten verbunden ist. Werden die Pensionsrückstellungen auf Basis der neuen Heubeck'schen Richttafeln 2005G(C) durchgeführt, so konnte eine angemessene Berücksichtigung demografischer Veränderungen festgestellt werden. Allerdings ist davon auszugehen, dass die gebildeten Pensionsrückstellungen unter Maßgabe des Rechnungszinses nach §6a EStG zu einer Unterbewertung des tatsächlichen Kostenaufwandes für Betriebsrenten von bis zu 30 Prozent führen. Vor dem Hintergrund dieser Ergebnisse werden schließlich alternative Möglichkeiten der Ausfinanzierung von Pensionszusagen beleuchtet. Pension accruals are linked to several risks for companies. In this paper we discuss two risk factors, taking pension promises as an example: Early retirement and the legal discount rate. As a starting point we ask whether statutory accruals correctly reflect the costs companies incur with pension promises. In a basic actuarial framework we first investigate the influence of the age of retirement on costs, taking into account that later retirement seems to go along with higher life expectancy. Then we investigate the cost effect of an actuarial discount rate that differs from the one stipulated by § 6a EStG. Our results show that early retirement (at age 62) leads to a cost reduction, whereas late retirement (at age 65and above) increases pension costs. If statutory accruals for pensions are calculated based on the new 2005 G Heubeck(c) tables, differential mortality seem quite well considered. Regarding differences in the discount rate, imposition of the statutory calculation rate according to § 6a EStG could imply an undervaluation of around 30 percent of real pension costs for companies. Given this result, we finally consider some alternative ways for companies to finance their pension promises.
    Keywords: Betriebliche Altersversorgung, Frühverrentung, Lebenserwartung, Pensionsrückstellung, Rechnungszins, Renteneintrittsalter, Rentenversicherung. occupational pension, early retirement, life expectancy, reserve for pensions, discount rate, age of retirement, pension insurance
    JEL: G18 G22 G23
    Date: 2007

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