nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒11‒11
twelve papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance By Randall D. Cebul; James B. Rebitzer; Lowell J. Taylor; Mark E. Votruba
  2. Do Optional Deductibles Reduce the Number of Doctor Visits? : Empirical Evidence with German Data By Hendrik Schmitz
  3. The Marriages of Intellectual Property & Insurance By Jayant Kumar, Jayant Kumar; Neeraj Parnami, Neeraj Parnami
  4. Testing Full Consumption Insurance in the Frequency Domain By Santos Monteiro, Paulo
  5. The Effect of Managed and Traditional Care Insurance Plans on Horizontal Inequity in Access to Health Care in the United States By Frank Puffer; Elizabeth Pitney Seidler
  6. Social Welfare and Demand for Health Care in the Urban Areas of Côte d'Ivoire By Arsène Kouadio; Vincent Monsan; Mamadou Gbongue
  7. Price Regulation, Market Exit, and Financial Leverage of Canadian Property-Liability Insurers By Strauss, Jason
  8. The market for retirement products in Sweden By Palmer, Edward
  9. Policy Change in the Canadian Welfare State: Comparing the Canada Pension Plan and Unemployment Insurance By Daniel Béland; John Myles
  10. The balanced scorecard as a knowledge management tool: a French experience in a semi-public insurance company By Gregory Wegmann
  11. Mental Health Parity Legislation, Cost-Sharing and Substance Abuse Treatment Admissions By Dhaval M. Dave; Swati Mukerjee
  12. Distribution Impact of Public Spending in Cameroon: The Case of Health Care By Bernadette Dia Kamgnia

  1. By: Randall D. Cebul; James B. Rebitzer; Lowell J. Taylor; Mark E. Votruba
    Abstract: Health insurance is a complex, multi-attribute product and this creates search frictions that can distort market outcomes. We study the effect of frictions in the market for employer based health insurance. We find that frictions are most severe in the "fully insured" part of the group health insurance market and we estimate that frictions in this market segment cause a quarter of the consumer surplus to shift from policy-holders to insurers (a transfer of 32.5 billion dollars in 1997). Our analysis also suggests that frictions in insurance markets also reduce incentives to invest in future health.
    JEL: I11 L13
    Date: 2008–10
  2. By: Hendrik Schmitz
    Abstract: Deductibles in health insurance are often regarded as a means to contain health care costs when individuals exhibit moral hazard. However, in the absence of moral hazard, voluntarily chosen deductibles may instead lead to self-selection into different insurance contracts. We use a set of new variables in the German Socioeconomic Panel for the years 2002, 2004, and 2006 that measure individual health more accurately and include risk-attitudes towards health in order to determine the price elasticity of demand for health care. A latent class approach that takes into account the panel structure of the data reveals that the effect of deductibles on the number of doctor visits is negligible. Private add-on insurance increases the number of doctor visits. However, altogether the effects of the insurance state on the demand for doctor visits are small in magnitude.
    Keywords: Health insurance, deductibles, add-on insurance, count data, latent class panel model
    JEL: I11 I18 G22
    Date: 2008
  3. By: Jayant Kumar, Jayant Kumar; Neeraj Parnami, Neeraj Parnami
    Abstract: The marriages of Intellectual Property and Insurance may sound a magical word for all those companies which are playing the game of intellectual property in their business. These companies manage their intellectual property under the guidance of IP management and an IP policy in the company. These companies earn a huge amount of money in this game; but there are also chances for the companies to face the risks ahead. These expected risks can be minimized to some extent, if the companies understand the meaning and the importance of this new term “Intellectual Property Insurance”. In order to make the companies appreciate the depth significance of the term, the paper is written and the paper emphasizes the need of IP insurance in the business, the role of IP insurance in mitigating the risks involved in the business and the framework of IP insurance policy etc.
    Keywords: Intellectual Property; Insurance; Intellectual Property Insurance
    JEL: O3 M13
    Date: 2008–04–01
  4. By: Santos Monteiro, Paulo (University of Warwick)
    Abstract: Full consumption insurance implies that consumers are able to perfectly share risk by equalizing state by state their inter-temporal marginal rates of substitution in the presence of idiosyncratic endowment shocks. In this paper I test the implications of full consumption insurance using band spectrum regression methods. I argue that moving to the frequency domain provides a possible solution to many difficulties tied to tests of perfect risk sharing. In particular, it provides a unifying framework to test consumption smoothing, both over time and across states of nature. Full consumption insurance is soundly rejected at business cycle frequencies.
    Keywords: Consumption insurance ; Idiosyncratic risk ; Frequency domain
    JEL: D1 E21
    Date: 2008
  5. By: Frank Puffer (Department of Economics, Clark University); Elizabeth Pitney Seidler (Department of Economics, College of the Holy Cross)
    Abstract: This study examines income inequity in access to health care in the United States. Given the predominant and growing presence of managed care organizations as a source of medical insurance and care in both the private and public settings, replacing traditional indemnity plans as a lower cost prophylactic alternative, we speculate that the presence of Managed Care Organizations would reduce, if not eliminate, any pro wealthy bias in access to health care for the insured population in the U.S. We rely on previously developed methodology from the EcuityII project, incorporating the health inequity index (HIWV), to estimate income inequity in traditional indemnity and managed care plans. Our results are surprisingly counterintuitive to the expected result that managed care was designed to have on access to care. The calculated HIWV indicates a relatively greater pro wealthy bias in the managed care group. This result has important and direct policy implications as public insurance programs in the U.S. contract with managed care organizations as a lower cost alternative for Medicaid and Medicare beneficiaries.
    Keywords: Access, equity, managed care
    JEL: J32 J33
    Date: 2008–11
  6. By: Arsène Kouadio; Vincent Monsan; Mamadou Gbongue
    Abstract: This paper analyses the relationship between the demand for health care and that for health insurance by the population of Côte d’Ivoire. A Poisson model is used to estimate the demand for health care and a multinomial logit model for estimating the demand for insurance. The data on which the research was based were taken from a sample of 2,040 households that were interviewed as part of a survey on Recours aux soins et dépenses de santé or PSA 92 (Health care use and health expenses, or PSA 92), which was carried out in 1992 in Yopougon, a working class neighbourhood of Abidjan. The results show that the length of the illness appears to be the factor that triggers the use of modern health care. They also indicate that employment and age are important factors in making decisions about which insurance to take. Extending the data collection system to the rural population, or generalizing it to the whole population, and gaining a better definition of the variables “state of health”, “consulting a health service”, “behaviour of the insured person and of the insurance company vis-à-vis health services” should be envisaged to refine the research. All this will lead to a better grasp of the problems of moral hazard and adverse selection in Côte d’Ivoire’s health system as a result of the minimizing costs of the implementation of the expected Universal Health Insurance (AMU).
    Date: 2008–07
  7. By: Strauss, Jason
    Abstract: This paper investigates strategic brinksmanship between regulated property-liability insurance firms and their regulators. Prior research suggests that firms increase their financial leverage, and thus their probability of bankruptcy and expected bankruptcy costs, in order to mitigate the severity of binding price ceilings. Although financial leverage can be altered by changing capital structure, it can also be altered by increasing other liabilities, as analyzed in this paper. This paper uses an instrumental variable for price regulation with a maximum-likelihood Heckman estimation method over panel data for Canadian property-liability insurers to extract the impact that price regulation has on the financial leverage of insurers as well as the probability of bankruptcy, the non-selection probability.
    Keywords: Price Regulation; Insurance; Financial Leverage; Capital Structure; Bankruptcy
    JEL: G22 G32 G33
    Date: 2007–12–26
  8. By: Palmer, Edward
    Abstract: Far-reaching changes in the regulation of financial markets and the organization of public pensions in the 1980s and 1990s transformed the landscape for retirement products in Sweden. First, banking and insurance were extensively deregulated in the 1980s, while the securities markets experienced major expansion. Insurance received a large boost from the authorization of unit-linked products in the early 1990s. Second, the public pension system was reformed. Survivor benefits for widows were eliminated from the public pillar in the late 1980s, leading to a large increase in demand for term life insurance. The old defined benefit public pension system was replaced by a notional or nonfinancial defined contribution (NDC) scheme, while a funded defined contribution (FDC) component was also created in the public pillar. The four occupational pension funds that cover the majority of Swedish workers were also converted into FDC schemes. This paper reviews the implications of these changes for the Swedish annuity market. It discusses the regulation of payout options in Sweden, highlighting the compulsory use of life annuities in the public pillar and the preference for term annuities in the occupational funds. It examines the performance of providers of retirement products, including the PPM, and reviews the increasing focus on risk-based regulation and supervision. The paper also emphasizes Sweden's success in moving in the direction of increased funding and privatization of old age insurance, while maintaining its basic character as a highly developed welfare state.
    Keywords: ,Debt Markets,Emerging Markets,Pensions&Retirement Systems,Insurance Law
    Date: 2008–10–01
  9. By: Daniel Béland; John Myles
    Abstract: Focusing on Canada, this paper explores the politics of social policy retrenchment and restructuring in two policy areas: old-age pensions, especially the Canada Pension Plan (CPP), and Employment Insurance (EI) [formerly Unemployment Insurance (UI)]. Drawing on historical institutionalism and the literature on ideas and policy change, the paper explains key differences between these two policy areas. The analysis shows that institutional factors like federalism explain some of the differences between the policy areas and programs at stake. Yet, to complement this analysis, the paper also highlights the political consequences of changing ideas and assumptions among policy-makers, which vary strongly from one program to another. In other words, ideational and institutional factors combined to produce distinct patterns of policy change. Overall, the paper suggests that scholars can draw a clear analytical line between ideational and institutional factors before combining them to explain specific episodes of policy change. From a methodological standpoint, the paper also demonstrates the added value of systematic comparisons between distinct policy areas located within the same country.
    Keywords: Ideas, institutions, unemployment, pensions, Canada
    JEL: H53 H55 L38
    Date: 2008–10
  10. By: Gregory Wegmann (Université de Bourgogne)
    Abstract: In this paper we present the Balanced Scorecard, a Strategic Control tool, which is quite famous all around the world and in the European countries. Its principle objective is to articulate planning decisions with control ones thanks to non-financial indicators. The Strategic Control and the Agency Theories constitute the foundation of this tool. But in Northern Europe, some specific Balanced Scorecard have been designed in the framework of the Knowledge Management Theory. To work, the Balanced Scorecard needs a sophisticated information system support.Using two theoretical backgrounds, the Strategic Control approach and the Knowledge Management Theory, we analyse the relevance of the Balanced Scorecard. More particularly, we present the French situation. First, we show that the French managers believe that the Balanced Scorecard is a relevant management instrument to drive the firm’s objectives. Second, we describe the Balanced Scorecard of a semi-public French insurance company.
    Keywords: Balanced Scorecard;Strategic Control;Non-financial Indicators;Knowledge Management;French Experience
    JEL: M40
    Date: 2008–09
  11. By: Dhaval M. Dave; Swati Mukerjee
    Abstract: Treatment is highly cost-effective in reducing an individual's substance abuse (SA) and associated harms. However, data from Treatment Episodes (TEDS) indicate that per capita treatment admissions have remained flat (1992-2003) despite an increase in heavy drug use. Only 16 percent of individuals with clinical SA disorders receive any treatment, and almost half point to accessibility and cost constraints as barriers to care. This study investigates the impact of state mental health parity legislation on treatment admission flows. Fixed effects specifications indicate that mandating comprehensive parity for mental health and SA disorders raises the probability that a treatment admission is privately insured, lowering costs for the individual. While there is some crowd-out of charity care for private insurance, mandates reduce the uninsured probability by a net 1.4-2.4 percentage points (5% relative to the sample mean). States which mandate comprehensive parity also see an increase in total treatment admissions, relative to states which do not support parity. Thus, increasing cost-sharing and reducing financial barriers for the at-risk population may aid in their obtaining adequate SA treatment. However, the effect sizes are muted due to supply/capacity constraints, suggesting that demand-focused interventions need to be complemented with policies that support treatment facilities and providers.
    JEL: I11 I12 I18
    Date: 2008–11
  12. By: Bernadette Dia Kamgnia
    Abstract: The study assessed Cameroonians’ participation in public health care services in order to grasp the distributional effects of those services. Three specific objectives are specified: determine the extent to which public spending on health care may constitute a targeted means for poverty reduction; identify the determinants of participation in health care services in general and in public services in particular; and propose alternative health care policies compatible with the government’s concern for poverty alleviation. In a benefit incidence analysis, it is shown that the benefits acquired from using publicly funded health care services are globally progressive. Integrated health care centres are chosen because of their nearness. Households appreciate the quality of services provided at the peripheral health care centres. Private health care is chosen because of the quality of the service, and people go to traditional healers or resort to self-medication because of the low cost. The majority of the considered factors – cost, nearness, revenue, education, age, gender and illness – had the expected sign and significantly affect the choice of health care providers. But for educated individuals who are employed in the formal sector, nearness and cost are the key variables in the design of health care policies.
    Date: 2008–05

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