nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒07‒28
ten papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The effect of private health insurance on medical care utilization and self-assessed health in Germany By Hullegie, P; Klein, T. J
  2. Does Health Insurance Make You Fat? By Jay Bhattacharya; Kate Bundorf; Noemi Pace; Neeraj Sood
  3. Insurance Search and Switching Behaviour at the time of the Dutch Health Insurance Reform By Bolhaar, J; Lindeboom, M; van der Klaauw, B
  4. The optimal level of deposit insurance coverage By Michael Manz
  5. Is this Risk Insurable? A Response to Sebastian Schich By Todd, Walker F.
  6. Estimating Claim Size and Probability in the Auto-insurance Industry: the Zero-adjusted Inverse Gaussian (ZAIG) Distribution By Bortoluzzo, Adriana B.; Claro, Danny P.; Caetano, Marco Antonio L. & Artes, Rinaldo
  7. Incentives and Selection Effects of Drug Coverage on Total Drug Expenditure: a Finite Mixture Approach. By Munkin, M; Trivedi, P. K
  8. “Do I really need to go to rehab? I’d say no, no, no.” Estimating Price Elasticities of Convalescent Care Programs By Ziebarth, N
  9. External Shocks, Household Consumption and Fertility in Indonesia By Kim Jungho; Alexia Prskawetz
  10. Selection Stories: Understanding Movement Across Health Plans By David M. Cutler; Bryan Lincoln; Richard J. Zeckhauser

  1. By: Hullegie, P; Klein, T. J
    Abstract: In Germany, employees are generally obliged to participate in the public health insurance system, where coverage is universal, co-payments and deductables are moderate, and premia are based on income. However, they may buy private insurance instead if their income exceeds the compulsory insurance threshold. Here, premia are based on age and health, individuals may choose to what extent they are covered, and deductables and co-payments are common. In this paper we estimate the effect of private insurance coverage on the number of doctor visits and self-assessed health. Variation in income around the compulsory insurance threshold provides a natural experiment that we exploit to control for selection into private insurance. We document that income is measured with error and suggest an approach to take this into account. We find negative effects of private insurance coverage on the number of doctor visits and positive effects on health.
    Keywords: Private health insurance, medical care utilization, selection into insurance, natural experiment, regression discontinuity design, measurement error.
    JEL: I11 I12 C31
    Date: 2009–07
  2. By: Jay Bhattacharya; Kate Bundorf; Noemi Pace; Neeraj Sood
    Abstract: The prevalence of obesity has been rising dramatically in the U.S., leading to poor health and rising health care expenditures. The role of policy in addressing rising rates of obesity, however, is controversial. Policy recommendations for interventions intended to influence body weight decisions often assume the obesity creates negative externalities for the non-obese. We build on earlier work demonstrating that this argument depends on two important assumptions: 1) that the obese do not pay for their higher medical expenditures through differential payments for health care and health insurance, and 2) that body weight decisions are responsive to the incidence of medical care costs associated with obesity. In this paper, we test the latter proposition – that body weight is influenced by insurance coverage - using two approaches. First, we use data from the Rand Health Insurance Experiment, in which people were randomly assigned to varying levels of health insurance, to examine the effect of generosity of insurance coverage on body weight along the intensive coverage margin. Second, we use instrumental variables methods to estimate the effect of type of insurance coverage (private, public and none) on body weight along the extensive margin. We explicitly address the discrete nature of the endogenous indicator of health insurance coverage by estimating a nonlinear instrumental variables model. We find weak evidence that more generous insurance coverage increases body mass index. We find stronger evidence that being insured increases body mass index and obesity.
    JEL: H23 I1
    Date: 2009–07
  3. By: Bolhaar, J; Lindeboom, M; van der Klaauw, B
    Abstract: The Netherlands introduced a new health insurance system in January 2006, a system based on managed competition. Such a system critically hinges on consumers that search. It is for this reason we think it is important to investigate the extend to which consumers search, how they search and why they search ´or don’t search. The price dispersion observed in the insurance market after the reform suggests the number of consumers that searches is low. We set up a search model for insurance that includes the main features of the Dutch health insurance market after the reform and test the hypotheses from this model on the data.
    Date: 2009–07
  4. By: Michael Manz
    Abstract: This paper develops a global game model that allows for a rigorous analysis of partial deposit insurance and provides the first comparative statics of the optimal level of deposit coverage. The optimal amount of coverage increases with lower bank liquidity requirements, with a higher precision of depositors' information, and with a lower relevance of large, uninsured creditors, and it should not be increased in anticipation of an economic downturn. Optimal insurance is higher if there is contagion and lower if banks can assume excessive risk, but interestingly, a high level of coverage may not be optimal even in the absence of moral hazard on the part of banks. The model supports the inauguration of coinsurance provisions and is applied to compare various policies addressing financial fragility. While an optimal lending of last resort policy can outperform deposit insurance, anticipated bailouts are inferior in terms of welfare. Capital requirements are not a substitute for insurance, but mitigate excessive risk taking.
    Keywords: Deposit insurance
    Date: 2009
  5. By: Todd, Walker F.
    Abstract: In his paper “Challenges Associated with the Expansion of Deposit Insurance Coverage during Fall 2008” Sebastian Schich of the OECD has written an excellent overview of the current situation of bank deposit insurance in the industrial economies of the world. He finds that, facing a crisis of confidence leading to visible bank runs, bank supervisors nearly everywhere resorted to raising deposit insurance limits, in some cases to “unlimited” status. Some of these changes have limitations of scope or duration, but some of the political changes of recent years (expansion of the European Union, for example) call into question whether any limits will be observed or whether recently granted expansions of deposit insurance will be recalled in due time. There are, however, important lessons to be learned from the American experience with deposit insurance, which has been present in the United States since 1933 but only in recent decades in numerous other developed economies. Alternatives to deposit insurance do exist and still could be tried anywhere, taking regional differences into account, as long as an adequate institutional structure is in place first. In any case, the alternatives would be cheaper and more efficient than the fairly explicit subsidy of the banking industry that present systems of deposit insurance entail.
    Keywords: International cooperation, discount window, deposit insurance, insurance coverage, moral hazard, risk assessment
    JEL: E61 G22
    Date: 2009
  6. By: Bortoluzzo, Adriana B.; Claro, Danny P.; Caetano, Marco Antonio L. & Artes, Rinaldo
    Date: 2009–10
  7. By: Munkin, M; Trivedi, P. K
    Abstract: This paper takes a nte mixture approach to model heterogeneity in incentives and selection effects of drug coverage on the total drug expenditure among the Medicare elderly US population. Evidence is found that the positive drug expenditures of the entire elderly popultion can be decomposed into two groups of relatively healthy with lower average expenditures and relatively unhealthy with higher average expenditures, accounting for approaximately 25% and 75% of the population, respectively. The incentive effects of drug insurance, i.e. ex post moral hazard, are much stronger in magnitude for the unhealthy group. There is also evidence of adverse selection into drug insurance, and this appears to be greater for the higher-expenditure component.
    Date: 2009–07
  8. By: Ziebarth, N
    Abstract: This study is the first to estimate the price elasticities of demand for both medical rehabilitation programs and treatment at health spas. In Germany, the Statutory Health Insurance (SHI) covers both forms of therapy if administered in authorized medical facilities on referral from a physician. While health resort stays are prescribed to recover from general symptoms of poor health and are preventive in character, medical rehabilitation implies recovering from a specific illness or accident. From 1997 onwards, the German government more than doubled the copayments for both types of health care services from DM 12 (e6.14) to DM 25 (e12.78) per day for those insured under the SHI. Using longitudinal microdata from the German Socio-Economic Panel Study (SOEP), this exogenous price variation allows us to study the causal effects on demand, since we have a sound control group available. The data suggest that pull-forward effects in 1996 accounted for up to one-fifth of the subsequent decrease in demand. Taking this anticipation effect into account, we show that the reform induced a decrease in total demand of about 20 percent. We estimate the price elasticity for rehabilitation programs that aim at preventing work incapacity to be about -0.15, whereas the elasticity for rehabilitation programs for recovery from work accidents lies around -0.30. In contrast, the price elasticity for treatment at health spas is elastic and lies between -1 and -2.5.
    Keywords: convalescent care, health spa, medical rehabilitation, price elasticities, SOEP
    JEL: H51 I11 I18 J22
    Date: 2009–07
  9. By: Kim Jungho; Alexia Prskawetz
    Abstract: This paper examines the impact of idiosyncratic income shocks on household consumption, educational expenditure and fertility in Indonesia, and assesses whether the investment in human capital of children and fertility are used to smooth household consumption. Using six different kinds of self-reported economic hardships, our findings indicate that coping mechanisms are rather efficient for Indonesian households that perceive an economic hardship. Only in case of unemployment we find a significant decrease in consumption spending and educational expenditure while fertility increases. Theses results indicate that households that perceive an unemployment shock use children as a means for smoothing consumption. Regarding the death of a household member or natural disaster we find that consumption even increases. These results are consistent with the argument that coping mechanisms even over-compensate the actual consumption loss due to an economic hardship. One important lesson from our findings is that different types of income shock may lead to different economic and demographic behavioral adjustments and therefore require specific targeted social insurance programs.
    Keywords: Consumption, Insurance, Fertility and Indonesia
    Date: 2009–05
  10. By: David M. Cutler; Bryan Lincoln; Richard J. Zeckhauser
    Abstract: This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.
    JEL: I0 I11 I18
    Date: 2009–07

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