nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒10‒31
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Regulating Private Health Insurance in France : New Challenges for Employer-Based Complementary Health Insurance By Monique Kerleau; Anne Fretel; Isabelle Hirtzlin
  2. Paying a Premium on Your Premium? Consolidation in the U.S. Health Insurance Industry By Leemore Dafny; Mark Duggan; Subramaniam Ramanarayanan
  3. Catastrophic Health Expenditure and Household Well-Being By Abul Naga, Ramses; Lamiraud, K
  4. The effect of disability insurance receipt on labor supply By Eric French; Jae Song
  5. High-Powered Incentives in Developing Country Health Insurance: Evidence from Colombia’s Régimen Subsidiado By Grant Miller; Diana M. Pinto; Marcos Vera-Hernández
  6. Are U.S. Corn and Soybeans Becoming More Drought Tolerant? By Yu, Tian; Babcock, Bruce A.
  7. Optimal Unemployment Insurance with Monitoring By Setty, Ofer
  8. Accident externality and vehicle size By Jonsson, Lina; Lindberg, Gunnar

  1. By: Monique Kerleau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Anne Fretel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Isabelle Hirtzlin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: In France, people obtain basic health insurance coverage through a public health insurance system. Although public coverage is comprehensive, substantial co-payments and deductibles are more and more required and individuals become increasingly dependant on private complementary health insurance, to be better reimbursed. In the context of strengthened constraints to control public health spending, the market for complementary cover is indeed likely to develop. This expansion has several implications for the regulation of private health insurance. Starting in the early 2000s, public policies have emphasized tools that directly motivate employers to provide group-insurance schemes. These include subsidies to employers for offering complulsory, supplementary coverage, and mandating social partners to negociate the implementation of health coverage in every compagny, whatever its size or activity. Such changes tend, to some extent, to "re-couple" health insurance with companies. This paper explores the implications of this experience for France.
    Keywords: Private health care insurance, complementary employer-provided health insurance.
    Date: 2009–09
  2. By: Leemore Dafny; Mark Duggan; Subramaniam Ramanarayanan
    Abstract: We examine whether and to what extent consolidation in the U.S. health insurance industry is leading to higher employer-sponsored insurance premiums. We make use of a proprietary, panel dataset of employer-sponsored healthplans enrolling over 10 million Americans annually between 1998 and 2006 to explore the relationship between premium growth and changes in market concentration. We exploit the differential impact of a large national merger of two insurance firms across local markets to estimate the causal effect of concentration on market-level premiums. We estimate real premiums increased by 2 percentage points (in a typical market) due to the rise in concentration during our study period. We also find evidence that consolidation facilitates the exercise of monopsonistic power vis a vis physicians, whose absolute employment and relative earnings decline in its wake.
    JEL: I11 L1 L4
    Date: 2009–10
  3. By: Abul Naga, Ramses; Lamiraud, K
    Abstract: According to the catastrophic health expenditure methodology a house- hold is in catastrophe if its health out-of-pocket budget share exceeds a critical threshold. We develop a conceptual framework for addressing three questions in relation to this methodology, namely: 1. Can a budget share be informative about the sign of a change in welfare? 2. Is there a positive association between a households poverty shortfall and its health out-of- pocket budget share? 3. Does an increase in population coverage of a health insurance scheme always result in a reduction of the prevalence of catastrophic expenditures?
    Keywords: Catastrophic health expenditure; welfare change; poverty; performance of health insurance schemes
    Date: 2009
  4. By: Eric French; Jae Song
    Abstract: This paper estimates the effect of the Disability Insurance program on labor supply. We find that 30% of denied applicants and 15% of allowed applicants work several years after a disability determination decision. The earnings elasticity with respect to the after tax wage is 0.8. However, the labor supply of those over age 55, college graduates, and those with mental illness is not sensitive to allowance of benefits.
    Date: 2009
  5. By: Grant Miller; Diana M. Pinto; Marcos Vera-Hernández
    Abstract: Despite current emphasis on health insurance expansions in developing countries, inefficient consumer incentives for over-use of medical care are an important counterbalancing concern. However, three factors that are more acute in poor countries (credit constraints, principal-agent problems, and positive externalities) result in substantial under-use and misuse as well. This paper studies Colombia’s Régimen Subsidiado, the first major developing country effort to expand insurance in a way that purposefully addresses these inefficiencies. Using a regression discontinuity design, we find that Colombia’s insurance program has provided risk protection while substantially increasing the use of traditionally under-utilized preventive services (with measurable health gains) through high-powered supply-side incentives.
    JEL: I10 O10
    Date: 2009–10
  6. By: Yu, Tian; Babcock, Bruce A.
    Abstract: An objective drought index that measures the dry and hot conditions adversely affecting crop yields is used in a regression analysis to test whether corn and soybeans have become more drought tolerant. Results indicate that corn yield losses, whether measured in quantity terms or as a percentage of mean yield, have decreased. The null hypothesis that the absolute level of soybean yield losses due to drought has not changed cannot be rejected. But yield losses in percentage terms have decreased over time. Because drought is the primary cause of yield loss in the U.S. crop insurance program and because U.S. crop insurance rates assume that percentage of yield losses are constant over time, these results indicate that U.S. crop insurance rates in the Corn Belt are too high.
    Keywords: corn, crop insurance rates, drought tolerance, soybean, yield risk
    Date: 2009–10–16
  7. By: Setty, Ofer
    Abstract: Monitoring the job-search activities of unemployed workers is a common government intervention. Typically, a caseworker reviews the unemployed worker's employment contacts at some frequency, and applies sanctions if certain requirements are not met. I model monitoring in the optimal unemployment insurance framework of Hopenhayn and Nicolini (1997), where job-search effort is private information for the unemployed worker. In the model, monitoring provides costly information upon which the government conditions the unemployment benefits. In the optimal monitoring scheme, endogenous sanctions and rewards, together with random monitoring, create effective job-search incentives for the unemployed worker. I calibrate the model to the US economy and find that the addition of optimal monitoring to the optimal unemployment insurance scheme decreases the variance of consumption by about two thirds and eliminates roughly half of the government's cost. I also find that compared with the optimal monitoring scheme, US states monitor too much and impose the sanctions over too short a time span. For the US on average, shifting to the optimal monitoring policy would generate savings of about $500 per unemployment spell.
    Keywords: Recursive Contracts; Unemployment Insurance; Job Search Monitoring
    JEL: H21 J65 J64 D82
    Date: 2009–01–06
  8. By: Jonsson, Lina (VTI); Lindberg, Gunnar (VTI)
    Abstract: Vehicle mass is a crucial factor for the distribution of injuries between occupants in involved vehicles in a two-vehicle crash. A larger vehicle mass protects the occupants in the vehicle while on the same time inflicts a higher injury risk on the occupants in the collision partner. This mass externality can be internalized to reach a situation where the drivers choose vehicle mass based on the social optimum instead of a private optimum that ignores the negative effects that a large vehicle mass has on the injury risk in presumptive collision partners. <p> Using a database including collision accidents in Sweden involving two passenger cars during five years, the influence of vehicle mass on the injuries and thereby the accident cost in both vehicles is explored. The database contains information on road infrastructure, vehicle characteristics including vehicle mass and characteristics of the occupants in the vehicles including their injuries. To get a measure of the accident cost the Swedish official economic valuation of slight injuries, severe injuries and fatalities are applied. <p> In each accident the two involved vehicles are divided into the lighter vehicle and the heavier vehicle and the effect of weight is examined separately for the two groups. The accident cost that falls on the lighter vehicle increases with the mass of the heavier vehicle and decreases with own mass. Given that a vehicle is the heavier one in the crash, neither the own mass nor the mass of the lighter vehicle significantly affect the accident cost. <p> The expected external accident cost is calculated and it is shown to increase rapidly with vehicle mass. The paper discusses different solutions to internalize this external accident cost and calculates a mass dependent multiplicative tax on the insurance premium in a no-fault insurance system.
    Keywords: Accident Externality; Accident Cost; Vehicle Mass; Traffic Safety
    JEL: D62 H23 I18 R41
    Date: 2009–10–26

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