nep-ias New Economics Papers
on Insurance Economics
Issue of 2010‒07‒10
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Medicare Part D and the Financial Protection of the Elderly By Gary V. Engelhardt; Jonathan Gruber
  2. Betting on a long life: The role of subjective life expectancy in the demand for private pension insurance of german households By Schulte, Katharina; Zirpel, Ulrike
  3. The Macroeconomics of Health Savings Accounts By Juergen Jung; Chung Tran
  4. Alarm System for Insurance Companies: A Strategy for Capital Allocation By Shubhabrata Das; Marie Kratz

  1. By: Gary V. Engelhardt; Jonathan Gruber
    Abstract: We examine the impact of the expansion of public prescription drug insurance coverage from Medicare Part D on the elderly and find evidence of substantial crowd-out. Using detailed data from the 2002-7 waves of the Medical Expenditure Panel Survey (MEPS), we estimate that the extension of Part D benefits resulted in 80% crowd-out of both prescription drug insurance coverage and prescription drug expenditures of those 65 and older. Part D is associated with only modest reductions in out-of-pocket spending. This suggests that the welfare gain from protecting the elderly from out-of-pocket spending risk through Part D has been small.
    JEL: H51 I18
    Date: 2010–07
  2. By: Schulte, Katharina; Zirpel, Ulrike
    Abstract: With a view to investigating the presence of adverse selection, we analyze determinants of private pension insurance uptake of German households in a probit model. Using survey data on savings and old-age provision, we find that subjective life expectancy is positively related with the probability of having supplementary private pension insurance. This indicates that the German annuities market is in fact characterized by adverse selection. Furthermore, pre-existing annuities from the public pension system tend to be a substitute to private insurance, while financial literacy enhances the uptake. We also find evidence for a bequest motive in old-age provision, but see no indication for pooling longevity risk within couples. --
    JEL: D82 G22 D91 J26
    Date: 2010
  3. By: Juergen Jung (Department of Economics, Towson University); Chung Tran (Department of Economics, University of New South Wales)
    Abstract: We analyze whether the introduction of Health Savings Accounts (HSAs), which is a health insurance reform coupled with a capital tax reform, can reduce health care expenditures in the United States and increase the fraction of the population with health insurance. Unlike previous studies on HSAs, our analysis relies on a general equilibrium framework and therefore fully accounts for feedback effects from general equilibrium price changes. Our results from numerical simulations indicate that the introduction of HSAs increases the percentage of the working age population with health insurance in the long run but fails to control spending on health care. The outcome of a HSAs reform depends critically on the annual contribution limits to HSAs and the interplay of general equilibrium effects. Finally, the long-run tax revenue loss due to the introduction of HSAs is large and can amount to up to 5 percent of GDP.
    Keywords: Health saving accounts, health care reform, privatization of health care systems, health insurance, stochastic dynamic general equilibrium model with health.
    JEL: H51 I18 I38
    Date: 2010–06
  4. By: Shubhabrata Das; Marie Kratz
    Abstract: One possible way of risk management for an insurance company is to develop an early and appropriate alarm system before the possible ruin. The ruin is defined through the status of the aggregate risk process, which in turn is determined by premium accumulation as well as claim settlement outgo for the insurance company. The main purpose of this work is to design an effective alarm system, i.e. to define alarm times and to recommend augmentation of capital of suitable magnitude at those points to prevent or reduce the chance of ruin. To draw a fair measure of effectiveness of alarm system, comparison is drawn between an alarm system, with capital being added at the sound of every alarm, and the corresponding system without any alarm, but an equivalently higher initial capital. Analytical results are obtained in general setup and this is backed up by simulated performances with various types of loss severity distributions. This provides a strategy for suitably spreading out the capital and yet addressing survivability concerns at satisfactory level.
    Date: 2010–06

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