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on Insurance Economics |
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Issue of 2011‒11‒28
twelve papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | John Cawley; Asako S. Moriya; Kosali I. Simon |
| Abstract: | This paper investigates the impact of the macroeconomy on the health insurance coverage of Americans. We examine panel data from the Survey of Income and Program Participation (SIPP) for 2004-2010, a period that includes the Great Recession of 2007-09. We find that a one percentage point increase in the state unemployment rate is associated with a 1.67 percentage point (2.12%) reduction in the probability that men have health insurance; this effect is strongest among college-educated, white, and older (50-64 year old) men. For women and children, the unemployment rate was not significantly correlated with the probability of health insurance coverage through any source. When one examines the source of coverage, it becomes apparent that a one percentage point increase in the unemployment rate is associated with a 1.37 percentage point (4.69%) higher probability that a child is covered by public health insurance. Based on the point estimates in this paper, we estimate that 9.3 million adult Americans, the vast majority of whom were men, lost health insurance due to a higher unemployment rate alone during the 2007-09 recession. This is roughly nine times more than lost health insurance during the previous (2001) recession. We conclude with a discussion of how components of recent health care reform may influence these relationships in the future. |
| JEL: | E32 J32 J6 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17600&r=ias |
| By: | Georges Dionne; Casey G. Rothschild |
| Abstract: | Risk classification refers to the use of observable characteristics by insurers to group individuals with similar expected claims, compute the corresponding premiums, and thereby reduce asymmetric information. An efficient risk classification system generates premiums that fully reflect the expected cost associated with each class of risk characteristics. This is known as financial equity. In the health sector, risk classification is also subject to concerns about social equity and potential discrimination. We present different theoretical frameworks that illustrate the potential trade-off between efficient insurance provision and social equity. We also review empirical studies on risk classification and residual asymmetric information. |
| Keywords: | Adverse selection, classification risk, diagnostic test, empirical test of asymmetric information, financial equity, genetic test, health insurance, insurance rating, insurance pricing, moral hazard, risk classification, risk characteristic, risk pooling, risk separation, social equity |
| JEL: | D80 D82 D86 G22 I11 I18 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1137&r=ias |
| By: | Michael Keane (School of Economics, University of New South Wales); Olena Stavrunova (Economics Discipline Group, University of Technology, Sydney) |
| Abstract: | The size of adverse selection and moral hazard effects in health insurance markets has important policy implications. For example, if adverse selection effects are small while moral hazard effects are large, conventional remedies for inefficiencies created by adverse selection (e.g., mandatory insurance enrolment) may lead to substantial increases in health care spending. Unfortunately, there is no consensus on the magnitudes of adverse selection vs. moral hazard. This paper sheds new light on this While both adverse selection and moral hazard effects of Medigap have been studied separately, this is the first paper to estimate both in an unified econometric framework. We develop an econometric model of insurance demand and health care expenditure, where adverse selection is measured by sensitivity of insurance demand to expected expenditure. The model allows for correlation between unobserved determinants of expenditure and insurance demand, and for heterogeneity in the size of moral hazard effects. Inference relies on an MCMC algorithm with data augmentation. Our results suggest there is adverse selection into Medigap, but the effect is small. A one standard deviation increase in expenditure risk raises the probability of insurance purchase by 0.037. In contrast, our estimate of the moral hazard effect is much larger. On average, Medigap coverage increases health care expenditure by 32%. |
| Keywords: | health insurance; adverse selection; moral hazard; health care expenditure |
| JEL: | D82 C34 C35 |
| Date: | 2011–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:wpaper:167&r=ias |
| By: | Cremer, Helmuth (Toulouse School of Economics); Goulão, Catarina (Toulouse School of Economics) |
| Abstract: | A wide variety of social protection systems coexist within the EU. Some member states provide social insurance that is of Beveridgean inspiration (with universal and more or less flat benefits), while others offer a system that is mainly Bismarckian (with benefits related to past contributions). Labor mobility raises concerns about the sustainability of the most generous and redistributive (Beveridgean) insurance systems. We address this issue in a two-country setting, where individuals differ in mobility cost (attachment to their native country). A Bismarckian insurance system is not affected by migration while a Beveridgean one is. Our results suggest that the race-to-the-bottom affecting tax rates may be more important under Beveridge-Beveridge competition than under Beveridge-Bismarck competition. Finally, we study the strategic choice of the type of social protection. We show that Bismarckian governments may find it beneficial to adopt a Beveridgean insurance system. |
| JEL: | H23 H70 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:24008&r=ias |
| By: | Bardey, David; Jaramillo, Fernando |
| Abstract: | We analyze whether the introduction of unemployment insurance (UI hereafter) benefits in developing countries would reduce the effort made by unemployed to secure a new job in the formal sector. We show that one shot UI benefits unambiguously increase the effort to secure a new job in the formal sector. The relative strength of income/substitution effects only determine how leisure and informal activities are affected. Consequently, our (partial equilibrium) analysis reveals that short term UI benefits in developing countries do not reduce incentives to secure a new formal job and therefore cannot be interpreted as a subsidy to the informal sector. |
| Keywords: | Unemployment insurance, informal sector, income effects, developing countries. |
| JEL: | H55 I38 J65 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:25103&r=ias |
| By: | Lars Hultkrantz; Gunnar Lindberg |
| Abstract: | Traffic accidents are a human tragedy that kills 1.2 million people worldwide annually (World Health Organization, 2004). The cost of traffic accidents are huge and recent estimates for US alone suggest the cost to be USD 433 billion in year 2000 or 4.3 percentage of GDP (Parry et al, 2007). A reduction of this cost can be done in two ways, either by reducing the number of accidents or by mitigating the consequences of the existing accidents. Insurance systems can contribute to both. |
| Date: | 2011–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2011/26-en&r=ias |
| By: | Jan Willem Bolderdijk; Linda Steg |
| Abstract: | In this paper, we provide an extensive summary of a field experiment we have recently conducted on the behavioural effects of pay-as-you-drive (PAYD) vehicle insurance (Bolderdijk et al., 2011a). We start with a review of the rationale for PAYD schemes from a behavioural science perspective. Next, we describe the design of our study, and discuss and elaborate on the main empirical findings. Based on this, we present practical guidelines for policy makers and insurance companies aiming to introduce PAYD schemes as a tool to reduce crash risk, improve traffic safety, and reduce the negative environmental impacts of car use. |
| Date: | 2011–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2011/23-en&r=ias |
| By: | Richard V. Burkhauser (Cornell University); Lauren H. Nicholas (University of Michigan); Maximilian D. Schmeiser (Federal Reserve Board of Governors) |
| Abstract: | The rate of application for Social Security Disability Insurance (SSDI) benefits, as well as the number of beneficiaries has been increasing for the past several decades, threatening the solvency of the SSDI program. One possible remedy is to promote continued employment amongst those experiencing the onset of a work limiting disability through the provision of workplace accommodations. Using the Health and Retirement Study data linked to Social Security administrative records and a state fixed effects model, we find that the provision of workplace accommodation reduces the probability of application for SSDI following disability onset. We estimate that receipt of an accommodation reduces a worker’s probability of applying for SSDI by 30 percent over five years and 21 percent over 10 years. We then attempt to control for the potential endogeneity of accommodation receipt by exploiting exogenous variation in the implementation of state and federal anti-discrimination laws to estimate the impact of workplace accommodation on SSDI application in an instrumental variables (IV) model. While our coefficients continue to indicate that accommodation reduces SSDI application, we obtain implausibly large estimates of this effect. Overall our results imply that increasing accommodation is a plausible strategy for reducing SSDI applications and the number of beneficiaries. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp251&r=ias |
| By: | Zhao, Kai |
| Abstract: | In this paper, I develop a quantitative macroeconomic model with endogenous health and endogenous longevity and use it to study the impact of Social Security on aggregate health spending. I find that Social Security increases the aggregate health spending of the economy via two channels. First, Social Security transfers resources from the young with low marginal propensity to spend on health care to the elderly (age 65+) with high marginal propensity to spend on health care. Second, Social Security raises people's expected future utility and thus increases the marginal benefit from investing in health to live longer. In the calibrated version of the model, I show that the positive impact of Social Security on aggregate health spending is quantitatively important. The expansion of US Social Security since 1950 can account for approximately 43% of the dramatic rise in US health spending as a share of GDP over the same period (i.e. from 4% of GDP in 1950 to 13% of GDP in 2000). I also find that this positive impact of Social Security has two interesting policy implications. First, the negative effect of Social Security on capital accumulation in this model is significantly smaller than what previous studies have found, because Social Security induces extra years of life via health spending and thus encourages private savings for retirement. Second, Social Security has a significant spill-over effect on public health insurance programs (e.g. Medicare). As Social Security increases health spending and longevity, it also increases the insurance payments from these programs, thus raising their financial burden. |
| Keywords: | Social Security; Health Spending; Savings; Longevity |
| JEL: | H30 I00 E20 E60 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34203&r=ias |
| By: | Menny, Claas; Osberghaus, Daniel; Pohl, Max; Werner, Ute |
| Abstract: | In two empirical surveys in Germany the link between the information respondents have about climate change and their risk perception of the phenomenon was analysed. We found that a better understanding of the effects of climate change might lead to a decrease of the perceived hazard. In contrast, a high self-declared knowledge about climate change might correspond with higher risk perception. Further factors affecting the risk perception of climate change are gender, experience of extreme weather events and trust in external aid. Surprisingly, information campaigns based on scientific facts are not effective for increasing risk perception and willingness to insure. Higher risk perception might induce higher interest in precautionary measures like insurance. -- |
| Keywords: | Climate Change,Knowledge Illusion,Insurance,Risk Perception,Information,Psychometric paradigm |
| JEL: | Q54 Q58 D83 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11060&r=ias |
| By: | Andrew Fronsko |
| Abstract: | Road trauma is the biggest killer of young people in the world. Reductions in the incidence and severity of road related trauma is of paramount importance to society, aimed at reducing the personal and economic burden to injured people and flow-on impact to families and the broader community... |
| Date: | 2011–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2011/25-en&r=ias |
| By: | Lasse Fridstrøm |
| Abstract: | The external accident cost of road use is a function of the marginal relationship between road use and accidents, as expressed, for instance, by the elasticity. This elasticity is, however, not necessarily constant, but may be assumed to depend on the traffic volume as seen in relation to road capacity. Dense or congested traffic may force speed levels down, decreasing the risk of accidents or at least the average loss incurred given that an accident takes place. Relying on a large econometric accident model based on monthly cross-section/time-series data for all provinces of Norway, we derive non-linear empirical functions describing the relationship between road use and accidents and discuss their implications in terms of accident costs and externalities. The analysis reveals that there is probably a large accident externality generated by heavy vehicle road use, but that the marginal external accident cost of private car use is quite small, perhaps even negative. To the extent that it is positive, it is so in large part on account of public and private insurance. Contrary to what is frequently believed and maintained, auto insurance does not serve to internalise the cost of accidents. In fact, its primary purpose and effect is exactly the opposite. The adverse incentives created by insurance could, however, be mitigated by certain innovative approaches to ratemaking. Such schemes would ideally involve more decision variables than just the decision to drive. Incentives could, in principle, be attached to speeding, route choice, vehicle choice, safety equipment, or time of day/week/year. |
| Date: | 2011–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2011/22-en&r=ias |