nep-ias New Economics Papers
on Insurance Economics
Issue of 2012‒01‒10
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice By Schmitz, Hendrik; Ziebarth, Nicolas R.
  2. Measuring the (Income) Effect of Disability Insurance Generosity on Labour Market Participation By Marie Olivier; Vall Castello Judit
  3. Does Retiree Health Insurance Encourage Early Retirement? By Steven Nyce; Sylvester Schieber; John B. Shoven; Sita Slavov; David A. Wise
  4. Dealing with Internal Inconsistency in Double-Bounded Dichotomous Choice: An Application to Community-Based Health Insurance By Hermann Pythagore Pierre Donfouet, CREM, UMR 6211, University of Rennes I, France; Pierre-Alexandre Mahieu, LEMNA, University of Nantes, France; P. Wilner Jeanty, Kinder Institute for Urban Research, Rice University, Houston, Texas, US
  5. Expanding Social Health Insurance Coverage: New Issues and Challenges By Manasan, Rosario G.
  6. Concept and Unintended Consequences of Weather Index Insurance: The Case of Mexico By Fuchs, Alan; Wolff, Hendrik
  7. Sickness Absence and Local Benefit Cultures By Lindbeck, Assar; Palme, Mårten; Persson, Mats
  8. Implementing Weights for Additivity of Chained Volume Measures in the National Accounts By Dumagan, Jesus C.

  1. By: Schmitz, Hendrik (RWI); Ziebarth, Nicolas R. (Cornell University)
    Abstract: This paper provides field evidence on (a) how price framing affects consumers' decision to switch health insurance plans and (b) how the price elasticity of demand for health insurance can be influenced by policymakers through simple regulatory efforts. In 2009, in order to foster competition among health insurance companies, German federal regulation required health insurance companies to express price differences between health plans in absolute Euro values rather than percentage point payroll tax differences. Using individual-level panel data, as well as aggregated health plan-level panel data, we find that the reform led to a sixfold increase in an individual's switching probability and a threefold demand elasticity increase.
    Keywords: health insurance, health plan switching, price competition, price elasticity, SOEP
    JEL: H51 I11 I18
    Date: 2011–12
  2. By: Marie Olivier; Vall Castello Judit (ROA rm)
    Abstract: We analyze the employment effect of a law that provides for a 36 percent increasein the generosity of disability insurance (DI) for claimants who are, as a result oftheir lack of skills and of the labour market conditions they face, deemed unlikely tofind a job. The selection process for treatment is therefore conditional on having alow probability of employment, making evaluation of its effect intrinsically difficult.We exploit the fact that the benefit increase is only available to individuals aged 55or older, estimating its impact using a regression discontinuity approach. Our firstresults indicate a large drop in employment for disabled individuals who receive theincrease in the benefit. Testing for the linearity of covariates around the eligibility agethreshold reveals that the age at which individuals start claiming DI is not continuous:the benefit increase appears to accelerate the entry rate of individuals aged 55 or over.We obtain new estimates excluding this group of claimants, and find that the policydecreases the employment probability by 8 percent. We conclude that the observedDI generosity elasticity of 0.22 on labour market participation is mostly due to incomeeffects since benefit receipt is not work contingent in the system studied.
    Keywords: labour economics ;
    Date: 2011
  3. By: Steven Nyce; Sylvester Schieber; John B. Shoven; Sita Slavov; David A. Wise
    Abstract: The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2 percent) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2 percent) increase in the probability of turnover at age 63; it has a more modest effects for individuals under the age of 62. A more generous employer contribution of 50 percent or more raises turnover by 1-3 percentage points at ages 56-61, by 5.9 percentage points (33.7 percent) at age 62, and by 6.9 percentage points (43.7 percent) at age 63. Overall, an employer contribution of 50 percent or more reduces the total number of person-years worked between ages 56 and 64 by 9.6 percent relative to no coverage.
    JEL: I11 J26 J32 J63
    Date: 2011–12
  4. By: Hermann Pythagore Pierre Donfouet, CREM, UMR 6211, University of Rennes I, France; Pierre-Alexandre Mahieu, LEMNA, University of Nantes, France; P. Wilner Jeanty, Kinder Institute for Urban Research, Rice University, Houston, Texas, US
    Abstract: Contingent valuation method is commonly used in the field of health economics in an attempt to help policy maker in taking decisions. The use of the double-bounded dichotomous choice format results in a substantial gain in statistical efficiency over the single bounded dichotomous choice format. Yet, this efficiency gain comes at the cost of biasness known as internal inconsistency. This paper aims at reducing this internal inconsistency in double-bounded dichotomous choice by using the certainty calibration technique in a community-based health insurance study. Findings confirm the internal inconsistency between the initial and the follow-up responses and the statistical efficiency gains of the double-bounded dichotomous choice over the single-bounded dichotomous choice. Furthermore, the use of certainty calibration reduces this internal inconsistent pattern in responses and still maintains efficiency gain. We further discuss the policy implications.
    Keywords: Contingent valuation; internal inconsistency; certainty calibration; community-based health insurance
    JEL: C15 D6 I38
    Date: 2011–12
  5. By: Manasan, Rosario G.
    Abstract: <p>Highly unequal access to health services and the large share of household out-of-pocket spending in total health expenditures underscore the importance of attaining universal health coverage. This study evaluates the major challenges involved in moving toward universal coverage of the Philippine National Health Insurance Program. The strategic approach of PhilHealth in expanding population coverage has been described as "squeezing the middle:" (i) "squeezing from the top" by expanding the PhilHealth coverage of the group subject to compulsory enrollment, i.e., the Employed Sector Program, (ii) "squeezing from the bottom" by expanding the coverage of the poor households under the Sponsored Program, and (iii) implementing interventions that are directed at expanding the coverage of nonpoor households whose heads are employed in the informal sector under the Individually Paying Program.</p><p>Recently, government decided that the national government counterpart in the premium contributions of members enrolled in the Sponsored Program will only be available for families identified as poor under the National Household Targeting System for Poverty Reduction (NHTS-PR). This decision is anchored on the expectation that the use of the NHTS-PR will improve the targeting performance of the Sponsored Program largely by enabling the government to eliminate political intervention in the selection process.</p><p>While this new policy direction helps promote better targeting of the national government subsidy, it presents distinct challenges to the PhilHealth in moving toward universal coverage. First, ensuring the enrollment in the program of all the households identified under the NHTS-PR is a major hurdle considering that the selection and enrollment of Sponsored Program beneficiaries are largely initiated by the LGUs and considering the extent of political patronage involved in the process. Second, ensuring the continued enrollment in PhilHealth of some 5.1 million households who were enrolled in the Sponsored Program in 2010 but who are not in the NHTS-PR list of poor households even if they are no longer qualified for the national government subsidy is another major challenge.</p><p>The analysis suggests that broadening population coverage of social health insurance program may be difficult to achieve without concomitant reforms in other elements of the program, particularly the payment mechanism.</p>
    Keywords: health insurance, Philippines, PhilHealth Sponsored Program, PhilHealth, premium, universal coverage, availment rate, National Household Targeting System for Poverty Reduction (NHTS-PR)
    Date: 2011
  6. By: Fuchs, Alan (University of California, Berkeley); Wolff, Hendrik (University of Washington)
    Abstract: Recently, Weather Index Insurance (WII) has received considerable attention as a tool to insure farmers against weather related risks, particularly in developing countries. Donor organizations, local governments, insurance companies, development economists as well as agricultural economists are discussing the costs and benefits of WII. While the literature on WII has mainly focused on many cases in Africa and Asia, in this article we analyze the WII program in Mexico, which is one of the largest WII programs worldwide. In this context we discuss potentially important spill-over effects on related markets which so far have not been considered in the academic literature. First, we argue that WII creates disincentives to invest in other non-insured crops leading to potential overspecialization and monoculture. Secondly, WII generates disincentives to invest in irrigation systems because farmers are insured only as long as production takes place on non-irrigated land. Third, in case of catastrophic events food prices can potentially inflate with indemnity payments at the expense of the uninsured poor. We also suggest that in Mexico the thresholds of the weather index be (continuously) re-calibrated in order to adjust for the development of drought resistant seeds. Finally, the index could relatively easily be extended to account for precipitation variances. We argue that these factors and spillover effects should be accounted for in cost benefit analysis of WII.
    Keywords: Weather Index Insurance, policy evaluation, Mexico
    JEL: Q11 Q14 O13 G22
    Date: 2011–12
  7. By: Lindbeck, Assar (Stockholm University); Palme, Mårten (Stockholm University); Persson, Mats (IIES, Stockholm University)
    Abstract: In many countries, sickness absence financed by generous insurance benefits has become an important concern in the policy debate. It turns out that there are strong variations in absence behavior between local geographical areas, and it has been difficult to explain these variations by observable socioeconomic factors. In this paper we investigate whether such variation is related to group effects in the form of social interaction among individuals within neighborhoods. Well-known methodological problems arise when trying to answer such a question. A special feature of our attempt to deal with these problems is that we adopt several alternative approaches to identify group effects. We base the study on a rich set of Swedish panel data, and we find indications of group effects in each one of our approaches.
    Keywords: sick-pay insurance, work absence, moral hazard, reflection problem, social norms
    JEL: H56 I38 J22 Z13
    Date: 2011–12
  8. By: Dumagan, Jesus C.
    Abstract: In current practice, subaggregate chained volume measures (CVMs) are neither weighted nor additive. This paper derives and implements "weights" for weighted subaggregate CVMs to be additive (i.e., their sum equals aggregate CVM) because without weights, nonadditivity permits the nonsensical result that a subaggregate CVM could exceed aggregate CVM. The weights are ratios of subaggregate to aggregate chained price deflators that exceed, equal, or fall below 1 depending on relative prices. CVMs in current practice are additive in the special case of constant relative prices when all weights equal 1. If relative prices change, weights do not equal 1 and their use avoids nonadditivity and the above nonsensical result. Empirically, they have widespread implications because CVM is now implemented in over 40 countries. Application to actual GDP data shows significant distortions of GDP composition due to nonadditivity of subaggregate CVMs from ignoring relative price changes. Among this paper`s formulas for additive weighted subaggregate CVMs, the one based on Paasche price and Laspeyres quantity indexes is recommended for practical implementation.
    Keywords: additivity, chained indexes, Government Service Insurance System (GSIS), Social Security System (SSS), chained volume measures, GDP in chained prices
    Date: 2011

This nep-ias issue is ©2012 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.