nep-ias New Economics Papers
on Insurance Economics
Issue of 2012‒07‒23
fourteen papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Durable Goods, Borrowing Constraints and Consumption Insurance By Cerletti, Enzo; Pijoan-Mas, Josep
  2. State Health Insurance and Out-of-Pocket Health Expenditures in Andhra Pradesh, India - Working Paper 298 By Victoria Fan, Anup Karan, and Anjay Mahal
  3. Type of Health Insurance and the Substance Abuse Treatment Gap. Journal of Substance Abuse Treatment, vol. 42, no. 3 By Ellen Englert Bouchery; Henrick J. Harwood; Joan Dilonardo; Rita Vandivort-Warren
  4. Use of hospital services and socio-economic status in urban India: Does health insurance ensure equitable outcomes? By Dutta, Mousumi; Husain, Zakir
  5. Estimation of crop yield distribution and Insurance Premium using Shrinkage Estimator: A Hierarchical Bayes and Small Area Estimation Approach By Awondo, Sebastain N.; Datta, Gauri S.; Ramirez, Octavio A.; Fonsah, Esendugue Greg
  6. How Financial Incentives Induce Disability Insurance Recipients to Return to Work By Kostøl, Andreas Ravndal; Mogstad, Magne
  7. Competition between Managed Care Organizations and Indemnity Plans in Health Insurance Markets By Edmond Baranes; David Bardey
  8. Effective Risk Management Policy choices under Climate Change: An Application to Saskatchewan Crop Sector By Kimura, Shingo; Anton, Jesus; Cattaneo, Andrea
  9. Do Income Taxes Affect the Progressivity of Social Security? By Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
  10. What Explains Variation in Disability Application Rates Across States? By Norma B. Coe; Kelly Haverstick; Alicia H. Munnell; Anthony Webb
  11. Income-Related Inequalities in Health Service Utilisation in 19 OECD Countries, 2008-2009 By Marion Devaux; Michael de Looper
  12. Selection in Massachusetts' Commonwealth Care Program: Lessons for State Basic Health Plans. Princeton, NJ: Robert Wood Johnson Foundation By Deborah Chollet; Allison Barrett; Amy Lischko
  13. Medicare Advantage 2012 Data Spotlight: Enrollment Market Update. Washington, DC: The Henry J. Kaiser Family Foundation By Marsha Gold; Gretchen Jacobson; Anthony Damico; Tricia Neuman
  14. There is Little Experience and Limited Data to Support Policy Making on Integrated Care for Dual Eligibles. Health Affairs, vol. 31, no. 6 By Marsha R. Gold; Gretchen A. Jacobson; Rachel L. Garfield

  1. By: Cerletti, Enzo; Pijoan-Mas, Josep
    Abstract: In this paper we study the transmission of income shocks into nondurable consumption in the presence of durable goods. We use a standard a life-cycle model with two goods to characterize the interaction of durability of goods, durability of shocks, and borrowing constraints as determinants of shock transmission. We show that borrowing constraints lead to a substitution between durable and non-durable goods upon arrival of an unexpected income change. This substitution biases the conventional measures of insurance based on the response of non-durable consumption to income changes. The sign of this bias depends critically on the persistence of the shock. We show that households have less insurance against transitory shocks and more insurance against permanent shocks than commonly measured. We calibrate the model economy to the US in order to measure the size of this bias.
    Keywords: Borrowing Constraints; Consumption Insurance; Durable Goods; Incomplete Markets; Persistence of Income Shocks
    JEL: D12 D91 E21
    Date: 2012–07
  2. By: Victoria Fan, Anup Karan, and Anjay Mahal
    Abstract: In 2007, the state of Andhra Pradesh in southern India began rolling out the Aarogyasri health insurance to reduce catastrophic health expenditures in households “below the poverty line.” We exploit variation in program roll-out over time and districts to evaluate the impacts of the scheme using difference-in-differences. Our results suggest that, within the first year of implementation, Phase I of Aarogyasri significantly reduced out-of-pocket inpatient expenditures and, to a lesser extent, outpatient expenditures. These results are robust to checks using quantile regression and matching methods. No clear effects on catastrophic health expenditures or medical impoverishment are seen. Aarogyasri is not benefiting scheduled caste and scheduled tribe households as much as the rest of the population.
    Keywords: health insurance; health expenditure; tertiary care; poverty; India
    JEL: I18 I38 G22
    Date: 2012–06
  3. By: Ellen Englert Bouchery; Henrick J. Harwood; Joan Dilonardo; Rita Vandivort-Warren
    Abstract: A study recently published concluded that populations with different types of public health insurance have rates of receiving treatment for a substance use disorder that range from two to four times greater than the privately insured. The study was funded by the Substance Abuse and Mental Health Services Administration (SAMHSA), with authors from SAMHSA, Mathematica, and the National Association of State Alcohol and Drug Abuse Directors. The study also found that those with private health insurance plans who need substance abuse treatment have the lowest rates of receiving any treatment services or specialty treatment services (6.9% and 3.9%, respectively).
    Keywords: Substance Abuse Treatment, Access to Care, Insurance Coverage, Health
    JEL: I
    Date: 2012–04–30
  4. By: Dutta, Mousumi; Husain, Zakir
    Abstract: In recent years universal health coverage has become an important issue in developing countries. Successful introduction of such a social security system requires knowledge of the relationship between socio-economic status and usage of health care services. This paper examines this relationship, and analyzes the impact of introducing health insurance into the model, using data for India, a major developing country with poor health outcomes. In contrast to similar works undertaken for developed countries, results of the instrumental variable model estimated reveals that the positive relation between usage of in-patient services and socio-economic status persists even in the presence of health insurance. This implies that insurance is unable to eliminate the inequities in accessing health care services stemming from disparities in socio-economic status. In fact, the presence of a double moral hazard and adverse selection leads to further attenuation of inequity in the health care market. The study is based on unit level data from the “Morbidity and Health Care Survey” undertaken by the National Sample Survey Organization (2005-06).
    Keywords: Hospitalization; Health insurance; Strategic independence; Simultaneous equation system; SES-health gradient; India
    JEL: I11 C34
    Date: 2012–07–12
  5. By: Awondo, Sebastain N.; Datta, Gauri S.; Ramirez, Octavio A.; Fonsah, Esendugue Greg
    Abstract: Obtaining reliable estimates of insurance premiums is a critical step in risk sharing and risk transfer necessary to ensure solvency and continuity in crop insurance programs. Challenges encountered in the estimation include dealing with aggregation bias from using county level yield averages as well as properly accounting for spatial and temporal heterogeneity. In this study, we associate some of these challenges as classical small area estimation (SAE) problems. We employ a hierarchical Bayes (HB) SAE to obtain design consistent expected county level yields and Group Risk Plan (GRP) premiums for corm farms in Illinois using quasi-simulated data. Preliminary results show little bias (< 10%) in estimated expected county yields in several counties investigated. We found wide variation in GRP, APH and basis risk across counties for similar level of coverage and scale. Results show that farmers could lower their GRP premiums by as much as 30% by carefully choosing a coverage level and scale combination.
    Keywords: Crop Insurance, Small area estimation, Hierarchical Bayes, Farm Management, Research Methods/ Statistical Methods, Risk and Uncertainty,
    Date: 2012
  6. By: Kostøl, Andreas Ravndal (Statistics Norway); Mogstad, Magne (University College London)
    Abstract: Disability Insurance (DI) programs have long been criticized by economists for apparent work disincentives. Some countries have recently modified their programs such that DI recipients are allowed to keep some of their benefits if they return to work, and other countries are considering similar return-to-work policies. However, there is little empirical evidence of the effectiveness of programs that incentivize the return to work by DI recipients. Using a local randomized experiment that arises from a sharp discontinuity in DI policy in Norway, we provide transparent and credible identification of how financial incentives induce DI recipients to return to work. We find that many DI recipients have considerable capacity to work that can be effectively induced by providing financial work incentives. We also show that providing work incentives to DI recipients may both increase their disposable income and reduce program costs. Our findings also suggest that targeted policies may be the most effective in encouraging DI recipients to return to work.
    Keywords: disability insurance, financial incentives, labor supply, regression discontinuity design
    JEL: H53 H55 I18 J21
    Date: 2012–07
  7. By: Edmond Baranes; David Bardey
    Abstract: This paper examines a model of competition between two types of health insurers: Managed Care Organizations (MCOs) and “Conventional Insurers”. MCOs vertically integrate health care providers and pay them at a competitive price, while conventional insurers work as indemnity plans and pay the health care providers that are freely chosen by their policyholders at a wholesale price. This first difference is called input price effect. Moreover, we assume that policyholders put a positive value on providers. diversity supplied by their health insurance plan and that this value increases with their probability of disease. Due to the restricted choice of health care providers in MCOs, a risk segmentation occurs: policyholders who choose conventional insurers are characterized by a higher risk. Surprisingly, our results point out that the effects of this input price and risk segmentation can be countervailing and do not necessarily work in the same direction. More precisely, we show that vertical integration in health insurance markets can create an anti-raise rivals’ cost effect. Consequently, our results reveal that the penetration of vertical integration may decrease conventional insurers’ premiums, which is a sufficient condition to be Pareto-improving. After more than three decades of vertical integration waves, our model may also explain why we observe an interior equilibrium in which conventional insurers have survived.
    Date: 2012–07–03
  8. By: Kimura, Shingo; Anton, Jesus; Cattaneo, Andrea
    Abstract: There is growing concern about the impact of climate change on agriculture and the potential need for better risk management instruments that respond to a more risky environment. This is based on the widespread assumption that climate change will increase weather and yield variability and will expose farmers to higher levels of risk. But it is not obvious what will be the net impact of those on the distribution of yields and its correlation with weather indexes. Five stylized scenarios for crop yields are built on the basis of the available empirical information: baseline, marginal climate change without adaptation, with adaptation and with misalignment of expectations, and an extreme events scenario. A micro simulation model is calibrated using micro farm level data from the Canadian province of Saskatchewan. Four alternative policy measures are analyzed: three types of subsidized insurance (individual yield, area-yield and weather index) and an ex post disaster payment. Results on insurance uptake, budgetary costs and impacts on diversification, farmers’ welfare and farm income variability, are presented for three different types of farms. The paper goes beyond indentifying the effectiveness of risk management instruments under stylized climate change scenario and analyze the policy decision criteria when policy makers face ambiguous climate change contingencies.
    Keywords: climate change, crop insurance, risk management and weather index insurance, Crop Production/Industries, Environmental Economics and Policy, Risk and Uncertainty, D81 / Q12,
    Date: 2012
  9. By: Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
    Abstract: Policymakers have designed Social Security to be a progressive retirement program that replaces a larger share of monthly earnings for low- and middle-income workers than for high earners. However, previous research has found that, although the Disability Insurance (DI) component of Social Security is very progressive, the Old-Age and Survivors Insurance (OASI) component may be less progressive than intended. One reason is that high earners tend to live longer than low earners. Since Social Security pays an annuity that lasts throughout retirement, it benefits high earners with greater longevity. Social Security’s progressivity may also be affected by federal income taxes paid by workers and retirees, but research to date has largely ignored this effect. This brief uses data on households from the Health and Retirement Study to examine the interaction between income taxes and Social Security contributions and benefits. The discussion proceeds as follows. The first section describes factors that could affect the progressivity of the OASI component of Social Security. The second section introduces three ways in which the income tax system could impact progressivity: the treatment of employer contributions to Social Security; the Earned Income Tax Credit; and the taxation of Social Security benefits. The third section describes the data and methodology used to analyze households in three birth cohorts and presents the before- and after-tax re­sults for the oldest cohort. The fourth section extends the analysis to the two later cohorts to assess whether the role of taxes changes over time. The conclusion is that the net impact of taxes on progressivity is modest, as large effects from the separate tax provi­sions mainly offset one another. Over time, however, the net impact of taxes appears to be growing more progressive as an increasing number of retirees are required to pay income taxes on their benefits under current law.
    Date: 2012–01
  10. By: Norma B. Coe; Kelly Haverstick; Alicia H. Munnell; Anthony Webb
    Abstract: Social Security Disability Insurance (SSDI) applica­tions and benefit receipts vary greatly by state, which has led to concerns about potential inconsistencies in the way that states apply disability standards. This possibility has prompted numerous Congressional hearings and reports, and led the Social Security Advisory Board to express concern about the Social Security Administration’s ability to disentangle the potential causes. This brief, using a longer time period and more comprehensive list of variables than other studies, explores the extent to which health, demographic, and employment characteristics – as well as state policies or politics – explain the variation across states. The discussion proceeds as follows. The first sec­tion describes an individual’s SSDI application deci­sion and factors that may influence state-level applica­tion rates. The second section presents variables used to determine the underlying causes of the state-level variation in application rates. The third section sum­marizes the results. The conclusion is that the health, demographic, and employment characteristics of each state explain the largest variations in SSDI application rates. Politics have little effect. Interestingly, states that require employers to provide temporary disability insurance have lower SSDI application rates.
    Date: 2012–01
  11. By: Marion Devaux; Michael de Looper
    Abstract: This Working Paper examines income-related inequalities in health care service utilisation in OECD countries. It extends a previous analysis (Van Doorslaer and Masseria, 2004) to 2008-2009 for 13 countries, and adds new results for 6 countries, for doctor and dentist visits, and cancer screening. Quintile distributions and concentration indices were used to assess inequalities. For doctor visits, horizontal equity was assessed, i.e. the extent to which adults in equal need of physician care appear to have equal rates of utilisation. The paper considers the evolution of inequalities over time by comparing results with the previous study, as data permit. Health system financing arrangements are examined to see how these might affect inequalities in health service use.<BR>Ce document de travail examine les inégalités liées aux revenus dans l’utilisation des services de santé dans les pays de l’OCDE. Il met à jour une étude précédente (Van Doorslaer and Masseria, 2004) pour 13 pays, et inclut 6 nouveaux pays, utilisant des données de 2008-2009, portant sur les consultations de médecins et dentistes, et le dépistage du cancer. Les inégalités sont mesurées à l’aide de distributions par quintile et d’indices de concentration. Cette étude s’intéresse à l’équité horizontale pour les consultations de médecins, i.e. dans quelle mesure des adultes ayant un besoin égal de soins médicaux ont apparemment des taux identiques d’utilisation de soins. Elle examine l’évolution des inégalités en comparant les résultats avec l’étude précédente lorsque les données le permettent. Le cadre d’analyse s’intéresse aux caractéristiques de financement des systèmes de santé et à leurs possibles influences sur les inégalités d’utilisation des services de santé.
    Keywords: health care, private health insurance, inequality
    JEL: I14 I18
    Date: 2012–07–10
  12. By: Deborah Chollet; Allison Barrett; Amy Lischko
    Abstract: This brief analyzes risk selection over time in Massachusetts' Commonwealth Care program, which serves low-income adults ineligible for Medicaid, much like a Basic Health Plan under the Affordable Care Act. The authors offer lessons for other states considering whether to form a Basic Health Plan, looking at questions of program design, impacts on the commercial market, financing, and operations.
    Keywords: Massachusetts, Commonwealth Care Plan, Health Plans, State Health
    JEL: I
    Date: 2012–02–28
  13. By: Marsha Gold; Gretchen Jacobson; Anthony Damico; Tricia Neuman
    Abstract: This Data Spotlight provides an overview of Medicare Advantage enrollment patterns in March 2012, including variations by plan type, state, and firm. It also analyzes trends in premiums paid by beneficiaries enrolled in Medicare Advantage plans including variations by plan type, and describes out-of-pocket limits and prescription drug coverage in the Part D "doughnut hole" provided by the plans selected by beneficiaries.
    Keywords: Medicare Advantage, Enrollment Patterns, Prescription Drug, Health
    JEL: I
    Date: 2012–06–30
  14. By: Marsha R. Gold; Gretchen A. Jacobson; Rachel L. Garfield
    Abstract: This article focuses on state efforts to coordinate care for “dual eligiblesâ€â€”Americans covered by both Medicare and Medicaid—within an integrated plan. The study revealed that (1) most beneficiaries currently receive Medicare and Medicaid benefits separately through fee-for-service arrangements, and (2) states have only a patchwork of experience with program coordination and integration for this population. The authors also found major gaps in timely, publicly available data relevant to assessing enrollment in initiatives designed to improve care, outcomes, and program efficiency for dual eligibles.
    Keywords: Dual Eligibles, Integrated Care, Medicaid, Medicare
    JEL: I
    Date: 2012–06–30

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