nep-ias New Economics Papers
on Insurance Economics
Issue of 2012‒09‒09
ten papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Wem gehören die Überschüsse der gesetzlichen Krankenversicherung? By Johann Eekhoff
  2. Krankenversicherung in den USA: Problemaufriss und Überblick über zentrale Reformziele By Ines Läufer
  3. Risk Classification and Health Insurance By Georges Dionne; Casey G. Rothschild
  4. Business Cycle Dependent Unemployment Benefits with Wealth Heterogeneity and Precautionary Savings By Mark Strøm Kristoffersen
  5. Adverse Selection in Insurance Contracting By Georges Dionne; Nathalie Fombaron; Neil Doherty
  6. Risk Classification and Health Insurance By Georges Dionne
  7. Risk-sharing and probabilistic network structure By Marco Pelliccia
  8. Health Insurance, Treatment Plan, and Delegation to Altruistic Physician By Ting Liu; Ching-to Albert Ma
  9. Assessing the Usability of MAX 2008 Encounter Data for Enrollees in Comprehensive Managed Care. Washington, DC: Mathematica Policy Research By Vivian L. H. Byrd; Allison Hedley Dodd; Rosalie Malsberger; Ashley Zlatinov
  10. Cash-on-Hand and the Duration of Job Search: Quasi-Experimental Evidence from Norway By Christoph Basten; Andreas Fagereng; Kjetil Telle

  1. By: Johann Eekhoff
    Keywords: Health Insurance
    Date: 2012–04
  2. By: Ines Läufer
    Keywords: Health Insurance, USA
    Date: 2012–01
  3. 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. With perfect risk classification, premiums fully reflect the expected cost associated with each class of risk characteristics and yield efficient outcomes. In the health sector, risk classification is also subject to concerns about social equity and potential discrimination. We present an analytical framework that illustrates the potential trade-off between efficient insurance provision and social equity. We also review empirical studies on risk classification and residual asymmetric information that inform this trade-off.
    Keywords: Adverse selection, Classification risk, Distributional equity, Empirical test of asymmetric information, Ex-ante efficiency, Financial equity, Genetic test, Group equity, Horizontal equity, Insurance rating, Interim efficiency, Moral hazard, Risk characteristic, Risk classification, Risk pooling, Risk separation, Social equity
    JEL: D82 I14 I18 I38 G22
    Date: 2012
  4. By: Mark Strøm Kristoffersen (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: In the wake of the financial and economic crisis the discussion about social insurance and optimal stabilization policies has re-blossomed. This paper adds to the literature by studying the effects of a business cycle dependent level of unemployment benefits in a model with labor market matching, wealth heterogeneity, precautionary savings, and aggregate fluctuations in productivity. The results are ambiguous: both procyclical and countercyclical unemployment benefi?ts can increase welfare relative to business cy- cle invariant benefits. Procyclical benefits are beneficial due to countercyclicality of the distortionary effect (on job creation) from providing unemployment insurance, whereas countercyclical benefits facilitate consumption smoothing.
    Keywords: Unemployment insurance, business cycles, wealth heterogeneity, precautionary savings
    JEL: E32 H3 J65
    Date: 2012–08–30
  5. By: Georges Dionne; Nathalie Fombaron; Neil Doherty
    Abstract: In this survey we present some of the more significant results in the literature on adverse selection in insurance markets. Sections 1 and 2 introduce the subject and Section 3 discusses the monopoly model developed by Stiglitz (1977) for the case of single-period contracts extended by many authors to the multi-period case. The introduction of multi-period contracts raises many issues that are discussed in detail; time horizon, discounting, commitment of the parties, contract renegotiation and accidents underreporting. Section 4 covers the literature on competitive contracts. The analysis is more complicated because insurance companies must take into account competitive pressures when they set incentive contracts. As pointed out by Rothschild and Stiglitz (1976), there is not necessarily a Cournot-Nash equilibrium in the presence of adverse selection. However, market equilibrium can be sustained when principals anticipate competitive reactions to their behavior or when they adopt strategies that differ from the pure Nash strategy. Multi-period contracting is discussed. We show that different predictions on the evolution of insurer profits over time can be obtained from different assumptions concerning the sharing of information between insurers about individual's choice of contracts and accident experience. The roles of commitment and renegotiation between the parties to the contract are important. Section 5 introduces models that consider moral hazard and adverse selection simultaneously and Section 6 covers adverse selection when people can choose their risk status. Section 7 discusses many extensions to the basic models such as risk categorization, multidimensional adverse selection, symmetric imperfect information, reversed or double-sided adverse selection, principals more informed than agents, uberrima fides and participating contracts.
    Keywords: Adverse selection, insurance markets, monopoly, competitive contracts, self-selection mechanisms, single-period contracts, multi-period contracts, commitment, contract renegotiation, accident underreporting, risk categorization, participating contracts.
    JEL: D80 D81 G22
    Date: 2012
  6. By: Georges Dionne
    Abstract: We discuss the difficult question of measuring the effects of asymmetric information problems on resource allocation. Three problems are examined: moral hazard, adverse selection, and asymmetric learning. One theoretical conclusion, drawn by many authors, is that information problems may introduce significant distortions into the economy. However, we verify, in different markets, that efficient mechanisms have been introduced in order to reduce these distortions and even eliminate, at the margin, some residual information problems. This conclusion is stronger for pure adverse selection. One explanation is that adverse selection is related to exogenous characteristics, while asymmetric learning and moral hazard are due to endogenous actions that may change at any point in time. Dynamic data help to identify the three information problems by permitting causality tests.
    Keywords: Empirical measure, information problem, moral hazard, adverse selection, learning, insurance fraud, causality tests, dynamic data
    JEL: C12 C18 C23 C26 D80 G22 C25 G11
    Date: 2012
  7. By: Marco Pelliccia (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: This paper studies the impact of a probabilistic risk-sharing network structure on the optimal portfolio composition. We show that, even assuming identical agents, we are able to differentiate their optimal risk-choice once we assume the link-structure defining their relationship probabilistic. In particular, the final agent's portfolio composition is function of his location in the network. If we assume positive asset-correlation coefficients, the relative location of a player in the graph influences his risk-behaviour as much as those of his direct and indirect partners in a not-straightforward way. We analyse also two potential "centrality measures" able to select the key-player in the risk-sharing network. The findings may help to select the "central" agent in a risk-sharing community and to forecast the risk-exposure of the players. Finally, this paper may explain natural differences between identical rational agents' choices emerging in a probabilistic network setup.
    Keywords: informal insurance, risk-sharing, network
    JEL: D85 D81 O17
    Date: 2012–09
  8. By: Ting Liu (Department of Economics, Stony Brook University); Ching-to Albert Ma (Department of Economics, Boston University)
    Abstract: We study delegating a consumer's treatment plan decisions to an altruistic physician. The physician?s degree of altruism is his private information. The consumer's illness severity will be learned by the physician, and also will become his private information. Treatments are discrete choices, and can be combined to form treatment plans. We distinguish between two commitment regimes. In the first, the physician can commit to treatment decisions at the time a payment contract is accepted. In the second, the physician cannot commit to treatment decisions at that time, and will wait until he learns about the patient's illness to do so. In the commitment game, the first best is implemented by a single payment contract to all types of altruistic physician. In the noncommitment game, the first best is not achieved All but the most altruistic physician earn positive profits, and treatment decisions are distorted from the first best.
    Keywords: Optimal contract, delegation, altruistic physician, commitment.
    Date: 2012–08
  9. By: Vivian L. H. Byrd; Allison Hedley Dodd; Rosalie Malsberger; Ashley Zlatinov
    Abstract: This issue brief provides an assessment of the selected other services, inpatient (IP), and prescription drug (RX) encounter data for enrollees in comprehensive managed care during 2008. It summarizes the availability, completeness, quality, and usability of the encounter data for comprehensive managed care enrollees by basis of eligibility category and gives specific information by state. It also examines the changes in the IP and RX encounter data from 2007 to 2008. The results are encouraging for researchers and policymakers. Most states that have comprehensive managed care plans are reporting IP, RX, and other services encounter data. Of those data, most are usable. The number of states submitting usable encounter data is increasing.
    Keywords: Medicaid Analytical Extract; MAX, Medicaid Statistical Information System; MSIS, fee-for-service, health insurance organization; health mainenance organization; HMO; HIO
    JEL: I
    Date: 2012–07–30
  10. By: Christoph Basten; Andreas Fagereng; Kjetil Telle
    Abstract: We identify the causal effect of lump-sum severance payments on nonemployment duration in Norway by exploiting a discontinuity in eligibility at age 50. We find that a severance payment worth 1.2 months’ earnings at the median lowers the fraction re-employed after a year by seven percentage points. Data on household wealth enable us to verify that the effect is decreasing in prior wealth, which favors an interpretation as liquidity constraints over the alternative of mental accounting. Finding liquidity constraints in Norway, despite its equitable wealth distribution and generous welfare state, means they are likely to exist also in other countries.
    Keywords: Unemployment, Optimal Unemployment Insurance, Liquidity Constraints, Mental Accounting, Severance Pay, Regression Discontinuity Design
    JEL: C41 E21 E24 J65
    Date: 2012

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