nep-ias New Economics Papers
on Insurance Economics
Issue of 2013‒12‒06
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  2. Tax Incentives and the Demand for Private Health Insurance By Olena Stavrunova; Oleg Yerokhin
  3. The impact of health care reform on physician payments: evidence from Massachusetts By Abe Dunn; Adam Hale Shapiro
  4. Optimal insurance purchase strategies via optimal multiple stopping times By Rodrigo S. Targino; Gareth W. Peters; Georgy Sofronov; Pavel V. Shevchenko

  1. By: Pinar Karaca-Mandic; Roger Feldman; Peter Graven
    Abstract: Health insurance markets in the United States are characterized by imperfect information, complex products, and substantial search frictions. Insurance agents and brokers play a significant role in helping employers navigate these problems. However, little is known about the relation between the structure of the agent/broker market and access and affordability of insurance. This paper aims to fill this gap by investigating the influence of agents/brokers on health insurance decisions of small firms, which are particularly vulnerable to problems of financing health insurance. Using a unique membership database from the National Association of Health Underwriters together with a nationally representative survey of employers, we find that small firms in more competitive agent/broker markets are more likely to offer health insurance and at lower premiums. Moreover, premiums are less dispersed in more competitive agent/broker markets.
    Date: 2013–12
  2. By: Olena Stavrunova (Economics Discipline Group, University of Technology, Sydney); Oleg Yerokhin (University of Wollongong)
    Abstract: This paper studies the effect of an individual insurance mandate (Medicare Levy Surcharge) on the demand for private health insurance (PHI) in Australia. It uses the administrative income tax returns data to show that mandate has several distinct effects on taxpayers' behavior. First, despite the large size of the tax penalty for not having PHI cover relative to the cost of the cheapest eligible insurance policy, the compliance with mandate is relatively low: the proportion of population with PHI cover increases by 6.5 percentage points (15.6%) at the income threshold at which the tax penalty starts to apply. This effect is most pronounced for young age taxpayers, while the middle aged people seem to be least responsive to this specific tax incentive. Second, the discontinuous increase in the average tax rate at the income threshold created by the policy generates a strong incentive for tax avoidance which manifests itself through bunching in the taxable income distribution below the threshold. Finally, after imposing some plausible assumptions the effect of the policy is extrapolated to other income levels to show that overall this policy hasn't had a significant impact on the demand for private health insurance in Australia.
    Date: 2013–11–01
  3. By: Abe Dunn; Adam Hale Shapiro
    Abstract: This study assesses the impact of major health insurance reform in Massachusetts on the prices of services paid to physicians in the privately insured market. We estimate that the reform caused physician payments to increase at least 10.8 percentage points. This impact occurred while the legislation was materializing but before the final compromised version of the reform was enacted in April 2006. This finding is consistent with prices being set in a forward-looking manner, in anticipation of the reform. Overall, one-sixth of physician service price growth in Massachusetts between 2003 and 2010 was directly attributable to the insurance reform.
    Keywords: Health care reform
    Date: 2013
  4. By: Rodrigo S. Targino; Gareth W. Peters; Georgy Sofronov; Pavel V. Shevchenko
    Abstract: In this paper we study a class of insurance products where the policy holder has the option to insure $k$ of its annual Operational Risk losses in a horizon of $T$ years. This involves a choice of $k$ out of $T$ years in which to apply the insurance policy coverage by making claims against losses in the given year. The insurance product structure presented can accommodate any kind of annual mitigation, but we present three basic generic insurance policy structures that can be combined to create more complex types of coverage. Following the Loss Distributional Approach (LDA) with Poisson distributed annual loss frequencies and Inverse-Gaussian loss severities we are able to characterize in closed form analytical expressions for the multiple optimal decision strategy that minimizes the expected Operational Risk loss over the next $T$ years. For the cases where the combination of insurance policies and LDA model does not lead to closed form expressions for the multiple optimal decision rules, we also develop a principled class of closed form approximations to the optimal decision rule. These approximations are developed based on a class of orthogonal Askey polynomial series basis expansion representations of the annual loss compound process distribution and functions of this annual loss.
    Date: 2013–12

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