nep-ias New Economics Papers
on Insurance Economics
Issue of 2014‒04‒18
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Health Status, Disability and Retirement Incentives in Belgium By Alain Jousten; Mathieu Lefebvre; Sergio Perelman
  2. What is Wrong with Moral Hazard and Adverse Selection Problems in the Conventional Economic Theory By Bertrand Lemennicier
  3. Health Care in a Multipayer System: The Effects of Health Care Service Demand among Adults under 65 on Utilization and Outcomes in Medicare By Sherry A. Glied
  4. Optimal stop-loss reinsurance: a dependence analysis By Anna Castañer; Mª Mercè Claramunt

  1. By: Alain Jousten; Mathieu Lefebvre; Sergio Perelman
    Abstract: Many Belgian retire well before the statutory retirement age. Numerous exit routes from the labor force can be identified: old-age pensions, conventional early retirement, disability insurance, and unemployment insurance are the most prominent ones. We analyze the retirement decision of Belgian workers adopting an option value framework, and pay special attention to the role of health status. We estimate probit models of retirement using data from SHARE. The results show that health and incentives matter in the decision to exit from the labor market. Based on these results, we simulate the effect of potential reforms on retirement.
    JEL: H55 J21 J26
    Date: 2014–04
  2. By: Bertrand Lemennicier
    Abstract: The purpose of this paper is to challenge the conventional theory of moral hazard and adverse selection. Moral hazard and adverse selection problems in contemporary economic theory are plagued with four major aws: 1) the alleged asymmetrical information between buyer and seller as a problem in the coordination process of the market; 2) the confusion between different concepts or denitions of probability: case or class probabilities, pure subjective beliefs on the occurrence of an event or relative prices on betting markets; 3) the presupposed inability of actors (sellers and buyers) to solve by themselves the problems they face, 4) the pretense of economists to be able to correct these so-called market failures with compulsory insurance without creating new moral hazard and/or adverse selection problems worse than the ones they want to cure. We center our paper mainly on the internal and theoretical inconsistency of the canonical model developed by Akerlof and Rothschild and Stiglitz's theory and their followers based on additive or non additive expected utility associated with the subjective versus frequency tradition in statistics. As an alternative, we propose to approach these phenomena through the eye glasses of betting markets an securitization of insurance contracts.
    Keywords: Moral hazard, adverse selection, uncertainty, risk, subjective probability, entrepreneurial judgment, asymmetrical information, contract incentives, compulsory insurance, betting market, free market competition as a discovery process
    JEL: B53 D23 D86 G22
    Date: 2014–04
  3. By: Sherry A. Glied
    Abstract: Doctors and hospitals in the United States serve patients covered by many types of insurance. This overlap in the supply of health care services means that changes in the prices paid or the volume of services demanded by one group of patients may affect other patient groups. This paper examines how marginal shifts in the demand for services among the adult population under 65 (specifically, factors that affect the uninsurance rate) affect use in the Medicare population. I provide a simple theoretical framework for understanding how changes in the demand for care among adults under 65 may affect Medicare spending. I then examine how two demand factors–recent coverage eligibility changes for parents and the firm size composition of employment–affect insurance coverage among adults under 65 and how these factors affect per beneficiary Medicare spending. Factors that contribute to reductions in uninsurance rates are associated with contemporaneous decreases in per beneficiary Medicare spending, particularly in high variation Medicare services. Reductions in the demand for medical services among adults below age 65 are not associated with reductions in the total quantity of physician services supplied. The increased Medicare utilization that accompanies lower demand among those under 65 has few, if any, benefits for Medicare patients.
    JEL: I1 I11 I13
    Date: 2014–04
  4. By: Anna Castañer (Dept. Matemàtica Econòmica, Financera i Actuarial, Universitat de Barcelona, Av. Diagonal, 690, 08034 Barcelona, Spain); Mª Mercè Claramunt (Dept. Matemàtica Econòmica, Financera i Actuarial, Universitat de Barcelona, Av. Diagonal, 690, 08034 Barcelona, Spain)
    Abstract: The stop-loss reinsurance is one of the most important reinsurance contracts in the insurance market. From the insurer point of view, it presents an interesting property: it is optimal if the criterion of minimizing the variance of the cost of the insurer is used. The aim of the paper is to contribute to the analysis of the stop-loss contract in one period from the point of view of the insurer and the reinsurer. Firstly, the influence of the parameters of the reinsurance contract on the correlation coefficient between the cost of the insurer and the cost of the reinsurer is studied. Secondly, the optimal stop-loss contract is obtained if the criterion used is the maximization of the joint survival probability of the insurer and the reinsurer in one period.
    Keywords: Stop-loss premium, survival probabilities, reinsurance
    Date: 2014–04

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