nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒02‒16
nineteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. How Initiatives to Reduce Fraud in Federal Health Care Programs Affect the Budget By Congressional Budget Office
  2. An Unemployment Insurance Scheme for the Euro Area By Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas
  3. Public Health Insurance and Entry into Self-Employment By Fossen, Frank M.; König, Johannes
  4. What Do Longitudinal Data on Millions of Hospital Visits Tell Us about the Value of Public Health Insurance as a Safety Net for the Young and Privately Insured? By Amanda E. Kowalski
  5. The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013 By David Card; Zhuan Pei; Andrew Johnston; Pauline Leung; Alexandre Mas
  6. Managing risk with insurance and savings : experimental evidence for male and female farm managers in the Sahel By Delavallade, Clara; Dizon, Felipe; Hill, Ruth Vargas; Petraud, Jean Paul
  7. Family status, social security claiming options, and life cycle portfolios By Hubener, Andreas; Maurer, Raimond; Mitchell, Olivia S.
  8. Federal Reinsurance for Terrorism Risk: An Update By Congressional Budget Office
  9. The Impact of Market Size and Composition on Health Insurance Premiums: Evidence from the First Year of the ACA By Michael J. Dickstein; Mark Duggan; Joseph Orsini; Pietro Tebaldi
  10. The effect of extended unemployment insurance benefits: evidence from the 2012-2013 phase-out By Farber, Henry S.; Rothstein, Jesse; Valletta, Robert G.
  11. Systemic Risk in the Insurance Sector: Review and Directions for Future Research By Eling, Martin; Pankoke, David
  12. Assessing the Design of the Low-Income Subsidy Program in Medicare Part D: Working Paper 2014-07 By Andrew Stocking; James Baumgardner; Melinda Buntin; Anna Cook
  13. Insuring Customers of a Unionized Firm Against Loss of Network Benefits By Frankel, David M.
  14. Modeling the Budgetary Costs of FHA's Single Family Mortgage Insurance: Working Paper 2014-05 By Francesca Castelli; Damien Moore; Gabriel Ehrlich; Jeffrey Perry
  15. Do We Know Why Earnings Fall with Job Displacement? Working Paper: 2015-01 By William J. Carrington
  16. The Capacity of Self-Reported Health Measures to Predict High-Need Medicaid Enrollees By Lindsey Leininger Kelsey Avery
  17. Introduction to Contracting with D-SNPs By Jim Verdier; Alexandra Kruse; Rebecca Lester
  18. Testimony on Comparing the Costs of the Veterans’ Health Care System with Private-Sector Costs By Matthew Goldberg
  19. Constrained Inefficiency and Optimal Taxation with Uninsurable Risks By Piero Gottardi; Atsushi Kajii; Tomoyuki Nakajima

  1. By: Congressional Budget Office
    Abstract: Observers often cite fraud as an important contributor to high health care spending, particularly in federal programs. This report describes how CBO estimates the budgetary effects of legislative proposals to reduce fraud in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), and how those estimates are used in the Congressional budget process. What Is Fraud? For the purposes of this report, fraud is considered to be any deliberate attempt to use deception to receive a service or payment from Medicare, Medicaid, or the Children’s Health Insurance Program when the
    JEL: H60 I13 I18 K42
    Date: 2014–10–20
  2. By: Dolls, Mathias; Fuest, Clemens; Neumann, Dirk; Peichl, Andreas
    Abstract: The Great Recession and the resulting European debt crisis revived a debate about deeper fiscal integration in the Eurozone. We discuss different alternatives how an unemployment insurance system for the euro area could be designed and run counterfactual simulations based on micro data to analyze the effectiveness of a basic scheme and a benefit extension program to act as an insurance device in the presence of asymmetric macroeconomic shocks. We find that a basic insurance scheme could be implemented with a relatively small annual budget of roughly 61 billion euros over the period 2008-2013. Net benefits would have stabilized incomes in particular in Cyprus, Estonia, Greece, Ireland, Portugal and Spain whereas Austria, Germany and the Netherlands would have been the largest net contributors.
    JEL: F55 H23 J65
    Date: 2014
  3. By: Fossen, Frank M. (Free University of Berlin); König, Johannes (Freie Universität Berlin)
    Abstract: We estimate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into entrepreneurship. In Germany, the public health insurance system is mandatory for most paid employees, but not for the self-employed, who usually buy private health insurance. Private health insurance contributions are relatively low for the young and healthy, and until 2013 also for males, but less attractive at the other ends of these dimensions and if membership in the public health insurance allows other family members to be covered by contribution-free family insurance. Therefore, the health insurance system can create incentives or disincentives to starting up a business depending on the family's situation and health. We estimate a discrete time hazard rate model of entrepreneurial entry based on representative household panel data for Germany, which include personal health information, and we account for non-random sample selection. We estimate that an increase in the health insurance cost differential between self-employed workers and paid employees by 100 euro per month decreases the annual probability of entry into self-employment by 0.38 percentage points, i.e. about a third of the average annual entry rate. The results show that the phenomenon of entrepreneurship lock, which an emerging literature describes for the system of employer provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health care reforms, not only in the USA and in Germany.
    Keywords: health insurance, entrepreneurship lock, self-employment
    JEL: L26 I13 J2
    Date: 2015–01
  4. By: Amanda E. Kowalski (Cowles Foundation, Yale University)
    Abstract: Young people with private health insurance sometimes transition to the public health insurance safety net after they get sick, but popular sources of cross-sectional data obscure how frequently these transitions occur. We use longitudinal data on almost all hospital visits in New York from 1995 to 2011. We show that young privately insured individuals with diagnoses that require more hospital visits in subsequent years are more likely to transition to public insurance. If we ignore the longitudinal transitions in our data, we obscure over 80% of the value of public health insurance to the young and privately insured.
    Keywords: Health insurance, Nonelderly, Cohort
    JEL: I13
    Date: 2015–01
  5. By: David Card (UC Berkeley, NBER, and IZA); Zhuan Pei (Brandeis University); Andrew Johnston (University of Pennsylvania); Pauline Leung (Princeton University); Alexandre Mas (Princeton University, NBER, and IZA)
    Abstract: We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.Length: 29 pages
    Date: 2015–01
  6. By: Delavallade, Clara; Dizon, Felipe; Hill, Ruth Vargas; Petraud, Jean Paul
    Abstract: Although there is fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. This paper uses a randomized field experiment in Senegal and Burkina Faso to compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. The paper finds that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even controlling for access to informal insurance and differences in crop choice. It is hypothesized that this finding results from the fact that, although men and women are equally exposed to yield risk, women face additional sources of lifecycle risk -- particularly health risks associated with fertility and childcare -- that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This finding suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.
    Keywords: Emerging Markets,Hazard Risk Management,Insurance&Risk Mitigation,Rural Poverty Reduction,Financial Intermediation
    Date: 2015–01–01
  7. By: Hubener, Andreas; Maurer, Raimond; Mitchell, Olivia S.
    Abstract: Social Security rules that determine retirement, spousal, and survivor benefits, along with benefit adjustments according to the age at which these are claimed, open up a complex set of financial options for household decisions. These rules influence optimal household asset allocation, insurance, and work decisions, subject to life cycle demographic shocks, such as marriage, divorce, and children. Our model-based research generates a wealth profile and a low and stable equity fraction consistent with empirical evidence. We confirm predictions that wives will claim retirement benefits earlier than husbands, while life insurance is mainly purchased by younger men. Our policy simulations imply that eliminating survivor benefits would sharply reduce claiming differences by sex while dramatically increasing men's life insurance purchases.
    Keywords: life-cycle models,household savings,investment decisions,life-cycle models,household savings,investment decisions
    Date: 2014
  8. By: Congressional Budget Office
    Abstract: The federal program that provides insurance against the risk of terrorism expired at the end of 2014. Without such a program, taxpayers will face less financial risk, but some businesses will lose or drop their terrorism coverage. Last year the Congress considered legislation to reauthorize the program but shift more risk to the private sector. Other options include limiting federal coverage to attacks using nonconventional weapons, and charging risk-based prices for federal coverage.
    JEL: G22 G28 H25 H42
    Date: 2015–01–06
  9. By: Michael J. Dickstein; Mark Duggan; Joseph Orsini; Pietro Tebaldi
    Abstract: Under the Affordable Care Act, individual states have discretion in how they define coverage regions, within which insurers must charge the same premium to buyers of the same age, family structure, and smoking status. We exploit variation in these definitions to investigate whether the size of the coverage region affects outcomes in the ACA marketplaces. We find large consequences for small and rural markets. When states combine small counties with neighboring urban areas into a single region, the included rural markets see .6 to .8 more active insurers, on average, and savings in annual premiums of between $200 and $300.
    JEL: I11 I13 I18
    Date: 2015–01
  10. By: Farber, Henry S. (Princeton University); Rothstein, Jesse (UC Berkeley); Valletta, Robert G. (Federal Reserve Bank of San Francisco)
    Abstract: Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.
    Date: 2015–01
  11. By: Eling, Martin; Pankoke, David
    Abstract: This paper reviews the extant research on systemic risk in the insurance sector and outlines new areas of research in this field. We summarize and classify 43 theoretical and empirical research papers from both academia and practitioner organizations. The survey reveals that traditional insurance activity in the life, non-life, and reinsurance sectors neither contributes to systemic risk, nor increases insurers’ vulnerability to impairments of the financial system. However, non-traditional activities (e.g., CDS underwriting) might increase vulnerability and life insurers might be more vulnerable than non-life insurers due to higher leverage. Whether non-traditional activities also contribute to systemic risk is not entirely clear; however, the activities with the potential to contribute to systemic risk include underwriting financial derivatives, providing financial guarantees, and short-term funding. This paper is of interest not only to academics, but is also highly relevant for the industry, regulators, and policymakers.
    Keywords: Systemic Risk; Insurance; Solvency II; Financial Crisis
    Date: 2014–11
  12. By: Andrew Stocking; James Baumgardner; Melinda Buntin; Anna Cook
    Abstract: By Andrew Stocking (CBO), James Baumgardner (CBO), Melinda Buntin (Vanderbilt University), and Anna Cook (CBO) The structure of the Medicare Part D prescription drug program generally encourages plan sponsors to submit low bids. However, rules in the program relating to low-income beneficiaries generate a different set of incentives for plans seeking to serve those beneficiaries. We find that over the first five years of the Part D program, two types of plans emerged—those that catered primarily to beneficiaries receiving low-income subsidies (LIS plans) and those that catered primarily
    JEL: I10 I11 I13 I18 I38
    Date: 2014–10–08
  13. By: Frankel, David M.
    Abstract: We study how optimally to insure customers of a unionized firm, such as an auto maker, against the loss of network benefits that occurs when other consumers abandon the firm.  The union first announces a wage.  A random demand shock is then realized.  The firm then chooses its price and, finally, consumers decide whether or not to buy from the firm.  Common knowledge of payoffs is perturbed slightly in order to obtain a unique outcome.  In this outcome the union chooses an excessive wage, leading consumers to abandon the firm too often.  The first best can be costlessly attained by providing consumers with countercyclical insurance.
    Keywords: insurance; Unions; Crises; network externalities; Network Benefits; Network Effects; Global games; Optimal Public Policy
    JEL: C72 D42 D62 H21
    Date: 2015–02–04
  14. By: Francesca Castelli; Damien Moore; Gabriel Ehrlich; Jeffrey Perry
    Abstract: This paper presents the simulation model that the Congressional Budget Office (CBO) uses to project the budgetary costs of the Federal Housing Administration's (FHA's) single-family mortgage insurance program. CBO simulates defaults, recoveries, and prepayments on cohorts of mortgages insured by FHA with key parameters estimated from a dataset of FHA-insured mortgages. Those simulations are used to estimate the loan guarantees' subsidy rates, which are the lifetime cost of FHA's insurance claim payments minus fees, expressed as a percentage of the original loan amounts. The simulations are
    JEL: G00 H50
    Date: 2014–09–11
  15. By: William J. Carrington
    Abstract: After being displaced from their jobs, workers experience reduced earnings for many years and are at greater risks of other problems as well. The ills suffered by displaced workers motivated several recent expansions of government programs, including the unemployment insurance system, and have spurred calls for wage insurance that would provide longer-run earnings replacement. However, while the average size and the individual characteristics associated with the losses are relatively clear, the theory of displacement-induced earnings loss is scattered. Much of the policy discussion appears to
    JEL: J3 J6
    Date: 2015–01–23
  16. By: Lindsey Leininger Kelsey Avery
    Abstract: This issue brief, from the SHARE-funded research project, presents findings from an evaluation of the usefulness of Health Needs Assessment (HNA) in predicting need for medical care among new enrollees in a Medicaid waiver program for previously-ineligible childless adults in Wisconsin.
    Keywords: Self-reported health measures, high-need Medicaid enrollees
    JEL: I
    Date: 2015–02–01
  17. By: Jim Verdier; Alexandra Kruse; Rebecca Lester
    Keywords: Medicare, D-SNP
    JEL: I
    Date: 2014–11–21
  18. By: Matthew Goldberg
    Abstract: Testimony by Matthew Goldberg, Deputy Assistant Director of CBO’s National Security Division, before the Committee on Veterans’ Affairs’s Subcommittee on Health, U.S. House of Representatives.
    JEL: I13 I18
    Date: 2015–01–28
  19. By: Piero Gottardi (European University Institute and Universita Ca' Foscari, Venice); Atsushi Kajii (Kyoto University and Singapore Management University); Tomoyuki Nakajima (Kyoto University and CIGS)
    Abstract: When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and distribution effects. This allows us to determine how the sign of the optimal taxes on capital and labor depend on the nature of the shocks, the degree of heterogeneity among consumers' income as well as on the way in which the tax revenue is used to provide lump sum transfers to consumers. When shocks affect primarily labor income and heterogeneity is small, the optimal tax on capital is positive. However in other cases a negative tax on capital is welfare improving.
    Keywords: optimal linear taxes, incomplete markets, constrained efficiency
    JEL: D52 H21
    Date: 2015–02

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