nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒12‒01
seven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Community rating in health insurance: trade-off between coverage and selection By Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
  2. International Comparison Of South African Private Hospitals Price Levels By Luca Lorenzoni; Tomas Roubal
  3. Tree-based censored regression with applications to insurance By Olivier Lopez; Xavier Milhaud; Pierre-Emmanuel Thérond
  4. Information Frictions and Adverse Selection: Policy Interventions in Health Insurance Markets By Benjamin R. Handel; Jonathan T. Kolstad; Johannes Spinnewijn
  6. The Economic Burden of Out-of-Pocket Medical Expenditures Before and After Implementation of the Medicare Prescription Drug Program By Ayse Akincigil; Karen Zurlo
  7. The Affordable Care Act, Medicare Costs, and Retirement Security By Alicia H. Munnell; Anqi Chen

  1. By: Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
    Abstract: We analyze the role of community rating in the optimal design of a risk adjustment scheme in competitive health insurance markets when insurers have better information on their customers' risk profiles than the sponsor of health insurance. The sponsor offers insurers a menu of risk adjustment schemes to elicit this information. The optimal scheme includes a voluntary reinsurance option. Additionally, the scheme should sometimes be complemented by a community rating requirement. The resulting inefficient coverage of low-cost types lowers the sponsor's cost of separating different insurer types. This allows the sponsor to redistribute more rents from low-cost to high-cost consumers.
    Keywords: cherry picking; health insurance; mechanism design; risk adjustment
    JEL: D02 I13
    Date: 2015–11
  2. By: Luca Lorenzoni; Tomas Roubal
    Abstract: The health system in South Africa is unique in many ways. South Africa spends 41.8% of total health expenditures on private voluntary health insurance – more than any OECD country – but only 17% of the population – mostly high income citizens - can afford to purchase private insurance. Given the magnitude of private health expenditures, the activities in the private health care market have an important impact on the functioning of the health care system as a whole. Medical schemes (private health insurance) in South Africa mainly finance care that is predominantly delivered by private providers (i.e., private hospitals, specialists, general practitioners, pharmacies). Therefore, these schemes primarily finance an alternative to seeking care in the public sector and offer services that duplicate those available in the public sector.<BR>Le système de santé sud-africain est unique à plusieurs égards. L'assurance maladie privée volontaire représente 41.8% des dépenses totales de santé sud-africaines - plus que tous les pays de l'OCDE - mais seul 17% de la population – surtout des citoyens à revenus élevés - peut souscrire à une assurance privée. Compte tenu de l'étendue des dépenses de santé privées, les activités du marché privé ont un impact important sur le fonctionnement du système de santé dans son ensemble. Les assurances maladie privées en Afrique du Sud financent principalement des soins fournis par des professionnels privés (hôpitaux privés, spécialistes, généralistes, pharmacies). Elles représentent par conséquent une alternative à la recherche de soins dans le secteur public et offrent les mêmes services que ce dernier.
    JEL: C43 D24 I13 M41
    Date: 2015–10–28
  3. By: Olivier Lopez (UPMC - Université Pierre et Marie Curie - Paris 6, Laboratoire de Finance et d'Assurance - CREST-INSEE - Centre de Recherche en Economie et en Statistique - Institut national de la statistique et des études économiques (INSEE)); Xavier Milhaud (Laboratoire de Finance et d'Assurance - CREST-INSEE - Centre de Recherche en Economie et en Statistique - Institut national de la statistique et des études économiques (INSEE)); Pierre-Emmanuel Thérond (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: In this paper, we propose a regression tree procedure to estimate the conditional distribution of a variable which is not directly observed due to censoring. The model that we consider is motivated by applications in insurance, including the analysis of guarantees that involve durations, and claim reserving. We derive consistency results for our procedure, and for the selection of an optimal subtree using a pruning strategy. These theoretical results are supported by a simulation study, and two applications to insurance datasets. The first one concerns income protection insurance, while the second deals with reserving in third-party liability insurance.
    Keywords: model selection,regression tree,insurance,survival analysis,censoring
    Date: 2015–04–10
  4. By: Benjamin R. Handel; Jonathan T. Kolstad; Johannes Spinnewijn
    Keywords: Information frictions, adverse selection, policy interventions
    JEL: D80 I13
    Date: 2015–11
  5. By: Valentin SCARLAT (Faculty of Economics, Ecological University of Bucharest)
    Abstract: Using financial-banking institutions in money laundering contribute to the undermining of financial institutions, in part and that kind proximal, of the entire financial system. At the same time, the increasing integration of global financial systems and removing the barriers placed in the front of free capitals movement, facilitated ease with which black money can be washed and complicates money tracking circuit (be materialized in their, or as scriptural money). To earn money by fraud has, invariably, a transient nature. They ruin the reputation and it discourages honest investor. Financial institutions involved in money laundering scandal will risk prosecution in court and loss of goodwill on the market. If not controlled, process of money laundering may undermine efforts for existence of a free and competitive market and may affect the development of a healthy economy (Guidelines for suspicious transactions, in Thus, the insurance market as a whole plays a special role in the national system of the money laundering preventing and combating and the increase in the volume of transactions grows the risk degree of money laundering and combating terrorism.
    Keywords: preventing and combating money laundering, insurance market, entities, knows your customer, suspicious transactions
    JEL: G22 G28
    Date: 2014–01
  6. By: Ayse Akincigil; Karen Zurlo
    Abstract: Older Americans, although covered by Medicare, bear a large economic burden of medical expenses in the form of premiums for Medicare and supplemental plans, as well as the cost of uncovered or under-covered medical services. This study compares the patterns of this economic burden in 2010 with the baseline year of 2005. The period covered was marked by economic shocks, health care technology innovations and major Medicare reforms, including implementation of the prescription drug (Part D) program and changes in premium rules. Consequently, we present a description of the economic burden and do not attempt to make causal inferences. The definition of expenditures is limited to three components of out-of-pocket (OOP) medical spending: premiums, prescription drugs costs, and health services. While this definition is a limitation of the study, it also allows the researchers to focus on the costs most likely to be affected by improved access to prescription drugs and premium reforms.
    Date: 2015–11
  7. By: Alicia H. Munnell; Anqi Chen
    Abstract: Rising Medicare costs have been a major contributor to projected long-run budget deficits, and rising out-of-pocket costs have become an increasing challenge to individuals’ retirement security. The 2010 Patient Protection and Affordable Care Act (ACA) made substantial changes to Medicare, designed both to im­prove the program’s finances and to reduce the out-of-pocket costs faced by retirees. However, the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS) warns that the assumed impact of the ACA may be overly optimistic and that realized savings may be far more muted. As a result, since 2010, OACT each year has released a set of alter­native projections to illustrate Medicare expenditures if current-law payment reductions are not sustained. This brief compares the baseline projections in the an­nual Medicare Trustees Report with OACT’s alternative projections. The discussion proceeds as follows. The first section discusses the ACA changes and the projected decline in Medicare expenditures. The second section examines how the reductions in expenditures trans­late into lower out-of-pocket spending for beneficia­ries. The third section outlines the key differences in assumptions between the Medicare Trustees Report and OACT’s alternative projections. The fourth sec­tion examines how the two sets of projections have changed over time. The conclusion is that they have been converging, suggesting increasing agreement that the ACA will significantly reduce long-run Medi­care costs.
    Date: 2015–11

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