nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒03‒23
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Aging and Health Financing in the US: A General Equilibrium Analysis By Juergen Jung; Chung Tran; Matthew Chambers
  2. Effects of ACA Medicaid Expansions on Health Insurance Coverage and Labor Supply By Robert Kaestner; Bowen Garrett; Anuj Gangopadhyaya; Caitlyn Fleming
  3. When the affordable has no value, and the valuable is unaffordable: The U.S. market for long-term care insurance and the role of Medicaid By Fels, Markus
  4. The Incidence of Mandated Health Insurance: Evidence from the Affordable Care Act Dependent Care Mandate By Gopi Shah Goda; Monica Farid; Jay Bhattacharya
  5. Solvency II at the gates: Benefits and risks of the new insurance regulation By Gründl, Helmut
  6. The Incidence of Health Insurance Costs: Empirical evidence from Japan By HAMAAKI Junya
  7. Health-care reform or labor market reform? a quantitative analysis of the Affordable Care Act By Nakajima, Makoto; Tuzemen, Didem
  8. Disentangling Moral Hazard and Adverse Selection in Private Health Insurance By David Powell; Dana Goldman
  9. Completing the Banking Union: Deposit Insurance By Gros, Daniel
  10. The Effect of Medicare Eligibility on Spousal Insurance Coverage By Marcus Dillender; Karen Mulligan
  11. Additional Unemployment Compensation Benefits During the Great Recession: Recipients and Their Post-Claim Outcomes By Heinrich Hock; Walter Nicholson; Karen Needels; Joanne Lee; Priyanka Anand
  12. A Credibility Approach of the Makeham Mortality Law By Yahia Salhi; Pierre-Emmanuel Thérond; Julien Tomas
  13. Health Insurance and Labor Force Participation: What Legal Recognition Does for Same-Sex Couples By Marcus Dillender
  14. Including Health Insurance in Poverty Measurement: The Impact of Massachusetts Health Reform on Poverty By Sanders Korenman; Dahlia K. Remler
  15. Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience During the Recent Recession By Katharine G. Abraham; Susan Houseman
  16. A European Unemployment Benefits Scheme: The rationale and the challenges ahead By Beblavý, Miroslav; Marconi, Gabriele; Maselli,Ilaria

  1. By: Juergen Jung (Department of Economics, Towson University); Chung Tran (Research School of Economics, The Australian National University); Matthew Chambers (Department of Economics, Towson University)
    Abstract: We quantify the effects of population aging on the US healthcare system. Our analysis is based on a stochastic general equilibrium overlapping generations model of endogenous health accumulation calibrated to match pre-2010 U.S. data. We find that population aging not only leads to large increases in medical spending but also a large shift in the relative size of public vs. private insurance. Without the Affordable Care Act (ACA), aging itself leads to a 36.6 percent increase in health expenditures by 2060. The group based health insurance (GHI) market shrinks, while the individual based health insurance (IHI) market and Medicaid expand significantly. Additional funds equivalent to roughly 4 percent of GDP are required to finance Medicare in 2060 as the elderly dependency ratio increases. The introduction of the ACA increases the fraction of insured workers to 99 percent by 2060, compared to 81 percent without the ACA. This additional increase is mainly driven by the further expansion of Medicaid and the IHI market. Interestingly, the ACA reduces aggregate health care spending by enrolling uninsured workers into Medicaid which pays lower prices for medical services. Overall, the ACA adds to the fiscal cost of population aging mainly via the Medicare and Medicaid expansion.
    Keywords: Population aging, health expenditures, Medicare/Mediaid, Affordable Care Act 2010, Grossman model of health capital, endogenous health spending and financing, general equilibrium.
    JEL: H51 I13 J11 E21 H62
    Date: 2016–03
  2. By: Robert Kaestner; Bowen Garrett; Anuj Gangopadhyaya; Caitlyn Fleming
    Abstract: We examined the effect of the expansion of Medicaid eligibility under the Affordable Care Act on health insurance coverage and labor supply of adults with a high school education or less. We found that the Medicaid expansions increased Medicaid coverage by approximately 4 percentage points, decreased the proportion uninsured by approximately 3 percentage points, and decreased private health insurance coverage by 1 percentage point. The Medicaid expansions had little effect on labor supply as measured by employment, usual hours worked per week and the probability of working 30 or more hours per week. Most estimates suggested that the expansions increased employment slightly, although not significantly.
    JEL: H42 I13 J22
    Date: 2015–12
  3. By: Fels, Markus
    Abstract: I consider the popular argument of Medicaid crowding out demand for private long-term care insurance. I show that this argument rests on a wrong counterfactual comparison. Furthermore, I question the welfare-decreasing impact of Medicaid as it neglects a large value of the program in providing access to care. I show that private insurance is unable to offer a similar value. I posit that the low take-up of private insurance is due to a dilemma prevalent in - but not exclusive to - the market for long term care insurance: a dilemma between access and affordability. Several empirical patterns in insurance uptake and lapsing behavior can be explained by considering the issue of limited affordability.
    Keywords: Aging,Insurance,Long term Care,Medicaid
    JEL: G22 I11 I38
    Date: 2016
  4. By: Gopi Shah Goda; Monica Farid; Jay Bhattacharya
    Abstract: The dependent care mandate is one of the most popular provisions of the 2010 Affordable Care Act (ACA). This provision requires that employer-based insurance plans cover health care expenditures for workers with children 26 years old or younger. While there has been considerable scholarly and policy interest in the effects of this mandate on health insurance coverage among young adults, there has been little scholarly work measuring the costs and incidence of this mandate and who pays the costs of it. In our empirical work, we exploit the fact that some states had dependent care mandates in years prior to the passage of the ACA. Using data from the Survey of Income and Program Participation (SIPP), we find that workers at firms with employer-based coverage – whether or not they have dependent children – experience an annual reduction in wages of approximately $1,200. Our results imply that the marginal costs of mandated employer-based coverage expansions are not entirely borne only by the people whose coverage is expanded by the mandate.
    JEL: I1 I13 J3
    Date: 2016–01
  5. By: Gründl, Helmut
    Abstract: Investors and insurance policyholders are often confronted with complex products and providers' opaque organisational structures. At the same time, the possibility that their claims will not be honoured often poses an existential risk. Financial regulation therefore aims at putting in place a financial services framework that will safeguard market processes whilst also protecting consumers. However, benefits of regulation are accompanied by certain risks, as can be exemplified with the case of insurance regulation.
    Abstract: Kapitalanleger wie Versicherungsnehmer werden oft konfrontiert mit komplexen Produkten und nicht durchschaubaren Unternehmensstrukturen der Anbieter. Gleichzeitig stellt die mögliche Nichterfüllung ihrer Ansprüche häufig ein existenzielles Risiko dar. Deshalb ist es Ziel der Finanzregulierung, Rahmenbedingungen im Finanzdienstleistungsbereich zu schaffen, die wirtschaftliche Abläufe gewährleisten und gleichzeitig den Konsumenten schützen. Dem Nutzen der Regulierung stehen aber auch Risiken gegenüber, die im diesem Artikel am Beispiel der Versicherungsregulierung dargelegt werden.
    Keywords: insurance,regulation
    Date: 2015
  6. By: HAMAAKI Junya
    Abstract: Empirical studies on the incidence of social security contributions in Japan have produced conflicting results. Against this background, the present study, using new panel data, examines the extent to which employers' health insurance contributions have been shifted to employees through the adjustment of wages following a major reform of the way insurance contributions are calculated. The results indicate that a large part of employers' contribution burden was shifted to employees, and that this tendency was particularly pronounced for health insurers with a large number of insurees. This finding is consistent with the view that the labour supply in Japan is inelastic with regard to changes in wages. Furthermore, the empirical results suggest that the increase in employers' insurance burden following the reform was not passed on to employees immediately but rather over time through the gradual adjustment of wages.
    Date: 2016–03
  7. By: Nakajima, Makoto; Tuzemen, Didem (Federal Reserve Bank of Kansas City)
    Abstract: An equilibrium model with firm and worker heterogeneity is constructed to analyze labor market and welfare implications of the Patient Protection and Affordable Care Act (ACA). Our model implies a significant reduction in the uninsured rate from 22.6 percent to 5.6 percent. {{p}} The model predicts a moderate positive welfare gain from the ACA, due to redistribution of income through Health Insurance Subsidies at the Exchange as well as Medicaid expansion. About 2.1 million more part-time jobs are created under the ACA, in expense of 1.6 million full-time jobs, mainly because the link between full-time employment and health insurance is weakened. The model predicts a small negative effect on total hours worked (0.36%), partly because of the general equilibrium effect.
    Keywords: Health insurance; Affordable Care Act; Labor market;
    JEL: D91 E24 E65 I10
    Date: 2015–09–01
  8. By: David Powell; Dana Goldman
    Abstract: Moral hazard and adverse selection create inefficiencies in private health insurance markets and understanding the relative importance of each factor is critical for policy. We use claims data from a large firm to isolate moral hazard from plan selection. Previous studies have attempted to estimate moral hazard in private health insurance by assuming that individuals respond only to the spot price, end-of-year price, expected price, or a related metric. The nonlinear budget constraints generated by health insurance plans make these assumptions especially poor and we statistically reject their appropriateness. We study the differential impact of the health insurance plans offered by the firm on the entire distribution of medical expenditures without assuming that individuals only respond to a parameterized price. Our empirical strategy exploits the introduction of new plans during the sample period as a shock to plan generosity, and we account for sample attrition over time. We use an instrumental variable quantile estimation technique that provides quantile treatment effects for each plan, while conditioning on a set of covariates for identification purposes. This technique allows us to map the resulting estimated medical expenditure distributions to the nonlinear budget sets generated by each plan. We estimate that 53% of the additional medical spending observed in the most generous plan in our data relative to the least generous is due to moral hazard. The remainder can be attributed to adverse selection. A policy which resulted in each person enrolling in the least generous plan would cause the annual premium of that plan to rise by $1,000.
    JEL: I1 I10 I11 I12 I13
    Date: 2016–01
  9. By: Gros, Daniel
    Abstract: It is generally agreed that a Banking Union should have common or ‘single’ institutions responsible for carrying out three basic functions: supervision, resolution and deposit insurance. So far, however, agreement has been reached in the EU on only the first two of these functions. The Commission has now presented its proposal on how to complete the Banking Union with a European Deposit Insurance Scheme (EDIS). It is an innovative and courageous proposal. It is courageous because it will clearly be very controversial in a number of member states (especially Germany) and it is innovative because it proposes a three-stage process, starting with re-insurance, then switching to co-insurance and finally to full direct insurance of deposits via a ‘single’ Deposit Insurance Fund (DIF). This final stage should be reached in 2024, which is also the date at which the Single Resolution Fund (SRF) will become the only source of financing for bank resolution. The Commission’s proposal calls for integrating the decision-making for EDIS into the decision-making entity for the SRF, namely the existing Single Resolution Board (SRB). This makes sense if one views resolution and deposit insurance as two highly interlinked dimensions of dealing with banks in trouble. In this view the two dimensions should be bundled into one institution – and one suspects that over time the two funds (the SRF and the DIF) could be merged into one. This Policy Brief argues that re-insurance should not be considered as a transitory phase, but could also provide a solution for the long run. ‘Experience rating’ could be used to ensure a proper pricing of risk and to protect the interests of the depositors in countries with safer banking systems. Moreover, EDIS should have a decision-making structure separate from and independent of the SRM, since it has mainly a macroeconomic function.
    Date: 2015–12
  10. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research); Karen Mulligan (Middle Tennessee State University)
    Keywords: Health Insurance, Medicare, Individual Market, Marriage, Employer Benefits, ACA
    JEL: I13 J3
  11. By: Heinrich Hock; Walter Nicholson; Karen Needels; Joanne Lee; Priyanka Anand
    JEL: J
    Date: 2016–03–02
  12. By: Yahia Salhi (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1); Pierre-Emmanuel Thérond (Galea & Associés, SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1); Julien Tomas (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)
    Abstract: The present article illustrates a credibility approach to mortality. Interest from life insurers to assess their portfolios' mortality risk has considerably increased. The new regulation and norms, Solvency II, shed light on the need of life tables that best reect the experience of insured portfolios in order to quantify reliably the underlying mortality risk. In this context and following the work of Bühlmann and Gisler (2005) and Hardy and Panjer (1998), we propose a credibility approach which consists on reviewing, as new observations arrive, the assumption on the mortality curve. Unlike the methodology considered in Hardy and Panjer (1998) that consists on updating the aggregate deaths we have chosen to add an age structure on these deaths. Formally, we use a Makeham graduation model. Such an adjustment allows to add a structure in the mortality pattern which is useful when portfolios are of limited size so as to ensure a good representation over the entire age bands considered. We investigate the divergences in the mortality forecasts generated by the classical credibility approaches of mortality including Hardy and Panjer (1998) and the Poisson-Gamma model on portfolios originating from various French insurance companies.
    Keywords: Graduation,Life insurance,Mortality,Credibility,Makeham law,Extrapolation
    Date: 2016
  13. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research)
    Keywords: health insurance, ACA, same-sex couples
    JEL: I13 J32 J38
  14. By: Sanders Korenman; Dahlia K. Remler
    Abstract: We develop and implement what we believe is the first conceptually valid health-inclusive poverty measure (HIPM)—a measure that includes health care or insurance in the poverty needs threshold and health insurance benefits in family resources—and we discuss its limitations. Building on the Census Bureau’s Supplemental Poverty Measure, we construct a pilot HIPM for the under-65 population under ACA-like health reform in Massachusetts. This pilot is intended to demonstrate the practicality, face validity and value of a HIPM. Results suggest that public health insurance benefits and premium subsidies accounted for a substantial, one-third reduction in the poverty rate. Among low-income families who purchased individual insurance, premium subsidies reduced poverty by 9.4 percentage points.
    JEL: I13 I32
    Date: 2016–02
  15. By: Katharine G. Abraham (University of Maryland); Susan Houseman (W.E. Upjohn Institute for Employment Research)
    Keywords: short-time compensation, work sharing, unemployment insurance, manufacturing
    JEL: J65 J08 J20
  16. By: Beblavý, Miroslav; Marconi, Gabriele; Maselli,Ilaria
    Abstract: This paper aims to frame the debate on a European Unemployment Benefits Scheme (EUBS), as a shock absorber for EU economies, around its origins on the one hand, and its most controversial aspects, on the other. The paper focuses on several key aspects of the EUBS, the first being the options for financing the scheme. This can be divided into those requiring the imposition of an ad-hoc tax in member countries and those relying on general contributions from these countries, which can in turn be financed in various ways. Second, it focuses on the extent to which harmonisation of current national unemployment benefit schemes would be needed. Harmonisation implies changing national legislation and practices, which creates political and administrative difficulties. Third, the study examines the problem of schemes generating regular monetary transfers from certain countries to others, and the associated problem of moral hazard. There are two broad ways to solve this problem: ex-ante or ex-post balancing. Fourth, it discusses which countries should join the EUBS. There are arguments for limiting membership to euro-area members, or for extending it to the entire European Union, but participation should in any case be mandatory. Finally, it reviews the costs of the various forms of EUBSs proposed in the literature, concluding that they tend to stay below 1% of the member countries’ aggregate GDP. This paper constitutes the first paper prepared in the context of a research project on “The Feasibility and Added Value of a European Unemployment Benefits Scheme”, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is re-published by CEPS with the kind permission of the European Commission and can also be downloaded from the Commission’s website.
    Date: 2015–09

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