nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒07‒09
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Long-term care social insurance. How to avoid big losses? By Klimaviciute, Justina; Pestieau, Pierre
  2. An Analysis of Private Long-Term Disability Insurance Access, Cost, and Policy Options Using the National Compensation Survey By Priyanka Anand; David Wittenburg
  3. Genetic Health Risks: The Case for Universal Public Health Insurance By Vicky Barham; Rose Anne Devlin; Olga Milliken
  4. Does Social Health Insurance Reduce Financial Burden? Panel Data Evidence from India By Azam, Mehtabul
  5. Current status and prospects of development of the tax system and insurance scheme of the Polish agriculture By Pawłowska-Tyszko, Joanna; Soliwoda, Michał; Pieńkowska-Kamieniecka, Sylwia; Walczuk, Damian
  6. Bunching at The Kink: Implications for Spending Responses to Health Insurance Contracts By Liran Einav; Amy Finkelstein; Paul Schrimpf
  7. Occupational Choice, Retirement, and the Effects of Disability Insurance By Jacobs, Lindsay
  8. Drowned by Numbers? Designing an EU-wide Unemployment Insurance By Étienne Farvaque; Florence Huart
  9. Moneyball in Medicare By Edward C. Norton; Jun Li; Anup Das; Lena M. Chen
  10. Disentangling Adverse Selection, Moral Hazard and Supply Induced Demand: An Empirical Analysis of The Demand For Healthcare Services By Vincenzo Atella; Alberto Holly; Alessandro Mistretta
  11. Securities Lending as Wholesale Funding : Evidence from the U.S. Life Insurance Industry By Foley-Fisher, Nathan; Narajabad, Borghan N.; Verani, Stephane

  1. By: Klimaviciute, Justina; Pestieau, Pierre
    Abstract: Long-term care (LTC) needs are expected to rapidly increase in the next decades and at the same time the main provider of LTC, namely the family is stalling. This calls for more involvement of the state that today covers less than 20% of these needs and most often in an inconsistent way. Besides the need to help the poor dependent, there is a mounting concern in the middle class that a number of dependent people are incurring costs that could force them to sell all their assets. In this paper we study the design of a social insurance that meets this concern. Following Arrow (1963), we suggest a policy that is characterized by complete insurance above a deductible amount.
    Keywords: Arrow's theorem; capped spending; long-term care insurance; optimal taxation
    JEL: H21 I13 J14
    Date: 2016–07
  2. By: Priyanka Anand; David Wittenburg
    Abstract: Policymakers are increasingly interested in expanding private long-term disability insurance (LTDI) options to increase access to work and income supports and reduce dependency on Social Security Disability Insurance (SSDI).
    Keywords: long-term disability insurance, access, cost, policy options, National Compensation Survey
    JEL: I J
  3. By: Vicky Barham (Department of Economics, University of Ottawa, Ottawa, ON); Rose Anne Devlin (Department of Economics, University of Ottawa, Ottawa, ON); Olga Milliken (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper examines the role of the public sector in providing genetic insurance and health care when health risks are genetically determined at conception. We characterize the ex ante efficient outcome (where individuals are placed behind the veil of ignorance), and demonstrate that this outcome cannot be achieved by private health insurance markets or by a government which cannot commit to a once-and-for-all transfer policy. In contrast, the desired outcome can be attained through public provision of universal health (genetic) insurance and of genetic testing, coupled with a public pension scheme.
    Keywords: Public health insurance; Genetic insurance; Genetic testing; Ex ante efficiency; Time inconsistent policy
    JEL: H51 I18 G22
    Date: 2016
  4. By: Azam, Mehtabul (Oklahoma State University)
    Abstract: Indian government launched the Rashtriya Swasthya Bima Yojana (RSBY), a national health insurance scheme, in 2008 that provides cashless health services to poor households in India. We evaluate the impact of RSBY on RSBY beneficiary households' (average treatment impact on the treated) utilization of health services, per capita out-of-pocket (OOP) expenditure, and per patient OOP expenditures on major morbidities. To address the issue of non-randomness in enrollment into the scheme, we exploit the longitudinal aspect of a large nationally representative household survey data to implement a difference-in-difference with matching. We find some evidence of positive impact of RSBY on utilization of health services by RSBY beneficiary households in rural India but not in urban India. However, there is no evidence that the RSBY reduced per person OOP expenditure for RSBY households in both rural and urban areas. Conditional on having received medical treatment for major morbidity, we find that RSBY increased probability of hospitalization and being treated by a government doctor in rural areas but no significant impact in urban areas. We also find lower expenditure on medicine for a RSBY cardholder patient in rural areas.
    Keywords: SHI, RSBY, IHDS, out-of-pocket expenditure, health services utilization
    JEL: I1 I18 I38
    Date: 2016–06
  5. By: Pawłowska-Tyszko, Joanna; Soliwoda, Michał; Pieńkowska-Kamieniecka, Sylwia; Walczuk, Damian
    Abstract: Agriculture taxation in Poland. Income taxation in agriculture – review and assessment of solutions. Suggestions for income taxation in Polish agriculture and their assessment. Social security in agriculture. Current and proposed changes in economic insurance in agriculture.
    Keywords: agriculture taxation, Poland, income taxation, agriculture, Polish agriculture, social security, economic insurance, Agribusiness, Agricultural and Food Policy, Agricultural Finance,
    Date: 2015
  6. By: Liran Einav; Amy Finkelstein; Paul Schrimpf
    Abstract: A large literature in empirical public finance relies on “bunching” to identify a behavioral response to non-linear incentives and to translate this response into an economic object to be used counterfactually. We conduct this type of analysis in the context of prescription drug insurance for the elderly in Medicare Part D, where a kink in the individual’s budget set generates substantial bunching in annual drug expenditure around the famous “donut hole.” We show that different alternative economic models can match the basic bunching pattern, but have very different quantitative implications for the counterfactual spending response to alternative insurance contracts. These findings illustrate the importance of modeling choices in mapping a compelling reduced form pattern into an economic object of interest.
    JEL: D12 G22
    Date: 2016–06
  7. By: Jacobs, Lindsay
    Abstract: There is much variation in the physical requirements across occupations, giving rise to great differences in later-life productivity, disability risk, and the value of Social Security Disability Insurance (SSDI). In this paper, I look at how such differences across occupations affect initial career choice as well as the extent to which SSDI, which insures shocks to productivity due to disability, prompts more people to choose physically intense occupations. Using data from the Health and Retirement Study (HRS) and the Current Population Survey (CPS), I estimate a dynamic model of occupational choice and retirement with heterogeneous agents and equilibrium effects on earnings across occupations. I document the differences between blue-collar and white-collar occupations in the effects of declining health and disability on productivity, which affects labor supply in later life and, in the context of a life-cycle model, influences the occupation decision. Through counterfactual exercises, I show that the additional disability risk in blue-collar jobs relative to white-collar jobs is equivalent to an additional six percentage point reduction in lifetime consumption and that the absence of SSDI, which insures some of this risk, would be equivalent to, respectively, a twelve and seven percent reduction in consumption for those in blue- and white- collar jobs. Furthermore, I find that the presence of SSDI results in three percent more individuals choosing blue-collar occupations, which is comparable to the effect on occupation selection resulting from an eight-percent increase in blue-collar earnings. This overall effect, however, masks the importance of the selection of less risk-averse individuals into blue-collar jobs and the equilibrium effects on wages; earnings for the most risk-averse type would have to be nearly fifteen percent greater to choose blue-collar occupations in the absence of SSDI.
    Keywords: Occupational choice ; Disability ; Life-cycle modeling ; Retirement
    JEL: H31 J14 J24 J26 C63
    Date: 2015–09–20
  8. By: Étienne Farvaque; Florence Huart
    Abstract: The severity of the recent crisis has given rise to several proposals for the creation of a European unemployment insurance system. In this paper, we first explore the theoretical backgrounds of a common insurance system. We, then, analyze the main features of an EU-wide unemployment insurance, and explore its financial and political sustainability, under different scenarios, including a “US-equivalent” one. We finally highlight key issues with regard to implementation and potential undesirable effects.
    Keywords: intergovernmental transfers; fiscal union; fiscal federalism; European integration; unemployment insurance,
    JEL: F45 F36 H77 H87 E60
    Date: 2016–06–22
  9. By: Edward C. Norton; Jun Li; Anup Das; Lena M. Chen
    Abstract: US policymakers place a high priority on tying Medicare payments to the value of care delivered. A critical part of this effort is the Hospital Value-based Purchasing Program (HVBP), which rewards or penalizes hospitals based on their quality and episode-based costs of care. Within HVBP, each patient affects hospital performance on a variety of quality and spending measures, and performance translates directly to changes in program points and ultimately dollars. In short, hospital revenue from a patient consists not only of the DRG payment, but also consists of that patient’s marginal future reimbursement. We estimate the magnitude of the marginal future reimbursement for individual patients across each type of quality and performance measure. We describe how those incentives differ across hospitals, including integrated and safety-net hospitals. We find some evidence that hospitals improved their performance over time in the areas where they have the highest marginal incentives to improve care.
    JEL: I11 I13 I18
    Date: 2016–06
  10. By: Vincenzo Atella (CEIS,University of Rome "Tor Vergata"); Alberto Holly (IEMS University of Lausanne, Universidade Nova de Lisboa, Lisbon,); Alessandro Mistretta (Bank of Italy and Università di Roma Tor Vergata.)
    Abstract: In the healthcare sector, Adverse Selection (AS), Moral Hazard (MH) and Supply Induced Demand (SID) are three very important phenomena that affect patients' behaviour. Despite there exists a vast theoretical and empirical literature on these phenomena, so far, no contribution has been able to approach them jointly. This is mostly due to the difficulty to model the joint determinants of health service utilisation and health insurance choice by means of a tractable structural simultaneous equation model. In this paper, we provide a solution to this problem and estimate a simultaneous four equation structural model with four latent variables, where the first two equations are meant to deal with the adverse selection issue, while the third and fourth equation deal with moral hazard and SID issues. A closed form solution for the likelihood function - which guarantees an exact solution - is maximised by the means of FIML, using a large cross-sectional dataset from the Italian healthcare system. Empirical analysis has confirmed the theoretical predictions of our structural model. In particular, we find evidence of AS in the choice of private insurance and SID, but do not find MH behaviour on the patient side. These results are extremely important from a health policy perspective, given the existing debate on the development of a second pillar in the financing of the healthcare system in Italy and Europe.
    Keywords: Quadrivariate probit, FIML, Supply induced demand, Moral hazard, Adverse selection, Health insurance.
    JEL: I13 I11 D82 C35
    Date: 2016–06–28
  11. By: Foley-Fisher, Nathan; Narajabad, Borghan N.; Verani, Stephane
    Abstract: The existing literature implicitly or explicitly assumes that securities lenders primarily respond to demand from borrowers and reinvest their cash collateral through short-term markets. Using a new dataset that matches every U.S. life insurer’s bond portfolio, as well as their lending and reinvestment decisions, to the universe of securities lending transactions, we offer compelling evidence for an alternative strategy, in which securities lending programs are used to finance a portfolio of long-dated assets. We discuss how the liquidity and maturity mismatch associated with using securities lending as a source of wholesale funding could potentially impair the functioning of the securities market.
    Keywords: Securities lending ; Wholesale funding ; Life insurers ; Market liquidity
    JEL: G11 G22 G23
    Date: 2016–05

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