nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒07‒16
ten papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Economics, Neuroeconomics, and the Problem of Identity By Wagner, Kathryn L.
  2. Work Incentives of Medicaid Beneficiaries and The Role of Asset Testing By Pashchenko, Svetlana; Porapakkarm, Ponpoje
  3. Updating mechanism for lifelong insurance contracts subject to medical inflation By Michel Denuit; Jan Dhaene; Hamza Hanbali; Nathalie Lucas; Julien Trufin
  4. Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment By Huck, Steffen; Lünser, Gabriele; Spitzer, Florian; Tyran, Jean-Robert
  5. Lifetime Consequences of Early and Midlife Access to Health Insurance: A Review By Étienne Gaudette; Gwyn C. Pauley; Gwyn C. Pauley
  6. Removing Disability Insurance Coverage: The Effects on Work Incentive and Occupation Choice By Atsuko Tanaka; Ha Nguyen; Hsuan-Chih (Luke) Lin
  7. Utility Indifference Pricing of Insurance Catastrophe Derivatives By Andreas Eichler; Gunther Leobacher; Michaela Sz\"olgyenyi
  8. Strengthening insurance partnerships in the face of climate change – insights from an agent-based model of flood insurance in the UK By Florence Crick; Katie Jenkins; Swenja Surminski
  9. Health insurance coverage and firm performance: Evidence using firm level data from Vietnam By Hiroyuki Yamada; Tien Manh Vu
  10. Doing More When You're Running LATE: Applying Marginal Treatment Effect Methods to Examine Treatment Effect Heterogeneity in Experiments for the Young and Privately Insured? By Amanda E. Kowalski

  1. By: Wagner, Kathryn L. (Department of Economics Marquette University)
    Abstract: Medicaid reimburses healthcare providers for services at a lower rate than any other type of insurance coverage. To account for the burden of treating Medicaid patients, providers claim that they must cost-shift by raising the rates of individuals covered by private insurance. Previous investigations of cost-shifting has produced mixed results. In this paper, I exploit a disabled Medicaid expansion where crowd-out was complete to investigate cost-shifting. I find that hospitals reduce the charge rates of the privately insured. Given that Medicaid is expanding in several states under the Affordable Care Act, these results may alleviate cost-shifting concerns of the reform
    JEL: I11 I13
    Date: 2016–06
  2. By: Pashchenko, Svetlana; Porapakkarm, Ponpoje
    Abstract: Should asset testing be used in means-tested programs? These programs target low-income people, but low income can result not only from low productivity but also from low labor supply. We aim to show that in the asymmetric information environment, there is a positive role for asset testing. We focus on Medicaid, one of the largest means-tested programs in the US, and we ask two questions: 1) Does Medicaid distort work incentives? 2) Can asset testing improve the insurance-incentives trade-off of Medicaid? Our tool is a general equilibrium model with heterogeneous agents that matches many important features of the data. We find that 23% of Medicaid enrollees do not work in order to be eligible. These distortions are costly: if individuals' productivity was observable and could be used to determine Medicaid eligibility, this results in substantial ex-ante welfare gains. When productivity is unobservable, asset testing is effective in eliminating labor supply distortions, but to minimize saving distortions, asset limits should be different for workers and non-workers. This work-dependent asset testing can produce welfare gains close to the case of observable productivity.
    Keywords: health insurance, Medicaid, labor supply, asset testing, general equilibrium, life-cycle models
    JEL: D52 D91 E21 H53 I13 I18
    Date: 2016–07–07
  3. By: Michel Denuit; Jan Dhaene; Hamza Hanbali; Nathalie Lucas; Julien Trufin
    Abstract: This paper proposes a practical way for ex-post indexing of level premiums in lifelong medical insurance contracts, in order to take into account observed medical inflation. We show that ex-post indexing can be achieved by considering only premiums, without explicit reference to reserves. This appears to be relevant in practice as reserving mechanisms may not be transparent to policyholders and as some insurers do not compute contract-specific reserves, managing the whole portfolio in a collective way. The present study originates from a proposal for indexing lifelong medical insurance level premiums in Belgium. As an application, we study the impact of various indexing mechanisms on a typical medical insurance portfolio on the Belgian market.
    Keywords: health insurance, reserving, inflation, premium update, solvency evaluation
    Date: 2016
  4. By: Huck, Steffen; Lünser, Gabriele; Spitzer, Florian; Tyran, Jean-Robert
    Abstract: In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians' market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.
    Keywords: Credence good,Physician,Overtreatment,Competition,Insurance
    JEL: C91 I11 I13
    Date: 2016
  5. By: Étienne Gaudette (University of Southern California); Gwyn C. Pauley (University of Southern California); Gwyn C. Pauley (University of Southern California)
    Abstract: This article reviews the literature on how health insurance affects health and economic outcomes in the United States prior to automatic Medicare eligibility at age 65, with the aim of providing a snapshot of the breadth of the existing evidence. A targeted approach was used to identify and review experimental or quasi-experimental articles deemed most likely to identify the causal impact of health insurance. Results were systematically reviewed by outcome category–ranging from mental health to education—and population of interest—ranging from prenatal to preretired. The effects of health insurance on economic outcomes remain inconclusive despite being well-studied, while evidence on the relationship between health insurance and several aspects of health has strengthened over the last decade.
    Date: 2016–03
  6. By: Atsuko Tanaka (Department of Economics, University of Calgary); Ha Nguyen (Department of Economics, University of Calgary); Hsuan-Chih (Luke) Lin (Institute of Economics, Academia Sinica, Taipei, Taiwan)
    Abstract: This paper studies how removing disability insurance coverage affects workers’work incentive and occupation choice. To do so, we exploit the 1997 Canadian Pension Plan (CPP) disability program reform, which required longer work experience for individuals to be eligible for disability insurance. The empirical strategy includes difference-in-difference and tripledifference estimations. The results show that the reform significantly increased work incentive for male individuals with a long non-employment spell. However, the rise in work incentive increased only unemployment, not employment. We also find that the reform barely affected the distribution of employment across occupation.
    Date: 2016–07
  7. By: Andreas Eichler; Gunther Leobacher; Michaela Sz\"olgyenyi
    Abstract: We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we price a catastrophe derivative by the method of utility indifference pricing. The associated stochastic optimization problem is treated by techniques for piecewise deterministic Markov processes. A numerical study illustrates our results.
    Date: 2016–07
  8. By: Florence Crick; Katie Jenkins; Swenja Surminski
    Abstract: Multisectoral partnerships are increasingly being mentioned as a mechanism to deliver and improve disaster risk management. Yet, partnerships are not a panacea and more research is required to understand the role that they can play in disaster risk management and particularly in disaster risk reduction. In this paper, we investigate how partnerships can incentivise flood risk reduction by focusing on the UK public-private partnership on flood insurance. Developing the right flood insurance arrangements to incentivise flood risk reduction and adaptation to climate change is a key challenge. While expectations of the insurance industry have traditionally been high when it comes to flood risk management, the insurance industry alone will not provide the solution to the management of rising flood risks due to climate change and socio-economic development. In addition, faced with these risks insurance partnerships can no longer afford to focus only on the risk transfer function. The case of flood insurance in the UK illustrates these challenges: even national government and industry together cannot fully address these risks and other actors need to be involved to create strong incentives for risk reduction. Our paper investigates this for the specific issue of surface water flood risk in London. Using an agent-based model we investigate how other agents could strengthen the insurance partnership by maintaining affordable insurance premiums and reducing flood risk and test this for the new Flood Re scheme. Our findings are relevant for wider discussions on the potential of insurance schemes to incentivise flood risk management and climate adaptation not just in the UK but also internationally.
    Date: 2016–06
  9. By: Hiroyuki Yamada (Faculty of Economics, Keio University); Tien Manh Vu (International Research Fellow of the Japan Society for the Promotion of Science, Osaka School of International Public Policy, Osaka University)
    Abstract: In literature, there is limited direct evidence regarding the effect of health insurance coverage on firm performance and worker productivity. In this paper, we study the impacts of health insurance on medium and large-scale domestic private firms' performance and productivity in Vietnam, using a large firm level census dataset. We deploy propensity-score matching methods, and find statistically positive health insurance effects on both aggregate profit and profit per worker for both complying and non-complying medium and large-scale firms. Given the full sample results, we recommend an improvement in government monitoring as one of the important policy options to induce medium and large-scale firms to contribute to health insurance premiums for their employees.
    Keywords: Health insurance, Medium and large-scale firms, Propensity-score matching, Vietnam
    JEL: D22 I13 I15 I18 O25
    Date: 2016–07
  10. By: Amanda E. Kowalski (Cowles Foundation, Yale University)
    Abstract: I examine treatment effect heterogeneity within an experiment to inform external validity. The local average treatment effect (LATE) gives an average treatment effect for compliers. I bound and estimate average treatment effects for always takers and never takers by extending marginal treatment effect methods. I use these methods to separate selection from treatment effect heterogeneity, generalizing the comparison of OLS to LATE. Applying these methods to the Oregon Health Insurance Experiment, I find that the treatment effect of insurance on emergency room utilization decreases from always takers to compliers to never takers. Previous utilization explains a large share of the treatment effect heterogeneity. Extrapolations show that other expansions could increase or decrease utilization.
    Keywords: Compliers, Dierence-in-dierence test, Sample local average treatment eect (SLATE), Marginal untreated outcome test, Massachusetts health reform, Program evaluation, Selection
    JEL: C1 C9 H4 I13
    Date: 2016–06

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