nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒09‒04
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Accounting for Low Take-up Rates and High Rejection Rates in the U.S. Long-Term Care Insurance Market By Tatyana Koreshkova; Karen Kopecky; R. Anton Braun
  2. Estimating the Value of Public Insurance Using Complementary Private Insurance By Marika Cabral; Mark R. Cullen
  3. From participation to repurchase: Low income households and micro-insurance By Renuka Sane; Susan Thomas
  4. Studying Farm Insurance Demand under Financial Constraints By Lajos Barath; Raushan Bokusheva; Imre Ferto
  5. The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation By Johannes F. Schmieder; Till von Wachter
  6. Insurance-markets Equilibrium with Sequential Non-convex Straight-time and Over-time Labor Supply By Vasilev, Aleksandar
  7. Meaningful Use of Electronic Health Records and Medicare Expenditures: Evidence from a Panel Data Analysis of U.S. Health Care Markets, 2010-2013 By Eric J. Lammers; Catherine G. McLaughlin
  8. Banks and Sovereigns: A Model of Mutual Contagion By Gruber, Alexander; Kogler, Michael
  9. Look Before You Leap: Risk Adjustment for Managed Care Plans Covering Long-Term Services and Supports By Debra Lipson
  10. Pension reforms in Chile and social security principles, 1981–2015 By Mesa-Lago, Carmelo; Bertranou, Fabio
  11. Developing Capitation Rates for Medicaid Managed Long-Term Services and Supports Programs: State Considerations By Debra Lipson; Maria Dominiak; Michelle Herman Soper; Brianna Ensslin

  1. By: Tatyana Koreshkova (Concordia University); Karen Kopecky (Federal Reserve Bank of Atlanta); R. Anton Braun (Federal Reserve Bank of Atlanta)
    Abstract: A protracted stay in a nursing home towards the end of life is one of the biggest risks faced by individuals. The annual cost of a nursing home stay in 2010 was $84,000. At age of 50, the probability of a nursing home stay ranges from 50 to 59 percent and among those who have a stay, 20 percent spend more 3 years. Yet, only about 10 percent of U.S. retirees purchase private long-term-care (LTC) insurance. Previous research has emphasized that Medicaid crowds out the demand for private LTC insurance. However, rejection rates are also high. Nearly 40 percent of the potential pool of purchasers would be rejected if they applied for private LTC insurance using current screening guidelines. We explore the possibility that high rejection rates are due to adverse selection. We propose a model which features agents who have private information about their risk exposure, a private LTC insurer and a government who provides public insurance (Medicaid). Our model accounts for low coverage rates and high rejection rates of private LTC insurance and is used to consider welfare-enhancing reforms of private and public provision of LTC insurance.
    Date: 2016
  2. By: Marika Cabral; Mark R. Cullen
    Abstract: The welfare associated with public insurance is often difficult to quantify. Relative to private insurance, a fundamental difficulty is that public insurance is typically compulsory, so the demand for coverage is unobserved and thus cannot be used to analyze welfare. However, in many public insurance settings, individuals can purchase private insurance to supplement their public coverage. In this paper, we outline an approach to use data and variation from private complementary insurance to quantify welfare associated with several counterfactuals related to compulsory public insurance. Using administrative data from one large firm on employee long-term disability insurance, we then apply this approach empirically to quantify the value of disability insurance among this population. We use premium variation among the employer-provided disability policies to quantify the surplus that would be generated by increasing the replacement rate of disability insurance for our sample population---a counterfactual that is within the set of insurance contracts observed in this setting. In addition, we estimate a lower bound on the surplus generated by public disability insurance in this context. Our findings suggest that public disability insurance generates substantial surplus for this population, and there may be gains to increasing the generosity of coverage in this context.
    JEL: H0 H53 I38 J68
    Date: 2016–08
  3. By: Renuka Sane (Indian Statistical Institute, New Delhi); Susan Thomas (Indira Gandhi Institute of Development Research)
    Abstract: The paper asks what drives insurance coverage in low income households by analysing repurchase patterns of micro-insurance policies. We use data on customers of a financial services provider from three states in India and find that the probability of repurchase is highest in the first two months after the contract expires, and steadily declines after. This suggests a window of opportunity for financial firms and governments to target customers to ensure continuous insurance purchase. Non-membership of micro-finance groups and poor rainfall in the month of expiry affect the chance of repurchase adversely. Customers who take longer to repurchase tend to increase the amount of insurance cover.
    Keywords: micro-insurance; credit; repurchase; India
    JEL: D14 G21 G22
    Date: 2016–07
  4. By: Lajos Barath (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Raushan Bokusheva (ETH Zürich, Agricultural Economics Group); Imre Ferto (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: We hypothesize a reciprocal causation between crop insurance use and the economic performance of farms in an environment characterized by imperfect financial markets and farms’ budget constraints. To test our hypothesis, we apply a system of simultaneous equations consisting of economic performance and insurance demand models to the case study of Hungarian cropping farms. In addition, considering that insured farms may have better access to external finance, we seek empirical evidence confirming a potential positive effect of crop insurance on the economic performance of financially constrained farms. Our study results indeed confirm the reciprocal causation hypothesis.
    Keywords: crop insurance demand; farm productivity; financial constraints; farm investment; Hungarian agriculture.
    JEL: G22 L25 Q12 Q14
    Date: 2016–08
  5. By: Johannes F. Schmieder; Till von Wachter
    Abstract: The Great Recession has renewed interest in Unemployment Insurance (UI) programs around the world. At the same time, there have been important advances in both theory and measurement of UI. In this paper, we first use the theory to present a unified treatment of the welfare effects of UI benefit levels and durations and derive convenient expressions of the disincentive effect of UI. We then discuss recent estimates of the effect of UI benefit levels and durations on labor supply based, to a large extent, on high-quality research designs and administrative data. We relate these estimates directly to the sufficient statistics identified by the model. We also discuss several active and open areas of research on UI. These include the effect of UI on aggregate labor market outcomes, the effect of UI on job outcomes, the long-term effects of UI, the effects of UI under non-standard behavioral assumptions, and the interactions of UI with other programs. While our review of the new experimental estimates confirms the range of negative labor supply effects of the previous literature, we show based on the model that these estimates are imperfect proxies for the actual disincentive effects. We also isolate several important areas in need for additional research, including estimates of the social value of UI as well as the effects of UI in less-developed countries.
    JEL: H21 H53 J64 J65 J68
    Date: 2016–08
  6. By: Vasilev, Aleksandar
    Abstract: This note describes the lottery- and insurance-market equilibrium in an economy with non-convex straight-time and overtime employment. In contrast to Hansen and Sargent (1988), the overtime-decision is a sequential one. This requires two separate insurance market to operate, one for straight-time work, and one for overtime. In addi- tion, given that the labor choice for regular and overtime hours is made in succession, the insurance market for overtime needs to open once the insurance market has closed. This segmentation and sequentiality of insurance markets operation is a new result in the literature and a direct consequence of the sequential nature of the overtime labor decision.
    Keywords: indivisible labor,straight-time,overtime,sequential lotteries,insurance
    JEL: E1 J2
    Date: 2016
  7. By: Eric J. Lammers; Catherine G. McLaughlin
    Abstract: Health care markets that had steeper increases in EHR penetration during 2010–2013 also had steeper decreases in total Medicare and acute care expenditures per beneficiary.
    Keywords: electronic health record, EHR, health IT, Meaningful use, Medicare expenditures
    JEL: I
  8. By: Gruber, Alexander; Kogler, Michael
    Abstract: The recent crisis has revealed that bank and sovereign risks are inherently intertwined. This paper develops a model of the bank-sovereign nexus to identify the main spillovers and to study the implications of guarantees and capital regulation. We show how banks’ asset risk may trigger a sovereign default through taxation and deposit insurance. The latter can be contagious because of its cost or stabilizing by avoiding liquidation losses. Since sovereign risks receive preferential regulatory treatment, banks purchase government bonds. This creates the opportunity for adverse feedback loops such that a sovereign default is the very reason for bank failure.
    Keywords: Sovereign Debt Crisis, Financial Risk, Contagion, Deposit Insurance
    JEL: G11 G21 G28 H63
    Date: 2016–08
  9. By: Debra Lipson
    Abstract: This brief reviews risk-adjustment strategies in Medicaid managed long-term services and supports programs that account for enrollees’ functional and cognitive status to improve the accuracy of capitation rates, as well as technical challenges and state program features that may affect the need to use risk adjustment.
    Keywords: MLTSS, Managed Long-Term Services and Supports, Risk adjustment
    JEL: I
  10. By: Mesa-Lago, Carmelo; Bertranou, Fabio
    Abstract: Chile pioneered in Latin America not only the introduction of social security pensions, but the structural reform that privatized them and a process of “re-reform” implementing key improvements. A Presidential Commission in Chile, appointed in 2014 to evaluate reform progress and remaining problems in the pension system, released its report in September 2015. In light of the Commission’s findings, the article assesses Chile’s compliance with International Labour Organization social security guiding principles: social dialogue, universal coverage, equal treatment, social solidarity, gender equity, adequacy of benefits, efficiency and affordable administrative cost, social participation in management, state role and supervision, and financial sustainability. The exercise follows three stages: the structural reform (1981–2008), the re-reform (2008–2015), and the Presidential Commission proposals (2015).
    Keywords: pension scheme, social security reform, ILO Convention, Chile, pensions
    JEL: H55 J18
    Date: 2015–12
  11. By: Debra Lipson; Maria Dominiak; Michelle Herman Soper; Brianna Ensslin
    Abstract: This brief identifies themes from the experiences of states at the forefront of Medicaid managed long-term services and supports that other states may want to consider as they seek to improve rate-setting and risk-adjustment methods, including efforts that promote services in home- and community-based settings.
    Keywords: Capitation Rates, Medicaid Managed Long-Term Services and Supports, State Considerations
    JEL: I

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