nep-ias New Economics Papers
on Insurance Economics
Issue of 2016‒12‒18
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Improving the Quality of Choices in Health Insurance Markets By Jason Abaluck; Jonathan Gruber
  2. Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People get it Right? By Nathan Kettlewell
  3. Alternative Strategies to Manage Weather Risk in Perennial Fruit Crop Production By Ho, Shuay-Tsyr; Ifft, Jennifer E.; Rickard, Bradley J.; Turvey, Calum G.
  4. Year 2 Demonstration Impacts of Using Medicaid Data to Directly Certify Students for Free School Meals: Final Evaluation Report (Summary) By Lara Hulsey; Joshua Leftin; Anne Gordon; Claire Smither Wulsin; Nicholas Redel; Allen Schirm; Nicholas Beyler; Sheila Heaviside; Brian Estes; Carole Trippe
  5. Medicaid Managed Care and Working-Age Beneficiaries with Disabilities and Chronic Illnesses By Henry T. Ireys; Craig Thornton; Hunter McKay
  6. Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data By Mercedes Ayuso; Montserrat Guillén; Jens Perch Nielsen
  7. Utilisation and Selection in an Ancillaries Health Insurance Market By Nathan Kettlewell
  8. Does Federal Crop Insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey By Ifft, Jennifer; Kuethe, Todd; Morehart, Mitch
  9. Acute admissions to a community hospital: a descriptive cost study By Lappegard, Øystein; Hagen, Terje P.; Hjortdahl, Per
  10. Identifying Discretion of Municipalities to Undertake Eligibility Assessments for Japan’s Long-Term Care Insurance Program By Nakazawa, Kasuyoshi
  11. The hierarchical generalized linear model and the bootstrap estimator of the error of prediction of loss reserves in a non-life insurance company By Alicja Wolny-Dominiak

  1. By: Jason Abaluck; Jonathan Gruber
    Abstract: Insurance product choice is a central feature of health insurance markets in the United States, yet there is ongoing concern over whether consumers choose appropriately in such markets – and little evidence on solutions to any choice inconsistencies. This paper addresses these omissions from the literature using novel data and a series of policy interventions across school districts in the state of Oregon. Using data on enrollment and medical claims for school district employees, we first document large choice inconsistencies, with the typical employee foregoing savings of more than $600 in their insurance plan choice. We then consider three types of interventions designed to improve choice quality. We first show that interventions to promote more active choice are unlikely to improve choice quality based on existing patterns of plan switching. We then implement a randomized trial of decision support software to illustrate that it has little impact on plan choices, largely because of consumer avoidance of the recommendations. Finally, we show that restricting the choice set size facing individuals does significantly reduce their foregone saving and total costs. This is not because individuals choose worse with larger choice sets, but rather because larger choice sets feature worse choices on average that are not offset by individual re-optimization.
    JEL: I11 I13
    Date: 2016–12
  2. By: Nathan Kettlewell (School of Economics, UNSW Business School, UNSW)
    Abstract: This paper evaluates health insurance policy selection and how this interacts with product bundling by using a discrete choice experiment closely calibrated to the Australian private health insurance market. The experimental approach overcomes some limitations of revealed preference research in this area. The results indicate that consumers are likely to make choices that violate expected utility theory, use heuristic decision strategies, and over-insure relative to minimising out-of-pocket costs. Decision quality is significantly lower when choosing a bundled hospital/ancillaries health insurance policy (compared to stand-alone ancillaries cover), which is the policy type most consumers purchase in Australia.
    Keywords: health insurance, heuristics, choice consistency, discrete choice experiment, latent class logit
    JEL: I13 D81 D03
    Date: 2016–10
  3. By: Ho, Shuay-Tsyr; Ifft, Jennifer E.; Rickard, Bradley J.; Turvey, Calum G.
    Abstract: Fruit producers in the Eastern United States face a wide range of weather-related risks during the growing season, and many of these events have the capacity to largely impact yields and profitability. This research examines the economic implications associated with responding to these risks for sweet cherry production in three different systems: using high tunnels to protect the crop, purchasing revenue insurance products, and employing weather insurance schemes. The analysis considers a distribution of revenue flows and costs using detailed price, yield, and weather data between 1984 and 2013. Our results show that the high tunnel system generates the largest net return if significant price premiums exist for earlier and larger fruit. Under most conditions, the results also indicate that net returns for the system that uses revenue-based crop insurance exceed those for the system that uses weather insurance products.
    Keywords: Specialty crops, risk management, crop insurance, weather insurance, high tunnels, Crop Production/Industries, Farm Management, Risk and Uncertainty, J43, K37, Q13,
    Date: 2016–11
  4. By: Lara Hulsey; Joshua Leftin; Anne Gordon; Claire Smither Wulsin; Nicholas Redel; Allen Schirm; Nicholas Beyler; Sheila Heaviside; Brian Estes; Carole Trippe
    Abstract: This report focuses on the experiences of States and districts conducting DC-M during School Year (SY) 2013-2014, the second year of the demonstration.
    Keywords: medicaid data, school meals
    JEL: I0 I1
  5. By: Henry T. Ireys; Craig Thornton; Hunter McKay
    Abstract: Even after a decade of study, there are still many questions about how working-age adults with disabilities or chronic illnesses are faring in Medicaid managed care.
    Keywords: Medicaid, Managed Care, Working-age beneficiaries, Disabilities, Chronic Illness
    JEL: I J
  6. By: Mercedes Ayuso (Riskcenter, Universitat de Barcelona); Montserrat Guillén (Riskcenter, Universitat de Barcelona); Jens Perch Nielsen (Cass Business School, City University London)
    Abstract: We show how data collected from a GPS device can be incorporated in motor insurance ratemaking. The calculation of premium rates based upon driver behaviour represents an opportunity for the insurance sector. Our approach is based on count data regression models for frequency, where exposure is driven by the distance travelled and additional parameters that capture characteristics of automobile usage and which may affect claiming behaviour. We propose implementing a classical frequency model that is updated with telemetrics information. We illustrate the method using real data from usage-based insurance policies. Results show that not only the distance travelled by the driver, but also driver habits, significantly influence the expected number of accidents and, hence, the cost of insurance coverage. Telemetry should facilitate the inclusion within insurance pricing of those factors that traffic authorities identify as being associated with risky drivers, including, for example, traffic violations.
    Keywords: tariff, premium calculation, pay-as-you-drive insurance, count data models
    Date: 2016–12
  7. By: Nathan Kettlewell (School of Economics, UNSW Business School, UNSW)
    Abstract: I study two important aspects of the Australian private ancillaries health insurance (PAHI) market. First, I estimate the effect of PAHI on utilisation of various health services using instrumental variable methods to identify causal effects. Next I test for the presence and direction of selection effects by identifying variables not used in pricing that influence both the insurance and utilisation decision. PAHI covers a wide range of out-of-hospital health services, including many discretionary and preventative services. The most quantitatively important are dental, optometry, physiotherapy and chiropractic. I find that PAHI does increase utilisation of health services, particularly the probability of visiting a dentist, physiotherapist, chiropractor, osteopath or acupuncturist. I find evidence of selection effects in the sense that a number of different variables can predict a person's propensity to insure as well as their propensity to utilise health services. The variables that I identify generally result in adverse selection to insurers for higher frequency health services, although selection bias is more heterogeneous for lower frequency services. There is little evidence of self-selection based on the joint probability of different health services, which indicates that diversified policy menus are a possible strategy for addressing adverse selection in the PAHI market.
    Keywords: health insurance, moral hazard, adverse selection, favourable selection
    JEL: I13 D82
    Date: 2016–10
  8. By: Ifft, Jennifer; Kuethe, Todd; Morehart, Mitch
    Abstract: Purpose – The paper considers how the Federal crop insurance program influences farm debt use, one of the key financial decisions made by farm operators. Design/methodology/approach – Using data from the nationally-representative Agricultural Resource Management Survey, the paper implements a propensity score matching model of the impact of Federal crop insurance participation on various measures of farm business debt use. To account for the simultaneity of financial decisions, the paper further tests this relationship using a seemingly unrelated regression model. Findings – Federal crop insurance participation is associated with an increase in use of short term farm debt, but not long term debt, consistent with risk balancing behavior and current trends in the farm sector. Research limitations/implications –In addition to risk balancing, the results are also consistent with credit constraints or lender preferences. The paper cannot fully establish causality between crop insurance participation and short term debt levels. Future research should address these limitations. Practical implications – Agricultural lending standards are generally conservative and the farm sector as a whole currently has historically low leverage, which implies that an increase in debt use may not be a threat to the financial health of the farm sector. Social implications – The results indicate that the reduction in total risk facing the farm sector is significantly less than the decline in risk provided by Federal crop insurance, which is an important consideration for policymakers. Originality/value – This is the first paper to use an econometric model to analyse the relationship between federal crop insurance and farm debt use decisions. This paper can inform future research on the Federal crop insurance program and farm financial decisions.
    Keywords: Agricultural finance, Crop insurance, Farm debt, Agricultural Resource Management Survey, Agricultural Finance, Farm Management,
    Date: 2015–01
  9. By: Lappegard, Øystein (Vestre Viken Hospital Trust); Hagen, Terje P. (Department of Health Management and Health Economics); Hjortdahl, Per (Department of General Practice)
    Abstract: Introduction: In several countries, health-care providers are searching for alternatives to hospitalization. In recent years, a practice has been established in Hallingdal, a rural region in Norway, in which patients with certain acute somatic illnesses are admitted to Hallingdal Sjukestugu (HSS), a community hospital 150 km from the nearest general hospital, Ringerike Sykehus (RS). A randomized, controlled study was carried out to compare health consequences, patient-perceived quality and health-care costs between patients acutely admitted to HSS and to RS. This paper discusses the topic of health-care costs. Methods: Patients intended for acute admission to HSS, as an alternative to hospitalization, were included in the study. Eligible patients were randomized to two groups; admitted to HSS (n = 33), and admitted to RS (n = 27). Costs were compared between the two groups at discharge and for the 12-month follow-up. Results: The cost of the inpatient stay at HSS was significantly lower than the cost at RS, which is explained by lower transport costs (p
    Keywords: health economy; rural health care systems; patient admission; emergency health-care services; general practitioners; community hospitals
    JEL: H42 I18
    Date: 2016–12–06
  10. By: Nakazawa, Kasuyoshi
    Abstract: Eligibility assessments play an important role in Japan’s long-term care insurance program and have been designed so that municipalities do not have discretion in their working. However, there are doubts about eligibility assessments based on the municipal fiscal situation. This study empirically identifies the discretion of municipalities to undertake eligibility assessments employing the idea of opportunistic municipal behavior at amalgamation. Amalgamation offers municipalities an incentive to free ride (e.g., public debt accumulation) when they can subrogate the load to a new municipality after amalgamation. If so, pre-merger municipalities might increase the eligibility ratio before amalgamation. Difference-in-difference regression confirms a free-rider effect of pre-merger municipalities in the eligibility assessments for long-term care by Japanese municipalities. Smaller pre-merger municipalities increase the eligibility ratio immediately before amalgamation. These results mean that the Japanese long-term care insurance system is not managed in accordance with the institutional design.
    Keywords: Long-term care insurance; Eligibility assessment; Municipal amalgamation; Free-rider behavior; Difference-in-difference
    JEL: H51 H73 H75 I13 I18 R5 R51
    Date: 2016–12–13
  11. By: Alicja Wolny-Dominiak
    Abstract: This paper presents the hierarchical generalized linear model (HGLM) for loss reserving in a non-life insurance company. Because in this case the error of prediction is expressed by a complex analytical formula, the error bootstrap estimator is proposed instead. Moreover, the bootstrap procedure is used to obtain full information about the error by applying quantiles of the absolute prediction error. The full R code is available on the Github serveHGLM.
    Date: 2016–12

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