nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒01‒29
four papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Expanding Universal Health Coverage in The Presence of Informality in Indonesia: Challenges and Policy Implications By Teguh Dartanto; Jahen Fachrul Rezki; Usman; Chairina Hanum Siregar; Hamdan Bintara; Wahyu Pramono
  2. The Effect of State Medicaid Expansions on Prescription Drug Use: Evidence from the Affordable Care Act By Ausmita Ghosh; Kosali Simon; Benjamin D. Sommers
  3. An Optimal Multi-layer Reinsurance Policy under Conditional Tail Expectation By Amir T. Payandeh Najafabadi; Ali Panahi Bazaz
  4. An Optimal Combination of Proportional and Stop-Loss Reinsurance Contracts From Insurer's and Reinsurer's Viewpoints By Amir T. Payandeh-Najafabadi; Ali Panahi-Bazaz

  1. By: Teguh Dartanto; Jahen Fachrul Rezki; Usman; Chairina Hanum Siregar; Hamdan Bintara; Wahyu Pramono (LPEM, Faculty of Economics and Business, University of Indonesia)
    Abstract: The implementation of national health insurance in Indonesia since 2014 has brought out the missing middle problem in which the non-poor informal sectors have remained uncovered from the health care due to self-enrollment. Therefore, achieving UHC in Indonesia will take a long process, especially when the proportion of non-poor informal sector in total population is large enough. This study aims at examining three main issues that may have become obstacles for informal sectors to join the program: (1) observing supply side readiness, (2) examining affordable premium and willingness to pay of informal sectors, and (3) exploring why informal workers have been reluctant to join the national health insurance. This study reports that around 53.7% of Sub National Government (SNG) faced a shortage of health facilities of 59,387 beds, though in some regions had surplus of beds (per 1000 people). This study also finds that a single premium for all over Indonesia is unfair and unaffordable for some people living in eastern part of Indonesia. Observing 400 households working in informal sectors and applying Triple Bounded Dichotomies Choice Contingent Valuation Method (TCCVM) to observe the Willingness to Pay (WTP), this study finds that around 70% of respondents had the desire to join the health insurance, but their willingness to pay of the premium was lower than the current rate. The current premium seemed less affordable for informal sectors; thus, this created a barrier for them to enthusiastically join the new health insurance program. Our econometric estimations confirm that availability of hospital, insurance literacy, experiences of inpatients and outpatients, number of family member, sex of head of household, access to internet and household income are highly correlated to the likelihood of informal sectors joining the national health insurance (NHI). Moreover, in contrast with findings from many other studies, the insurance premium is surprisingly not the main reason for informal sectors to join the program; rather, the main obstacle is the lack of insurance literacy. Consequently, the necessary condition for mandating informal sectors to join the program is an improvement of insurance literacy, while the sufficient conditions are supply-side readiness and affordable premium. This study calls for a massive campaign to educate the public about the importance of health insurance.
    Keywords: Returns to Scale
    JEL: H40
    Date: 2015–11
  2. By: Ausmita Ghosh; Kosali Simon; Benjamin D. Sommers
    Abstract: This study provides a national analysis of how the 2014 Affordable Care Act (ACA) Medicaid expansions have affected aggregate prescription drug utilization. Given the prominent role of prescription medications in the management of chronic conditions, as well as the high prevalence of unmet health care needs in the population newly eligible for Medicaid, the use of prescription drugs represents an important measure of the ACA’s policy impact. Prescription drug utilization also provides insights into whether insurance expansions have increased access to physicians, since obtaining these medications requires interaction with a health care provider. We use 2013-2015 data from a large, nationally representative, all-payer pharmacy transactions database to examine effects on overall prescription medication utilization as well as effects within specific drug classes. Using a differences-in-differences (DD) regression framework, we find that within the first 15 months of expansion, Medicaid-paid prescription utilization increased by 19 percent in expansion states relative to states that did not expand; this works out to approximately seven additional prescriptions per year per newly enrolled beneficiary. The greatest increases in Medicaid prescriptions occurred among diabetes medications, which increased by 24 percent. Other classes of medication that experienced relatively large increases include contraceptives (22 percent) and cardiovascular drugs (21 percent), while several classes more consistent with acute conditions such as allergies and infections experienced significantly smaller increases. As a placebo test, we examine Medicare-paid prescriptions and find no evidence of a post-ACA effect. Both expansion and non-expansion states followed statistically similar trends in Medicaid prescription utilization in the pre-policy era, offering support for our DD approach. We did not observe reductions in uninsured or privately insured prescriptions, suggesting that increased utilization under Medicaid did not substitute for other forms of payment. Within expansion states, increases in prescription drug utilization were larger in geographical areas with higher uninsured rates prior to the ACA. Finally, we find some suggestive evidence that increases in prescription drug utilization were greater in areas with larger Hispanic and black populations.
    JEL: I1 I13
    Date: 2017–01
  3. By: Amir T. Payandeh Najafabadi; Ali Panahi Bazaz
    Abstract: A usual reinsurance policy for insurance companies admits one or two layers of the payment deductions. Under optimal criterion of minimizing the conditional tail expectation (CTE) risk measure of the insurer's total risk, this article generalized an optimal stop-loss reinsurance policy to an optimal multi-layer reinsurance policy. To achieve such optimal multi-layer reinsurance policy, this article starts from a given optimal stop-loss reinsurance policy $f(\cdot).$ In the first step, it cuts down an interval $[0,\infty)$ into two intervals $[0,M_1)$ and $[M_1,\infty).$ By shifting the origin of Cartesian coordinate system to $(M_{1},f(M_{1})),$ and showing that under the $CTE$ criteria $f(x)I_{[0, M_1)}(x)+(f(M_1)+f(x-M_1))I_{[M_1,\infty)}(x)$ is, again, an optimal policy. This extension procedure can be repeated to obtain an optimal k-layer reinsurance policy. Finally, unknown parameters of the optimal multi-layer reinsurance policy are estimated using some additional appropriate criteria. Three simulation-based studies have been conducted to demonstrate: ({\bf 1}) The practical applications of our findings and ({\bf 2}) How one may employ other appropriate criteria to estimate unknown parameters of an optimal multi-layer contract. The multi-layer reinsurance policy, similar to the original stop-loss reinsurance policy is optimal, in a same sense. Moreover it has some other optimal criteria which the original policy does not have. Under optimal criterion of minimizing general translative and monotone risk measure $\rho(\cdot)$ of {\it either} the insurer's total risk {\it or} both the insurer's and the reinsurer's total risks, this article (in its discussion) also extends a given optimal reinsurance contract $f(\cdot)$ to a multi-layer and continuous reinsurance policy.
    Date: 2017–01
  4. By: Amir T. Payandeh-Najafabadi; Ali Panahi-Bazaz
    Abstract: A reinsurance contract should address the conflicting interests of the insurer and reinsurer. Most of existing optimal reinsurance contracts only considers the interests of one party. This article combines the proportional and stop-loss reinsurance contracts and introduces a new reinsurance contract called proportional-stop-loss reinsurance. Using the balanced loss function, unknown parameters of the proportional-stop-loss reinsurance have been estimated such that the expected surplus for both the insurer and reinsurer are maximized. Several characteristics for the new reinsurance are provided.
    Date: 2017–01

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