nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒02‒12
twenty-one papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Impact of the Affordable Care Act Young Adult Provision on Childbearing, Marriage, and Tax Filing Behavior: Evidence from Tax Data By Bradley Heim; Ithai Lurie; Kosali I. Simon
  2. A Longitudinal Survey of Unemployment Insurance Recipients in Two Regions in California By Joanne Lee; Karen Needels; Walter Nicholson
  3. The Effect of the Affordable Care Act on the Labor Supply, Savings, and Social Security of Older Americans By Eric French; Hans-Martin von Gaudecker; John Bailey Jones
  4. Late-in-Life Risks and the Under-Insurance Puzzle By Ameriks, John; Briggs, Joseph; Caplin, Andrew; Shapiro, Matthew D.; Tonetti, Christopher
  5. Healthcare Spending and Utilization in Public and Private Medicare By Vilsa Curto; Liran Einav; Amy Finkelstein; Jonathan D. Levin; Jay Bhattacharya
  6. Data Analytics for Non-Life Insurance Pricing By Mario V. Wuthrich; Christoph Buser
  7. The role of public health insurance in protecting against the costs of ill health By Belén Sáenz de Miera Juárez
  8. Price-Linked Subsidies and Health Insurance Markups By Sonia P. Jaffe; Mark Shepard
  9. Comparing Econometric Methods to Empirically Evaluate Job-Search Assistance By Muller, Paul; van der Klaauw, Bas; Heyma, Arjan
  10. Government Commitment and Unemployment Insurance Over the Business Cycle By Pei, Yun; Xie, Zoe
  11. Ranking of Unwarranted Variations in Healthcare Treatments By Moes, Herry; Brekelmans, Ruud; Hamers, Herbert; Hasaart, F.
  12. Basis risk and welfare effect of weather index insurance for smallholders in China By Huo, Ran; Octavio, Ramirez
  13. Optimal Risk Sharing with Limited Liability By Semyon Malamud; Huaxia Rui; Andrew B. Whinston
  14. Mental Health of Small and Medium Enterprise Workers: An Empirical Analysis using Medical Claims Data from Japan Health Insurance Association By Juntaro Yamaoka; Yoshihide Fujioka; Kazufumi Yugami; Jun Suzuki; Yoshimi Adachi
  15. The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule By Kyyrä, Tomi; Pesola, Hanna
  16. The Labor Market Consequences of Receiving Disability Benefits During Childhood By Michael Levere
  17. Firm-Related Risk and Precautionary Saving Response By Fagereng, Andreas; Guiso, Luigi; Pistaferri, Luigi
  18. Market Power, Contracts and Outcomes: The Case of Patients with Long-Term Diseases in the Colombian Health Care System By Juan Esteban Carranza; Álvaro J. Riascos; Natalia Serna
  19. I open a bank account, you pay your mortgage, he/she gets a credit card, we buy health insurance, you invest safely, they… enjoy a bailout. A critical analysis of financial education in Spain By Miren Alonso Álvarez
  20. A Study of the Self-Employment Assistance Program: Helping Unemployed Workers Pursue Self-Employment By Elizabeth Weigensberg; Karen Needels; Alix Gould-Werth; Ankita Patnaik; Joanne Lee
  21. Optimal social insurance and health inequality By Grossmann, Volker; Strulik, Holger

  1. By: Bradley Heim; Ithai Lurie; Kosali I. Simon
    Abstract: We use panel U.S. tax data spanning 2008-2013 to study the impact of the Affordable Care Act (ACA) young adult provision on two important demographic outcomes—childbearing and marriage. The impact on childbearing is theoretically ambiguous, as gaining insurance may increase access to contraceptive services, while also reducing the out-of-pocket costs of childbirth. The impact on marriage is also ambiguous, as marriage rates may decrease when young adults have less need for dependent health insurance through a spouse, but may increase when they are now allowed to stay on their parent’s plans even if they are married. Changes in childbearing and marriage can, in turn, lead to changes in the likelihood of filing a tax return. Since W-2 forms record access to employer-provided fringe benefits, we were able to examine the impact of the coverage expansion by focusing on young adults whose parents have access to benefits. We compare those who are slightly younger than the age threshold to those who are slightly older. Our results suggest that the ACA young adult provision led to a modest decrease in childbearing and marriage rates, though the propensity to file a tax return did not change significantly.
    JEL: I13 J12 J13
    Date: 2017–01
  2. By: Joanne Lee; Karen Needels; Walter Nicholson
    Abstract: This study used longitudinal survey data to investigate how unemployment insurance recipients in California changed their job search strategies and ways of coping with financial hardships during a six- to nine-month period after they started receiving benefits.
    Keywords: unemployment, insurance, California, benefits, longitudinal, survey
    JEL: J
  3. By: Eric French (University College London); Hans-Martin von Gaudecker (Universität Bonn); John Bailey Jones (Federal Reserve Bank of Richmond and University at Albany, SUNY)
    Abstract: This paper assesses the effect of the Affordable Care Act (ACA) on the labor supply of Americans ages 50 and older. Using data from the Health and Retirement Study and the Medical Expenditure Panel Survey, we estimate a dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Importantly, we model the two key channels by which health insurance rates are predicted to change: the Medicaid expansion and the subsidized private exchanges.
    Date: 2016–10
  4. By: Ameriks, John (Vanguard Group, Inc); Briggs, Joseph (Federal Reserve Board); Caplin, Andrew (NYU); Shapiro, Matthew D. (University of MI); Tonetti, Christopher (University of Stanford)
    Abstract: Individuals face significant late-in-life risks, including needing long-term care (LTC). Yet, they hold little long-term care insurance (LTCI). Using both "strategic survey questions," which identify preferences, and stated demand questions, this paper investigates the degree to which a fundamental lack of interest and poor product features determine low LTCI holdings. It estimates a rich set of individual-level preferences and uses a life-cycle model to predict insurance demand, finding that better insurance would be far more widely held than are products in the market. Comparing stated and model-predicted demand shows that flaws in existing products provide a significant, but partial, explanation for this under-insurance puzzle.
    JEL: D14 D91 E21 G22 H31 I13 J14
    Date: 2016–09
  5. By: Vilsa Curto; Liran Einav; Amy Finkelstein; Jonathan D. Levin; Jay Bhattacharya
    Abstract: We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare (TM) in the same county with the same risk score. Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care, with similar reductions for "high value" and "low value" care. Spending differences primarily reflect differences in healthcare utilization; spending per encounter and hospital payments per admission are very similar in MA and TM. Geographic variation in MA spending is about 20 percent higher than in TM, but geographic variation in hospital prices is about 20 percent lower. We present evidence consistent with MA plans encouraging substitution to less expensive care, such as primary rather than specialist care, and outpatient rather than inpatient surgery, and with employing various types of utilization management. Some of the overall spending differences between MA and TM may be driven by selection on unobservables, and we report a range of estimates of this selection effect using mortality outcomes to proxy for selection.
    JEL: H11 H42 H51 I11 I13
    Date: 2017–01
  6. By: Mario V. Wuthrich (RiskLab, ETH Zurich and Swiss Finance Institute); Christoph Buser
    Abstract: These notes aim at giving a broad skill set to the actuarial profession in non-life insurance pricing and data science. We start from the classical world of generalized linear models, generalized additive models and credibility theory. These methods form the basis of the deeper statistical understanding. We then present several machine learning techniques such as regression trees, bagging, random forest, boosting and support vector machines. Finally, we provide methodologies for analyzing telematic car driving data.
    Keywords: non-life insurance pricing, car insurance pricing, generalized linear models, generalized additive models, credibility theory, neural networks, regression trees, CART, bootstrap, bagging, random forest, boosting, support vector machines, telematic data, data science, machine learning, data analytics
    JEL: G22 G28
  7. By: Belén Sáenz de Miera Juárez
    Abstract: In the absence of health insurance, households have to self-insure against the risk of ill health, which may involve the use of mechanisms that have long-term consequences. This study analyses whether Mexican households are able to smooth consumption after severe health shocks, as well as the contribution of public health insurance in the form of social security and, more recently, the Seguro Popular programme. Using data from the Mexican Family Life Survey, a nationally representative longitudinal survey, the results indicate that unexpected health events such as accidents and deterioration in physical capacity are associated with large declines in non-medical consumption. Social security seems to provide protection against both types of shocks, but the endogeneity-corrected estimates indicate that the Seguro Popular programme only protects consumption against accidents. This suggests that income losses associated with disability shocks, for which the programme does not offer protection, are likely larger than medical care expenditures, and poses the question of whether other social security benefits, such as disability insurance, should also be extended to non-beneficiaries.
    Keywords: public insurance, consumption, catastrophic risks, health shocks
    Date: 2017
  8. By: Sonia P. Jaffe; Mark Shepard
    Abstract: Subsidies in many health insurance programs depend on prices set by competing insurers – as prices rise, so do subsidies. We study the economics of these “price-linked” subsidies compared to “fixed” subsidies set independently of market prices. We show that price-linked subsidies weaken price competition, leading to higher markups and subsidy costs for the government. We argue that price-linked subsidies make sense only if (1) there is uncertainty about costs/prices, and (2) optimal subsidies increase as prices rise. We propose two reasons why optimal health insurance subsidies may rise with prices: doing so both insures consumers against cost risk and indirectly links subsidies to market-wide shocks affecting the cost of “charity care” used by the uninsured. We evaluate these tradeoffs empirically using a structural model estimated with data from Massachusetts’ health insurance exchange. Relative to fixed subsidies, price-linking increase prices by up to 5%, and by 5-10% when we simulate markets with fewer insurers. For levels of cost uncertainty that are reasonable in a mature market, we find that the losses from higher prices outweigh the benefits of price-linking.
    JEL: I11 I13 L11
    Date: 2017–01
  9. By: Muller, Paul (Department of Economics, School of Business, Economics and Law, Göteborg University); van der Klaauw, Bas (VU University Amsterdam and Tinbergen Institute); Heyma, Arjan (SEO Economic Research)
    Abstract: We test whether different empirical methods give different results when evaluating job-search assistance programs. Budgetary problems at the Dutch unemployment insurance (UI) administration in March 2010, caused a sharp drop in the availability of these programs. Using administrative data provided by the UI administration, we evaluate the effect of the program using (1) the policy discontinuity as a quasiexperiment, (2) conventional matching methods, and (3) the timing-of-events model. All three methods use the same data to consider the same program in the same setting, and also yield similar results. The program reduces job finding during the first six months after enrollment. At longer durations, the quasi-experimental estimates are not significantly different from zero, while the non-experimental methods show a small negative effect.
    Keywords: empirical policy evaluation; job-search assistance; unemployment duration
    JEL: C14 C31 J64
    Date: 2017–02
  10. By: Pei, Yun; Xie, Zoe
    Abstract: We investigate the role of government commitment to future policies in shaping unemployment insurance (UI) policy in a stochastic general equilibrium model of labor search and matching. Compared with the optimal(Ramsey)policy of a government with commitment, the policy under no commitment characterized by a Markov-perfect equilibrium has higher benefits and leads to higher unemployment rates in the steady state. We also find starkly different policy responses to a productivity shock or changes in unemployment. The differences arise because the Ramsey government can use an ex-ante committed policy to stimulate job search.
    Keywords: Unemployment insurance, Commitment, Markov-perfect equilibrium, Business cycle
    JEL: E61 H21 J64 J65
    Date: 2016–11–03
  11. By: Moes, Herry (Tilburg University, Center For Economic Research); Brekelmans, Ruud (Tilburg University, Center For Economic Research); Hamers, Herbert (Tilburg University, Center For Economic Research); Hasaart, F.
    Abstract: In this paper, we introduce a framework designed to identify and rank possible unwarranted variation of treatments in healthcare. The innovative aspect of this framework is a ranking procedure that aims to identify healthcare institutions where unwarranted variation is most severe, and diagnosis treatment combinations which appear to be the most sensitive to unwarranted variation. By adding a ranking procedure to our framework, we have taken our research a step beyond the existing literature. This ranking procedure is intended to assist health insurance companies in their search for violations, and to help find them more quickly, enabling more effective corrective and preventive actions on behalf of the healthcare institutions concerned.
    Keywords: unwarranted variation; practice variation; upcoding; diagnosis-related group; healthcare data; health insurance
    JEL: L13
    Date: 2017
  12. By: Huo, Ran; Octavio, Ramirez
    Abstract: Recent years have witnessed a proliferation of weather-index insurance (WII) pilot programs in developing countries. However, the uptake of this novel insurance turns to be generally low despite that most WII programs are heavily subsidized by central and local government. Although basis risk is widely referred to as the most serious drawbacks to the effectiveness of index-based insurance, the impact of basis risk on the potential benefits of adopting weather index insurance is rarely documented. This paper designs a weather index contract for cotton in Shandong province and examines impact of two components of basis risk, covariate risk and idiosyncratic risk, separately. The findings of this paper underscores the importance of minimizing covariate risk in designing weather index insurance contracts and sheds lights on the different impacts of basis risk components on potential benefits of WII.
    Keywords: Weather index insurance, basis risk, China, Agricultural Finance,
    Date: 2017–02–08
  13. By: Semyon Malamud (Ecole Polytechnique Federale de Lausanne, Swiss Finance Institute, and Centre for Economic Policy Research (CEPR)); Huaxia Rui (University of Rochester); Andrew B. Whinston (University of Texas at Austin)
    Abstract: We solve the general problem of optimal risk sharing among a finite number of agents with limited liability. We show that the optimal allocation is characterized by endogenously determined ranks assigned to the participating agents and a hierarchical structure of risk sharing, where all agents take on risks only above the agent-specific thresholds determined by their ranks. When all agents have CARA utilities, linear risk sharing is optimal between two adjacent thresholds. We use our general characterization of optimal risk sharing with limited liability to solve the problem of optimal insurance design with multiple insurers. We show that the optimal thresholds, or deductibles, can be efficiently calculated through the fixed point of a contraction mapping. We then use this contraction mapping technique to derive a number of comparative statics results for optimal insurance design and its dependence on microeconomic characteristics.
    Keywords: optimal risk sharing, limited liability, optimal insurance design
    JEL: A10 D86 G22
  14. By: Juntaro Yamaoka (Graduate School of Economics, Kobe University); Yoshihide Fujioka (Graduate School of Economics, Kobe University); Kazufumi Yugami (Graduate School of Economics, Kobe University); Jun Suzuki (Graduate School of Economics, Kobe University); Yoshimi Adachi (Graduate School of Economics, Konan University)
  15. By: Kyyrä, Tomi (VATT, Helsinki); Pesola, Hanna (VATT, Helsinki)
    Abstract: This paper analyzes the effects of unemployment insurance (UI) benefits on unemployment exits and subsequent labor market outcomes. We exploit a piecewise linear relationship between the previous wage and UI benefits in Finland to identify the causal effects of the benefit level by using a regression kink design. According to our findings, higher benefits lengthen nonemployment spells and decrease time spent in part-time unemployment, and thus result in more full-time unemployment. Also the re-employment probability and post-unemployment wage are negatively affected. The results for the duration of the first post-unemployment job are not conclusive, but in total both employment and earnings in the two years following the beginning of the unemployment spell decrease with higher benefits.
    Keywords: unemployment duration, job match quality, regression kink design, unemployment insurance
    JEL: J64 J65
    Date: 2017–01
  16. By: Michael Levere
    Abstract: This paper explores the causal impact of receiving Supplemental Security Income benefits during childhood on labor market earnings and SSI benefit receipt in adulthood.
    Keywords: Disability, Supplemental Security Income, Program Participation, Youth, Employment, Zebley
    JEL: I J
  17. By: Fagereng, Andreas; Guiso, Luigi; Pistaferri, Luigi
    Abstract: We propose a new approach to identify the strength of the precautionary motive and the extent of self-insurance in response to earnings risk based on Euler equation estimates. To address endogeneity problems, we use Norwegian administrative data and instrument consumption and earnings volatility with the variance of firm-specific shocks. The instrument is valid because firms pass some of their productivity shocks onto wages; moreover, for most workers firm shocks are hard to avoid. Our estimates suggest a coefficient of relative prudence of 2, in a very plausible range.
    Keywords: firm shocks; precautionary savings; self-insurance
    Date: 2017–01
  18. By: Juan Esteban Carranza; Álvaro J. Riascos; Natalia Serna
    Abstract: The Colombian health system has two main types of agents: the insurers and the service providers, which interact with each other through bilateral contracts. The types of contracts that these agents can write is restricted to a limited menu established by the regulator. The two most prevalent types of contract in the data are, by far, capitation contracts and fee-for-service contracts, which distribute risk and incentives differentially across both parties. We use a detailed data set of services and payments of all insurers and service providers at the individual user level to study the determinants of contract choice and their effect on health outcomes of a large sample of patients with chronic diseases. We focus on patients who are identical at the type of diagnosis, except for the contract type under which they are served, and show that capitation contracts are strongly correlated with lower rates of return to emergency care and lower rates of reincidence, compared with fee-for-service contracts. Both types of contracts lead to statistically different treatment paths. These results are consistent with contract theory and the economics of asymmetric information. Moreover, we show that the contract type depends on the market power of insurers and providers as predicted by a bargaining model. More generally, the results highlight the relevance of vertical contracts for the performance of health systems.
    Keywords: Vertical contracts, health insurance, asymmetric information
    JEL: D86 I11 L14
    Date: 2017–01–30
  19. By: Miren Alonso Álvarez (Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.)
    Abstract: International organizations, banks and public entities are altogether trying to teach financial education in the schools. The response to the crisis is to educate the children to be the perfect financial subjects that will create the perfect financial system. This working paper will study, then, how financial education is conceived, taught and received within the Spanish society, where the interpretations of the crisis and the role of the financial system is far from closed. The paper will look at this issue within the frame of neoliberal governmentality and it will try to understand it with discursive lenses. Departing from this analysis, it will go to the spaces of greyness and to the complexity and heterogeneous reality of social practices, such as specific financial education programmes, from where resistance is indeed possible to emerge and multiply.
    Abstract: Organizaciones Internacionales, bancos y entidades públicas están introduciendo la educación financiera en las escuelas y convirtiéndose en maestros de esta nueva disciplina. La respuesta a la crisis se basa en educar a los niños para ser los perfectos sujetos financieros que crearán el perfecto sistema financiero. Este documento de trabajo estudiará cómo es concebida, enseñada y recibida la educación financiera en el contexto de la sociedad española, dónde las interpretaciones acerca del rol del sistema financiero en la crisis distan mucho de estar cerradas. Se observará este fenómeno en el marco de la gubernamentalidad neoliberal, tratando de entenderla con lentes discursivas. Partiendo de ese análisis, este documento se dirigirá a las zonas grises y a la complejidad y heterogeneidad de las prácticas sociales, como los programas específicos de educación financiera, desde los que la resistencia emerge y tiene la potencialidad de crecer y multiplicarse.
    Keywords: Financial education, Poststructuralism, Neoliberal governmentality, Spanish crisis, Resistance.; Educación financiera, Posestructuralismo, “Governmentality” neoliberal, Crisis española, Resistencia.
    Date: 2017
  20. By: Elizabeth Weigensberg; Karen Needels; Alix Gould-Werth; Ankita Patnaik; Joanne Lee
    Abstract: This report for the Department of Labor examines Self-Employment Assistance (SEA) programs, which help eligible unemployment benefit recipients start businesses. It examines states’ motivation for and experience with establishing SEA programs and outcomes of SEA participants and their businesses.
    Keywords: self-employment, unemployment, unemployment insurance, entrepreneurs, SEA
    JEL: J
  21. By: Grossmann, Volker; Strulik, Holger
    Abstract: This paper integrates into public economics a biologically founded, stochastic process of individual ageing. The novel approach enables us to quantitatively characterize the optimal joint design of health and retirement policy behind the veil of ignorance for today and in response to future medical progress. Calibrating our model to Germany, we find that future progress in medical technology calls for a potentially drastic increase in health spending that typically should be accompanied by a lower pension savings rate and a higher retirement age. Interestingly, medical progress and higher health spending are in conflict with the goal to reduce health inequality.
    Keywords: ageing,health expenditure,health inequality,social security system,retirement age
    JEL: H50 I10 C60
    Date: 2017

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