nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒04‒30
thirteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Early Effects of the Affordable Care Act on Health Care Access, Risky Health Behaviors, and Self-Assessed Health By Charles Courtemanche; James Marton; Benjamin Ukert; Aaron Yelowitz; Daniela Zapata
  2. The Welfare Cost of Inflation Risk Under Imperfect Insurance By Yann Algan; Olivier Allais; Edouard Challe; Xavier Ragot
  3. International comparison of life insurers By Kazuaki Washimi; Hiroki Inaba; Kei Imakubo
  4. Enrollee Choices after Their Health Plans Are Terminated: Default Effects versus Persistent Preferences By Sinaiko, Anna; Zeckhauser, Richard
  5. Nonparametric kernel estimation of the impact of tax policy on the demand for private health insurance in Australia By Xiaodong Gong; Jiti Gao
  6. Price-Linked Subsidies and Health Insurance Markups By Jaffe, Sonia; Shepard, Mark
  7. The Multiple Effects of Child Health Insurance in Vietnam By Dang, Thang
  8. Reforms and physicians’ status in Turkey: Distribution of OOP Health Expenditures for Physicians and Hospitals By Burcay Erus
  9. Population Aging, Health Care, and Fiscal Policy Reform: The challenges for Japan By HSU Minchung; YAMADA Tomoaki
  10. Temperature and Rainfall Index Insurance in India By Ayako Matsuda; Takashi Kurosaki
  11. Life Insurance and Life Settlement Markets with Overconfident Policyholders By Hanming Fang; Zenan Wu
  12. Students in Distress: Labor Market Shocks, Student Loan Default, and Federal Insurance Programs By Holger M. Mueller; Constantine Yannelis
  13. The Drive toward Universal Health Coverage: Progress and Challenges around the World By Young Eun Kim; Norman V. Loayza

  1. By: Charles Courtemanche; James Marton; Benjamin Ukert; Aaron Yelowitz; Daniela Zapata
    Abstract: The goal of the Affordable Care Act (ACA) was to achieve nearly universal health insurance coverage through a combination of mandates, subsidies, marketplaces, and Medicaid expansions, most of which took effect in 2014. We use data from the Behavioral Risk Factor Surveillance System to examine the impacts of the ACA on health care access, risky health behaviors, and self-assessed health after two years. We estimate difference-in-difference-in-differences models that exploit variation in treatment intensity from state participation in the Medicaid expansion and pre-ACA uninsured rates. Results suggest that the ACA led to sizeable improvements in access to health care in both Medicaid expansion and non-expansion states, with the gains being larger in expansion states along some dimensions. No statistically significant effects on risky behaviors or self-assessed health emerge for the full sample. However, we find some evidence that the ACA improved self-assessed health among older non-elderly adults, particularly in expansion states.
    JEL: I12 I13 I18
    Date: 2017–03
  2. By: Yann Algan (Département d'économie); Olivier Allais (Laboratoire de Recherche sur la Consommation); Edouard Challe (Department of Economics); Xavier Ragot (Observatoire français des conjonctures économiques)
    Abstract: What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution. A key feature of our analysis is a nonhomothetic specification for households’ preferences towards money and consumption goods. Unlike traditional specifications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the joint distribution of nonmonetary assets and consumption).
    Keywords: Money-in-the-utility; Incomplete markets; Inflation risk; Welfare
    JEL: E21 E32 E41
    Date: 2016–02
  3. By: Kazuaki Washimi (Bank of Japan); Hiroki Inaba (Bank of Japan); Kei Imakubo (Bank of Japan)
    Abstract: Life insurers, unlike other financial institutions, play a unique role in investing in long-term assets in order to fulfill long-term insurance contracts. While this fundamental role is a common feature around the world, there are large differences in the insurance products they provide and in the investment assets they hold. These differences have led to a divergence in firm-level financial risks, such as duration mismatch between assets and liabilities, which could also result in variation in their systemic impact. With this motivation, this report provides an international comparison on the balance-sheet composition of life insurers in Japan, Germany, the United Kingdom, and the United States.
    Date: 2017–04–18
  4. By: Sinaiko, Anna (Harvard University); Zeckhauser, Richard (Harvard University)
    Abstract: Behavioral economic research has established that defaults, one form of nudge, powerfully influence choices. In most policy contexts, all individuals receive the same nudge. We present a model that analyzes the optimal universal nudge when individuals differ in their preferences, different individuals should make different choices, and there is a cost to resist a nudge. Our empirical focus is on terminated choosers, individuals whose prior choice becomes no longer available. Specifically, we examine the power of defaults for individuals who had enrolled in Medicare Advantage with drug coverage and had their plans discountinued. Should these terminated choosers fail to actively choose another Medicare Advantage plan, they are automatically defaulted into fee-for-service Medicare absent drug coverage. Overall, the rate of transition for TCs to FFS Medicare is low, implying that original preferences and status quo bias overpowered the default. Black TCs were more susceptible to the default than non-blacks. Increasing numbers of Americans are choosing plans in health insurance exchange settings such as Medicare, the Affordable Care Act (ACA), and private exchanges. Plan exits and large numbers of TCs are inevitable, along with other forms of turmoil. Any guidance and defaults provided for TCs should attend to their past revealed preferences.
    Date: 2016–12
  5. By: Xiaodong Gong; Jiti Gao
    Abstract: This paper is motivated by our attempt to answer an empirical question: how is private health insurance take-up in Australia affected by the income threshold at which the Medicare Levy Surcharge (MLS) kicks in? We propose a new difference de-convolution kernel estimator for the location and size of regression discontinuities. We also propose a bootstrapping procedure for estimating confidence bands for the estimated discontinuity. Performance of the estimator is evaluated by Monte Carlo simulations before it is applied to estimating the effect of the income threshold of Medicare Levy Surcharge on the take-up of private health insurance in Australia using contaminated data.
    Keywords: De-convolution kernel estimator, regression discontinuity, error-in-variables, demand for private health insurance.
    JEL: C13 C14 C29 I13
    Date: 2017
  6. By: Jaffe, Sonia (University of Chicago); Shepard, Mark (Harvard University)
    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.
    Date: 2017–01
  7. By: Dang, Thang
    Abstract: This paper estimates multiple effects of tremendous expansion in health insurance coverage for children on medical services utilizations for both children and parents by focusing on Free Care for Children Under Six, a child health insurance program that provides free access to health care practices for children under 6 in Vietnam. Using a regression discontinuity design, the paper finds that child health insurance has considerable positive effects on children’s health care uses whereas it reduces parental health care utilization for some outcomes. In particular, child health health insurance increases the probabilities of public inpatient visit and private outpatient visit by 22.3% and 33% respectively while it rises the frequencies of public inpatient visits and private outpatient visits by 0.32 times and 2.24 times respectively. In contrast, child health insurance reduces a mother’s probabilities of public inpatient visit and public outpatient visit by 32.6% and 27% respectively, number of public inpatient visits by 0.41 times. Also, paternal impacts of child health insurance consists of a 23.2% reduction in the probability of private outpatient visit and a 1.01 time decrease in the frequency of private outpatient visits. The paper significantly provides a more insightful understanding of various impacts of a health policy on health care utilization from developing countries.
    Keywords: Child health insurance; health care utilization; regression discontinuity; Vietnam
    JEL: I12 I13 I18
    Date: 2017–04–19
  8. By: Burcay Erus (Bogazici University)
    Abstract: Turkish health care reforms brought about significant changes regarding the way physicians practice. Dual-time practice, which was very common among public hospital physicians, was gradually banned. While public insurance coverage has been extended to private hospitals, private practices have been left out. The resulting system rendered physicians more attached to the hospitals, public and private, and decreased their independence. This study explores the change in out-of-pocket payments to physicians and hospitals from 2003, the year reforms started, to 2013. We use a finite mixture model to examine changes in small and large expenditures. Our findings show a steep drop in payments to physicians both for small and large sums of payments. For hospitals, the drop in the size of the payments appear to be compensated by an increase in the number of households making a payment.
    Date: 2017–04–25
  9. By: HSU Minchung; YAMADA Tomoaki
    Abstract: This paper quantitatively studies the influence of a rapidly aging population on the financing of a public universal health insurance system and the corresponding fiscal policies. We construct a general equilibrium life-cycle model to investigate the effects of aging and evaluate various policy alternatives designed to lessen the negative influence of aging. In particular, we analyze the reforms of insurance benefits and tax financing tools that were the recent focus of a great amount of attention and debate in Japan because of the tense financial situation. We show that although the potential reforms significantly improve the welfare of future generations, political implementation of such reforms is difficult because of the large welfare costs for the current population. Our analysis suggests that a gradual reform with an intergenerational redistribution will be more implementable politically than a sudden reform.
    Date: 2017–03
  10. By: Ayako Matsuda (Research Fellow, Japan Society for the Promotion of Science, Osaka School of International Public Policy (OSIPP)); Takashi Kurosaki (Professor, Institute of Economic Research, Hitotsubashi University)
    Abstract: Weather index insurance has been attracting much attention from academics and policy makers. This paper investigates the demand for temperature and rainfall index insurance in India using the data from randomized subsidy experiments. We find that price, income and asset levels influence the demand for both temperature and rainfall insurance. We also show that richer farmers are less price-sensitive and farmers' response to the discount becomes less price-sensitive as the amount of discount increases. Non-price factors such as age and education level of a respondent are important correlates. Purchase decisions are also influenced by individual prior experience and society experience of insurance.
    Keywords: Weather Insurance, Temperature Insurance, Demand for Insurance
    JEL: O13 O16 G22
    Date: 2017–04
  11. By: Hanming Fang; Zenan Wu
    Abstract: We analyze how the life settlement market – the secondary market for life insurance – may affect consumer welfare in a dynamic equilibrium model of life insurance with one-sided commitment and overconfident policyholders. As in Daily et al. (2008) and Fang and Kung (2010), policyholders may lapse their life insurance policies when they lose their bequest motives; but in our model the policyholders may underestimate their probability of losing their bequest motive, or be overconfident about their future mortality risks. For the case of overconfidence with respect to bequest motives, we show that in the absence of life settlement overconfident consumers may buy “too much” reclassification risk insurance for later periods in the competitive equilibrium. In contrast, when consumers are overconfident about their future mortality rates in the sense that they put too high a subjective probability on the low-mortality state, the competitive equilibrium contract in the absence of life settlement exploits the consumer bias by offering them very high face amounts only in the low-mortality state. In both cases, life settlement market can impose a discipline on the extent to which overconfident consumers can be exploited by the primary insurers. We show that life settlement may increase the equilibrium consumer welfare of overconfident consumers when they are sufficiently vulnerable in the sense that they have a sufficiently large intertemporal elasticity of substitution of consumption.
    JEL: D03 D86 G22 L11
    Date: 2017–03
  12. By: Holger M. Mueller; Constantine Yannelis
    Abstract: The collapse in home prices during the Great Recession triggered a sharp drop in consumer demand by households, leading to massive employment losses. This paper examines the implications of these labor market shocks for the dramatic rise in student loan defaults, which originated during this time period. Linking administrative student loan data at the individual borrower level to de-identified tax records and exploiting Zip code level variation in home price changes, we show that the drop in home prices during the Great Recession accounts for approximately 24 to 32 percent of the increase in student loan defaults. Consistent with a labor market channel, we find a strong relationship between home prices, employment losses, and student loan defaults at the individual borrower level, which is concentrated among low income jobs. Comparing the default responses of home owners and renters, we find no evidence of a direct liquidity effect of home prices on student loan defaults. Lastly, we show that the Income Based Repayment (IBR) program introduced by the federal government in the wake of the Great Recession reduced both student loan defaults and their sensitivity to home price fluctuations, thus providing student loan borrowers with valuable insurance against adverse income shocks.
    JEL: H81 I22 I26 J24
    Date: 2017–03
  13. By: Young Eun Kim (World Bank); Norman V. Loayza (World Bank)
    Abstract: To move toward universal health coverage to enable everyone to receive quality health care without financial hardship, three dimensions should be considered simultaneously: population to be covered, health services to be covered, and financial risk protection. Collaboration among ministries of health, finance, education, and labor is important for effective policy making and implementation, and societal solidarity is essential for sustainability.
    Date: 2017–04

This nep-ias issue is ©2017 by Soumitra K. Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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