nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒06‒18
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Introducing Risk Adjustment and Free Health Plan Choice in Employer-Based Health Insurance: Evidence from Germany By Adam Pilny; Ansgar Wübker; Nicolas R. Ziebarth
  2. The Welfare Implications of Health Insurance By Sonia Jaffe; Anup Malani
  3. New Zealand: Financial Sector Assessment Program; Detailed Assessment of Observance-Insurance Core Principles By International Monetary Fund
  4. Bank Diversification into the Insurance Business: The Effects of the Deregulation of the Bank-Sales Channel at Japanese Banks By KONISHI, Masaru; OKUYAMA, Eiji; YASUDA, Yukihiro
  5. Impacts of Deregulation on Property and Casualty Insurers' Pricing and Risk Taking: Empirical Evidence in Japan By YASUDA, Yukihiro
  6. Looking at the Centers for Medicare and Medicaid Services Research Designs in a New Context By Thomas W. Grannemann; Randall S. Brown
  7. Social capital and maternal health care use in rural Ethiopia By Sheabo Dessalegn, S.
  8. Austerity, health care provision, and health outcomes in Spain By Borra, Cristina; Pons-Pons, Jeronia; Vilar-Rodriguez, Margarita
  9. Does Physician Pay Affect Procedure Choice and Patient Health? Evidence from Medicaid C-section Use By Alexander, Diane

  1. By: Adam Pilny; Ansgar Wübker; Nicolas R. Ziebarth
    Abstract: To equalize differences in health plan premiums due to differences in risk pools, the German legislature introduced a simple Risk Adjustment Scheme (RAS) based on age, gender and disability status in 1994. In addition, effective 1996, consumers gained the freedom to choose among hundreds of existing health plans, across employers and state-borders. This paper (a) estimates RAS pass-through rates on premiums, financial reserves, and expenditures and assesses the overall RAS impact on market price dispersion. Moreover, it (b) characterizes health plan switchers and investigates their annual and cumulative switching rates over time. Our main findings are based on representative enrollee panel data linked to administrative RAS and health plan data. We show that sickness funds with bad risk pools and high pre-RAS premiums lowered their total premiums by 42 cents per additional euro allocated by the RAS. Consequently, post-RAS, health plan prices converged but not fully. Because switchers are more likely to be white collar, young and healthy, the new consumer choice resulted in more risk segregation and the amount of money redistributed by the RAS increased over time.
    Keywords: employer-based health insurance, free health plan choice, risk adjustment, health plan switching, adverse selection, German sickness funds, SOEP
    JEL: D12 H51 I11 I13 I18
    Date: 2017
  2. By: Sonia Jaffe (Becker Friedman Institute For Research in Economics); Anup Malani (University of Chicago)
    Abstract: We analyze the financial value of insurance when individuals have access to credit markets. Loans allow consumers to smooth shocks across time, decreasing the value of the smoothing (across states of the world) provided by insurance. We derive a simple formula for the incremental value of insurance and show how it depends on individual characteristics and the features of available loans. Our central contribution is to derive formulas for aggregate welfare that can be taken to data from typical studies of health insurance. We provide both exact formulas that can be taken to data on the distribution of medical expenditures and income and an approximate formula for aggregate data on medical expenditure. Using the Medical Expenditure Panel Survey we illustrate how the incremental value of insurance is decreasing with access to loans. For consumers in the sickest decile, access to a five-year loan decreases the incremental value of insurance by $338 (6%) on average and $3,433 (36%) for the poorest consumers. We also find that our approximate formula is a reasonable proxy for the exact one in our data.
    Keywords: health insurance, credit access
    JEL: I10 I13 I00 H53
    Date: 2017–06
  3. By: International Monetary Fund
    Abstract: The insurance sector is small, increasingly focused on non-life business, and characterized by high concentration and extensive foreign, particularly Australian, participation. The non-life sector has recovered strongly from heavy losses due to the Canterbury earthquakes in 2010–2011, but growth in life insurance is weak and product range limited, as savings have migrated from insurance to investment products. High rates of commission paid by insurers to intermediaries may also be hampering growth. The market is dominated by the branches and subsidiaries of Australian groups, the largest accounting for almost half of total non-life premium income. Natural catastrophe risks predominate, although losses on residential property insurance are shared, within limits, with the government-backed Earthquake Commission (EQC) under a system that has generally performed well through the Canterbury crisis. The risks are also mitigated by reinsurance programs. Another government body, the Accident Compensation Corporation (ACC), covers most personal accident losses, reducing the market for private cover.
    Keywords: Asia and Pacific;New Zealand;
    Date: 2017–05–12
  4. By: KONISHI, Masaru; OKUYAMA, Eiji; YASUDA, Yukihiro
    Abstract: In this paper we empirically examine the diversification effects of the deregulation of bank-sales channel into the insurance business by Japanese banks. Using the Japanese unique data set on fee-based revenues, we identify separate fee-based revenues, such as insurance and/or mutual fund sales. We find that banks with a higher BIS ratio, more branches, more monopolistic power in loan market, and higher loan-to-deposit ratios tend to have shifted towards an insurance fee-based business. This indicates that bank health and branch expansion can affect the fee business strategy at each bank. We also find that banks with lower mutual fund fee revenues tend to earn more insurance fee revenues, implying that a substitute relationship has developed between them after the Global Financial Crisis of 2007. We find that banks with higher insurance revenues are positively associated with return volatilities (such as ROA and/or ROE) but are not related with total risk or Z score. The results indicate that although increased fee-based activities can increase the volatility of bank earnings, they have only had a small impact on equity and/or insolvency risks at Japanese banks.
    JEL: G21 G22 G28
    Date: 2016–05–26
  5. By: YASUDA, Yukihiro
    Abstract: The purpose of this paper is to examine empirically the effects of rate-deregulation on Japanese Property and Casualty (P/C) insurers' pricing and risk-taking behaviors. As long as we know, there is little empirical evidence of the determinants of risk-taking at P/C insurance companies in Japan. Applying the basic ideas from the field of banking, we investigate the factors affecting risk-taking at P/C insurance companies. We find that the price setting at Japanese P/C insurers are decreased after the deregulation. In contrast, we find the risk levels of Japanese P/C insurers are generally increased after the rate-deregulation. However, franchise value that is measured by simple Q contributes adversely to P/C insurer risk-taking only before the deregulation. Lastly, we find that P/C insurers that belong to keiretsu groups have reduced the insurer rates but increased risk taking after the deregulation. In this sense, the impacts of deregulation are higher for P/C insurance companies that belong to the Keiretsu groups.
    Keywords: Japanese P/C insurers, Rate-deregulation, Risk Taking, Franchise Value, Keiretsu affliation.
    JEL: G21 G22 G28
    Date: 2016–03
  6. By: Thomas W. Grannemann; Randall S. Brown
    Abstract: With the recent widespread implementation of alternative payment models (APMs), strong designs are needed more than ever to provide evidence for policy decisions about model expansion, modification, or termination for Center for Medicare and Medicaid Innovation (Innovation Center) initiatives.
    Keywords: Alternative Payment Models, Center for Medicare and Medicaid Innovation, Centers for Medicare and Medicaid Services, factorial experiments
    JEL: I
  7. By: Sheabo Dessalegn, S. (Tilburg University, School of Economics and Management)
    Abstract: This thesis analyzes the effect of social capital on maternal health care use in rural Ethiopia. Reports show that in Ethiopia, despite the huge investment in health infrastructure and the deployment of health professionals to provide maternal health services free of charge, utilization remains low. Here we argue that one of the potential factors behind underutilization or inequality in use of the services is social capital. Social capital is important especially in the rural context, where access to modern means of information is low. Accordingly, this study analyzed the effect of social capital on maternal health care use, employing a broad definition of social capital. The findings show that the use of maternal health services cannot be fully explained using an individual perspective. They show that, among others, social capital is an important determinant for knowing the benefits of maternal health care and translating it into use. Also the findings show that different dimensions of social capital have different effects on maternal health care use. Thus free provision of the services may not ensure use if the potential users have poor knowledge about the services. In a nutshell, this study suggests that social capital is helpful in reducing maternal deaths. Therefore, there is a need to strengthen the current networking of mothers.
    Date: 2017
  8. By: Borra, Cristina; Pons-Pons, Jeronia; Vilar-Rodriguez, Margarita
    Abstract: The recession that started in the United States in December 2007 has had a significant impact on the Spanish economy through a large increase in the unemployment rate and a long recession which led to tough austerity measures imposed on public finances. Taking advantage of this quasi-natural experiment, we use data from the Spanish Ministry of Health from 1997 to 2014 to provide novel causal evidence on the short-term impact of health care provision on health outcomes. The fact that regional governments have discretionary powers in deciding health care budgets and that austerity measures have not been implemented uniformly across Spain helps isolate the impact of these policy changes on health indicators of the Spanish population. Using Ruhm’s (2000) fixed effects model, we find that staff or hospital bed reductions account for a significant increase in mortality rates from cardiovascular disease and external causes, for 25-34 and 65-74 year-old groups, and in the late foetal mortality rate. Mortality rates, however, do not seem to be robustly affected by the 2012 changes in retirees’ pharmaceutical co-payments. Contrary to expectations, we find some evidence of reduced mortality rates for cancer and female cancer as a result of the 2012 changes in migrants’ access restrictions to the Spanish NHS. Overall, our analyses suggest that short-term impacts of decreases in health care provision on mortality are significant but small. However, impacts prove to be economically and quantitatively significant in the case of fatalities due to external causes, especially accidental deaths.
    Keywords: Health care provision; Mortality; Health cuts
    JEL: I10 I18
    Date: 2017–06–16
  9. By: Alexander, Diane (Federal Reserve Bank of Chicago)
    Abstract: I investigate the relationship between physician pay, C-section use, and infant health, using vital statistics data and newly collected data on Medicaid payments to physicians. First, I confirm past results—when Medicaid pays doctors relatively more for C-sections, they perform them more often. I bolster the causal interpretation of this result by showing that salaried doctors do not respond to this pay differential, and by using a much larger sample of states and years. Second, unlike past work, I look at how changing physician pay affects infant health outcomes. I find that increased C-section use is associated with fewer infant deaths for births likely covered by Medicaid, suggesting that C-section rates may be too low for some groups. Taken together, these findings suggest that policies aimed at decreasing costs by lowering procedure use may have adverse health consequences, especially for low-income patients.
    Keywords: C-sections; Low-income; Medicaid
    JEL: I11 I12 I18
    Date: 2015–07–31

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