nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒07‒30
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes By Mark Duggan; Gopi Shah Goda; Emilie Jackson
  2. Demand for Health Insurance Marketplace Plans Was Highly Elastic in 2014-2015 By Jean Abraham; Coleman Drake; Daniel W. Sacks; Kosali I. Simon
  3. The Unemployment Insurance Taxable Wage Base Mystery By Parsons, Donald O.
  4. The Impact of the Affordable Care Act's Medicaid Expansion on Medicaid Spending by Health Care Service Category By Jacqueline Fiore
  5. Other State Approaches to Integrating Medicare and Medicaid for Dually Eligible Beneficiaries: Implications for the New York State FIDA Demonstration By James Verdier; Ann Mary Philip
  6. Financing Mars settlement: Default Insurance Notes to Implement Venture Banking By Brian P. Hanley
  7. Job duration and history dependent unemployment insurance By Andersen, Torben M; Ellermann-Aarslev, Christian
  8. Income and Substitution Effects of a Disability Insurance Reform By Eugster, Beatrix; Deuchert, Eva
  9. Surprise! Out-of-Network Billing for Emergency Care in the United States By Zack Cooper; Fiona Scott Morton; Nathan Shekita

  1. By: Mark Duggan; Gopi Shah Goda; Emilie Jackson
    Abstract: The Affordable Care Act (ACA) includes several provisions designed to expand insurance coverage that also alter the tie between employment and health insurance. In this paper, we exploit variation across geographic areas in the potential impact of the ACA to estimate its effect on health insurance coverage and labor market outcomes in the first two years after the implementation of its main features. Our measures of potential ACA impact come from pre-existing population shares of uninsured individuals within income groups that were targeted by Medicaid expansions and federal subsidies for private health insurance, interacted with each state’s Medicaid expansion status. Our findings indicate that the majority of the increase in health insurance coverage since 2013 is due to the ACA and that areas in which the potential Medicaid and exchange enrollments were higher saw substantially larger increases in coverage. While labor market outcomes in the aggregate were not significantly affected, our results indicate that labor force participation reductions in areas with higher potential exchange enrollment were offset by increases in labor force participation in areas with higher potential Medicaid enrollment
    JEL: H31 H51 J18 J20 J38
    Date: 2017–07
  2. By: Jean Abraham; Coleman Drake; Daniel W. Sacks; Kosali I. Simon
    Abstract: A major provision of the Affordable Care Act was the creation of Health Insurance Marketplaces, which began operating for the 2014 plan year. Although enrollment initially grew in these markets, enrollment has fallen recently amid insurer exits and rising premiums. To better understand these markets, we estimate premium elasticity of demand for Marketplace plans, using within-plan premium changes from 2014 to 2015, accounting for state-specific trends and simultaneous changes in generosity. Our preferred estimate implies that a one percent premium increase reduces plan-specific enrollment by 1.7 percent. We argue that this high elasticity reflects the rapid growth and high churn in this market, as well as the high degree of standardization and the availability of many close substitutes.
    JEL: I11
    Date: 2017–07
  3. By: Parsons, Donald O. (George Washington University)
    Abstract: Unemployment insurance experts lament the low Federal taxable wage base (TWB), last increased to $7000 per worker in 1982. The Federal TWB sets only a system minimum and by 2014 all but two states had TWBs that exceeded the minimum, opening up state TWB choice for study. States do align TWB with state payroll earnings. Indeed TWB/WAGE ratios within states have been remarkably stable for decades, though the ratio varies dramatically across states. Critics seem especially concerned about the tax regressivity of low TWBs, but the hypothesis that more progressive states choose less regressive (higher) TWBs is flatly rejected by the data. Earlier UI analysts focused on employer insurance equity, and the resistance of low cost, high-wage (stable) employers to subsidizing high cost, low-wage (unstable) employers. These analysts provided convincing evidence that (i) employers believed this to be the key issue, and (ii) the TWB did redistribute the insurance premium burden in the hypothesized direction. Across states – wage levels constant – economies characterized by greater income inequality and a preponderance of large (low turnover) firms are associated with lower TWBs. Apparently critics were right to imagine a link between wages and the TWB, but ignored the fact that this matching could be done better across location.
    Keywords: unemployment insurance, taxable wage base, experience rating
    JEL: J65 J41 J33
    Date: 2017–07
  4. By: Jacqueline Fiore (Department of Economics, Tulane University)
    Abstract: The 2014 Medicaid expansion revised Medicaid eligibility provisions to allow for low-income, non-elderly adults to be eligible for Medicaid in those states which opt for this change. During the first two years after the expansion, there were more than 10.7 million newly eligible Medicaid enrollees nationwide. I investigate the short-term impact the 2014 Medicaid expansion had on Medicaid spending by the government. Using data from the Centers for Medicare and Medicaid Services on all Medicaid expenditures over a seventeen year period, I apply a difference-in-differences design to exploit the variation among states electing to participate in the expansion and the health care services they offer. These data allow me to study the economic impact of the expansion on all possible health care services. Among the 21 services assessed, I find that after the expansion became effective, five services utilized by the target population for the reform experienced a statistically significant increase in average Medicaid spending: dental services (211 percent), clinic services (101 percent), outpatient hospital services (77 percent), physician and surgical services (35 percent), and inpatient hospital services (17 percent). This implies that the new adult group may be healthier and seeking more routine or preventive care compared to the traditional Medicaid population. The increase in routine and preventive care has the potential to result in better health outcomes and fewer medical emergencies in the future, ultimately lowering Medicaid spending by the state and federal government over the long term.
    Keywords: Affordable Care Act; Medicaid expansion; non-elderly adults; expenditures
    JEL: H51 I13
    Date: 2017–07
  5. By: James Verdier; Ann Mary Philip
    Abstract: This presentation highlights national trends and patterns in integrating Medicare and Medicaid services for beneficiaries dually eligible for both programs.
    Keywords: New York, Fuly Integrated Duals Advantage, FIDA, dual eligible, Medicare, Medicaid
    JEL: I
  6. By: Brian P. Hanley
    Abstract: The capital requirements for space settlement are colossal, at least on the order of several trillion dollars. To this end, I propose creation of a venture bank, able to multiply the capital of a venture capital firm by up to 47 times, without requiring access to the Federal Reserve or other central bank apart from settlement. This concept rests on insuring loans to expand Tier 1 and 2 capital. Profitability depends on overall portfolio performance, availability of default insurance notes, cost of default insurance, and the multiple of original capital (MOC) adopted by the venture bank. If the form that uses interbank funds is used, then it also depends on the interbank funds rates. I propose a new derivative financial instrument, the Default Insurance Note (DIN), to insure loans to venture investments. A DIN is similar to a credit default swap (CDS) but with a host of unique features. The features and operation of these new derivative instruments are outlined along with audit requirements. This instrument would be traded on open-outcry exchanges with special rules to ensure orderly operation of the market. It is the creation of public markets for DINs that makes possible the use of public market pricing to indirectly establish a market capitalization for the underlying venture-bank investment, which is the key to achieving regulatory acceptance of the fully-insured version of this proposal. That fully-insured version insulates the venture-bank from losses in most situations, and multiplies profitability quite dramatically. There are risks to this method. It also gives up quite a bit of the company. However, this system could take roughly 70 billion dollars and create at least 3 trillion dollars out of it, leaving approximately 280 billion dollars of headroom. This is attainable with the pooled resources of a relative few wealthy individuals.
    Date: 2017–07
  7. By: Andersen, Torben M; Ellermann-Aarslev, Christian
    Abstract: Unemployment insurance schemes typically include eligibility conditions depending on the employment history of the unemployed. The literature on the design of unemployment insurance schemes has largely ignored this aspect, perhaps due to the implied history dependence and heterogeneity across otherwise identical workers. We develop an analytically tractable matching model permitting an analysis of the consequences of such history dependencies. Unemployed determine reservation durations to the jobs they find acceptable, and the stronger employment histories lead to higher reservation durations. Consequently, short-term jobs are only acceptable to unemployed with a weak employment history, while unemployed with a stronger employment history have higher reservation durations. This affects the equilibrium distribution of employment according to job durations; fewer short duration jobs are filled, but this also means that fewer are locked-into such jobs, and therefore more jobs with long durations are filled, although the net effect generally is to lower employment. Employment history contingencies this affect both the level and structure of employment. Equilibrium (un)employment depends not only on reservation durations, and a longer benefit duration combined with a decrease in the benefit level to retain reservation durations has a negative effect on employment.
    Keywords: Employment conditions; Employment history; job search; Unemployment insurance
    JEL: E24 J64 J65
    Date: 2017–07
  8. By: Eugster, Beatrix; Deuchert, Eva
    Abstract: Disability insurance (DI) systems are widely criticized for their inherent work disincentives. This paper evaluates the effects of a Swiss DI reform that aims to lower pensions for a group of existing DI bene?ciaries and introduces an additional notch to the pension schedule. The reform does not signi?cantly affect average earnings and employment, but increases the disability degree of those threatened by a pension decline. We estimate bounds on the income and substitution effects employing the principal strati?cation framework. The in-come effect is quantitatively important, while the substitution e?ect is smaller and bounds include zero.
    Keywords: Disability insurance, work disincentives, income and substitution effects, partial bene?t system
    JEL: C30 I13 J01
    Date: 2017–07
  9. By: Zack Cooper; Fiona Scott Morton; Nathan Shekita
    Abstract: Using insurance claims data, we show that in 22% of emergency episodes, patients attended in-network hospitals, but were treated by out-of-network physicians. Out-of-network billing allows physicians to significantly increase their payment rates relative to what they would be paid for treating in-network patients. Because patients cannot avoid out-of-network physicians during an emergency, physicians have an incentive to remain out-of-network and receive higher payment rates. Hospitals incur costs when out-of-network billing occurs within their facilities. We illustrate in a model and confirm empirically via analysis of two leading physician-outsourcing firms that physicians offer transfers to hospitals to offset the costs of out-of-network billing and allow the practice to continue. We find that a New York State law that introduced binding arbitration between physicians and insurers to settle surprise bills reduced out-of-network billing rates.
    JEL: I11 I13 I18 L14
    Date: 2017–07

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