nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒09‒10
five papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Public Insurance and Psychotropic Prescription Medications for Mental Illness By Johanna Catherine Maclean; Benjamin L. Cook; Nicholas Carson; Michael F. Pesko
  2. Losing Public Health Insurance: TennCare Disenrollment and Personal Financial Distress By Argys, Laura; Friedson, Andrew; Pitts, M. Melinda; Tello-Trillo, D. Sebastian
  3. Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets By Kate Ho; Robin Lee
  4. Can Land Fragmentation Reduce the Exposure of Rural Households to Weather Variability? By Stefanija Veljanoska
  5. Uncompensated Care and the Collapse of Hospital Payment Regulation: An Illustration of the Tinbergen Rule By Jeffrey Clemens; Benedic Ippolito

  1. By: Johanna Catherine Maclean; Benjamin L. Cook; Nicholas Carson; Michael F. Pesko
    Abstract: Mental illnesses are prevalent in the United States and globally, and cost is a critical barrier to treatment receipt for many afflicted individuals. Affordable insurance coverage can permit access to effective healthcare services and treatment of mental illnesses. We study the effects of recent and major eligibility expansions within Medicaid, a pubic insurance system in the U.S. that finances healthcare services for the poor, on psychotropic medications prescribed in outpatient settings. To this end, we estimate differences-in-differences models using administrative data on medications prescribed in outpatient settings for which Medicaid was a third-party payer between 2011 and 2016. Our findings suggest that these expansions increased psychotropic prescriptions by 22% with substantial heterogeneity across psychotropic class and state characteristics that proxy for patient need, expansion scope, and system capacity. We provide further evidence that Medicaid, and not patients, primarily financed these prescriptions. These findings suggest that public insurance expansions have the potential to improve access to evidence-based treatments among low-income populations suffering from mental illnesses.
    JEL: I1 I13 I18
    Date: 2017–08
  2. By: Argys, Laura (University of Colorado Denver); Friedson, Andrew (University of Colorado Denver); Pitts, M. Melinda (Federal Reserve Bank of Atlanta); Tello-Trillo, D. Sebastian (University of Virginia)
    Abstract: A main goal of health insurance is to smooth out the financial risk that comes with health shocks and health care. Nevertheless, there has been relatively sparse evidence on how health insurance affects financial outcomes. The few studies that exist focus on the effect of gaining health insurance. This paper explores the effect of losing public health insurance on measures of individual financial well-being. In 2005, the state of Tennessee dropped about 170,000 individuals from Medicaid, resulting in a plausibly exogenous shock to health insurance status. Both across- and within-county variation in the size of the disenrollment is linked with individual-level credit risk score and debt data to identify the effects. The results suggest that the disenrollment resulted in a 1.73 point decline in credit risk scores for the median individual in Tennessee. There is also evidence of increases in the amount and share of delinquent debt (90 days past due or more) and of increases in bankruptcy risk. These findings are mostly concentrated among individuals who were in relatively worse financial status before the disenrollment and suggest that there are significant negative consequences to current recipients that would need to be considered in the cost and benefit calculations around rollbacks of recent Medicaid expansions.
    Keywords: Medicaid; public assistance; household finance; debt; bankruptcy
    JEL: D14 H75 I13
    Date: 2017–08–01
  3. By: Kate Ho (Columbia University); Robin Lee (Harvard University Department of Economics)
    Abstract: Why do insurers choose to exclude medical providers, and when would this be socially desirable? We examine network design from the perspective of a profit-maximizing insurer and a social planner to evaluate the welfare effects of narrow networks and restrictions on their use. An insurer may engage in exclusion to steer patients to less expensive providers, cream-skim enrollees, and negotiate lower reimbursement rates. Private incentives for exclusion may diverge from social incentives: in addition to the standard quality distortion arising from market power, there is a “pecuniary” distortion introduced when insurers commit to restricted networks in order to negotiate lower rates. We introduce a new bargaining solution concept for bilateral oligopoly, Nash-in-Nash with Threat of Replacement, that captures such bargaining incentives and rationalizes observed levels of exclusion. Pairing our framework with hospital and insurance demand estimates from Ho and Lee (2017), we compare social, consumer, and insurer-optimal hospital networks for the largest non-integrated HMO carrier in California across several geographic markets. We find that both an insurer and consumers prefer narrower networks than the social planner in most markets. The insurer benefits from lower negotiated reimbursement rates (up to 30% in some markets), and consumers benefit when savings are passed along in the form of lower premiums. A social planner may prefer a broader network if it encourages the utilization of more efficient insurers or providers. We predict that, on average, network regulation prohibiting exclusion has no significant effect on social surplus but increases hospital prices and premiums and lowers consumer surplus. However, there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.
    Keywords: health insurance, narrow networks, selective contracting, hospital prices, bargaining, bilateral oligopoly
    JEL: C78 I11 L13
    Date: 2017–09
  4. By: Stefanija Veljanoska (Paris School of Economics, UniversitŽ de Paris 1 PanthŽon-Sorbonne, UniversitŽ Paris-Sud)
    Abstract: Climate change continuously affects African farmers that operate in rain-fed environments. Coping with weather risk through credit and insurance markets is almost inexistent as these markets are imperfect in the African economies. Even though land fragmentation is often considered as a barrier to agricultural productivity, this article aims at analyzing whether land fragmentation, as an insurance alternative, is able to reduce farmers' exposure to weather variability. In order to address this research question, I use the Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA) data on Uganda. After dealing with the endogeneity of land fragmentation, I find that higher land fragmentation decreases the loss of crop yield when households experience rain deviations. Therefore, policy makers should be cautious with land consolidation programs.
    Keywords: climate change, land fragmentation, rainfall, yield, insurance
    JEL: Q12 Q15 Q54
    Date: 2017–05
  5. By: Jeffrey Clemens; Benedic Ippolito
    Abstract: Hospital payment regulation has historically been introduced to meet multiple policy objectives. The primary objective of "all-payer" rate setting regimes was to control costs through consistent, centrally regulated payments. These regimes were often linked, however, to an ancillary goal of financing care for the uninsured. We show that this secondary objective made states' all-payer regimes economically and legally unstable. Their economic instability reflected a feedback loop from surcharge rates to insurance coverage rates and back to the quantities of uncompensated care in need of being financed. The erosion of all-payer regimes' surcharge bases was particularly pronounced when health maintenance organizations were exempted from surcharge collections, creating a regulatory arbitrage opportunity. The economic and legal instability we highlight could largely have been avoided by financing the cost of uncompensated care provision through taxation of income or other standard revenue bases. These developments thus illustrate the wisdom of the Tinbergen Rule, which recommends that independent policy objectives be met with independent policy instruments.
    JEL: H2 I11 I13 I18
    Date: 2017–08

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.