nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒12‒03
fifteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Means-Testing Federal Health Entitlement Benefits By Andrew Samwick
  2. Risk Sharing and the Demand for Insurance: Theory and Experimental Evidence from Ethiopia By Erlend Berg; Michael Blake; Karlijn Morsink
  3. Exploding Asthma and ADHD Caseloads: The Role of Medicaid Managed Care By Anna Chorniy; Janet Currie; Lyudmyla Sonchak
  4. BOND Implementation and Evaluation: 2016 Stage 1 Interim Process, Participation, and Impact Report By Denise Hoffman; Sarah Croake; David R. Mann; David Stapleton; Priyanka Anand; Chris Jones; Judy Geyer; Daniel Gubits; Stephen Bell; Andrew McGuirk; David Wittenburg; Debra Wrght; Amang Sukasih; David Judkins; Michael Sinclair
  5. Medicaid and Financial Health By Kenneth Brevoort; Daniel Grodzicki; Martin B. Hackmann
  6. Revisiting Hopenhayn and Nicolini 's optimal unemployment insurance with job search monitoring and sanctions By Sebastien Menard; Solenne Tanguy
  7. A Reminder to Pay Less for Healthcare: take-up of Increased Reimbursement in a large-scale randomized field experiment By Raf Van Gastel; Tim Goedemé; Julie Janssens; Eva Lefevere; Rik Lemkens
  8. The effects of access to health insurance: Evidence from a regression discontinuity design in Peru By Bernal Lobato, Noelia; Carpio, M.A.; Klein, Tobias
  9. Optimal investment-consumption and life insurance selection problem under inflation. A BSDE approach By Calisto Guambe; Rodwell Kufakunesu
  10. Cyber Risk, Market Failures, and Financial Stability By Emanuel Kopp; Lincoln Kaffenberger; Christopher Wilson
  11. Institutions for Contract Enforcement: Insiders, Outsiders, and Insurance in Early Modern London By A.B. Leonard
  12. Firm-Level Early Intervention Incentives: Which Recent Employers of Disability Program Entrants Would Pay More? (Journal Article) By David C. Stapleton; David R. Mann; Pragya Singh; Jae Song
  13. Banking on the Boom, Tripped by the Bust: Banks and the World War I Agricultural Price Shock By Jaremski, Matthew; Wheelock, David C.
  14. On Fair Reinsurance Premiums; Capital Injections in a Perturbed Risk Model By Zied Ben Salah; Jos\'e Garrido
  15. Interconnectedness of Global Systemically-Important Banks and Insurers By Sheheryar Malik; TengTeng Xu

  1. By: Andrew Samwick
    Abstract: Recent federal legislation has linked the price paid for health insurance benefits to current income. Under the Patient Protection and Affordable Care Act of 2010, individuals and families with income as high as 400 percent of the federal poverty level are eligible for premium tax credits that limit their health insurance premiums to under 10 percent of their income. Under the Medicare Modernization Act of 2003, higher-income beneficiaries face income-related premiums over three times the standard premium for Part B coverage. For workers at or near retirement age, means-testing based on current income provides an incentive for early retirement, dissaving, and income manipulation, raising concerns about the efficiency of such means-testing. Further, current income is subject to short-term fluctuations, making it a noisy predictor of ability to pay. Using the Health and Retirement Study and linked Social Security earnings histories, this paper introduces a measure of lifetime income that compares favorably to current income as a basis for means-testing. It offers less short-term variation in premiums while improving incentives for pre-retirement work and saving.
    JEL: H51 I13
    Date: 2017–11
  2. By: Erlend Berg; Michael Blake; Karlijn Morsink
    Abstract: Households, organisations and governments commonly engage in risk sharing. The residual risk, however, is often considerable. In response, many policy makers consider the introduction of parametric or index insurance. This raises the question of how demand for insurance depends on the extent of pre-existing risk sharing. We contribute to the literature in two ways. First, we present a simple model to analyse demand for both standard indemnity insurance and index insurance in the presence of risk sharing. Second, we conduct an artefactual field experiment with Ethiopian farmers, in which the predictions of the theoretical framework are borne out.
    Keywords: risk sharing; indemnity insurance; index insurance
    JEL: D14 D81 G22 O16
    Date: 2017
  3. By: Anna Chorniy; Janet Currie; Lyudmyla Sonchak
    Abstract: In the U.S., nearly 11% of school-age children have been diagnosed with ADHD, and approximately 10% of children suffer from asthma. In the last decade, the number of children diagnosed with these conditions has inexplicably been on the rise. This paper proposes a novel explanation of this trend. First, the increase is concentrated in the Medicaid caseload nationwide. Second, nearly 80% of states transitioned their Medicaid programs from fee-for-service (FFS) reimbursement to managed care (MMC) by 2016. Using Medicaid claims from South Carolina, we show that this change contributed to the increase in asthma and ADHD caseloads. Empirically, we rely on exogenous variation in MMC enrollment due a change in the “default” Medicaid plan from FFS or MMC, and an increase in the availability of MMC. We find that the transition from FFS to MMC explains most of the rise in the number of Medicaid children being treated for ADHD and asthma. These results can be explained by the incentives created by the risk adjustment and quality control systems in MMC.
    JEL: I11 I13
    Date: 2017–10
  4. By: Denise Hoffman; Sarah Croake; David R. Mann; David Stapleton; Priyanka Anand; Chris Jones; Judy Geyer; Daniel Gubits; Stephen Bell; Andrew McGuirk; David Wittenburg; Debra Wrght; Amang Sukasih; David Judkins; Michael Sinclair
    Abstract: The Benefit Offset National Demonstration (BOND) tests variants of Social Security Disability Insurance program rules governing work and other supports. The BOND project includes two stages. Stage 1 supports an evaluation of how a national $1 to $2 benefit offset would affect earnings and program outcomes for the entire SSDI population. This report documents results of BOND Stage 1 impacts on earnings and benefit outcomes during the fourth calendar year of implementation (2014), process and participation analyses for 2015, and an overpayment analysis from 2011 to 2013.
    Keywords: Disability, Social Security, Employment, Benefit Offset
    JEL: I J
  5. By: Kenneth Brevoort; Daniel Grodzicki; Martin B. Hackmann
    Abstract: This paper investigates the effects of the Medicaid expansion provision of the Affordable Care Act (ACA) on households' financial health. Our findings indicate that, in addition to reducing the incidence of unpaid medical bills, the reform provided substantial indirect financial benefits to households. Using a nationally representative panel of 5 million credit records, we find that the expansion reduced unpaid medical bills sent to collection by $3.4 billion in its first two years, prevented new delinquencies, and improved credit scores. Using data on credit offers and pricing, we document that improvements in households' financial health led to better terms for available credit valued at $520 million per year. We calculate that the financial benefits of Medicaid double when considering these indirect benefits in addition to the direct reduction in out-of-pocket expenditures.
    JEL: D14 H51 I13
    Date: 2017–11
  6. By: Sebastien Menard; Solenne Tanguy
    Date: 2017
  7. By: Raf Van Gastel; Tim Goedemé; Julie Janssens; Eva Lefevere; Rik Lemkens
    Abstract: We evaluate how a simple letter and flyer sent to a low-income group stimulates the participation in a beneficial health insurance plan. Using a large-scale randomized field experiment we study the effect of contacting potential beneficiaries on the take-up of the Increased Reimbursement (IR) for healthcare in Belgium. We find a fourfold increase in the take-up of IR, with large differences across geographic areas. The group that remains without IR is, on average, less vulnerable than the group that takes up IR in response to the letter. As such, the mailing arguably succeeds in reaching out to the target population.
    Keywords: accessible health care, field experiment, Increased Reimbursement, Nudging, RCT
    JEL: I10 I13 I18 C93
    Date: 2017–11
  8. By: Bernal Lobato, Noelia (Tilburg University, School of Economics and Management); Carpio, M.A.; Klein, Tobias (Tilburg University, School of Economics and Management)
    Abstract: In many countries large parts of the population do not have access to health insurance. Peru has made an effort to change this in the early 2000’s. The institutional setup gives rise to the rare opportunity to study the effects of health insurance coverage exploiting a sharp regression discontinuity design. We find large effects on utilization that are most pronounced for the provision of curative care. Individuals seeing a doctor leads to increased awareness about health problems and generates a potentially desirable form of supplier-induced demand: they decide to pay themselves for services that are in short supply.
    Date: 2017
  9. By: Calisto Guambe; Rodwell Kufakunesu
    Abstract: We discuss an optimal investment, consumption and insurance problem of a wage earner under inflation. Assume a wage earner investing in a real money account and three asset prices, namely: a real zero coupon bond, the inflation-linked real money account and a risky share described by jump-diffusion processes. Using the theory of quadratic-exponential backward stochastic differential equation (BSDE) with jumps approach, we derive the optimal strategy for the two typical utilities (exponential and power) and the value function is characterized as a solution of BSDE with jumps. Finally, we derive the explicit solutions for the optimal investment in both cases of exponential and power utility functions for a diffusion case.
    Date: 2017–11
  10. By: Emanuel Kopp; Lincoln Kaffenberger; Christopher Wilson
    Abstract: Cyber-attacks on financial institutions and financial market infrastructures are becoming more common and more sophisticated. Risk awareness has been increasing, firms actively manage cyber risk and invest in cybersecurity, and to some extent transfer and pool their risks through cyber liability insurance policies. This paper considers the properties of cyber risk, discusses why the private market can fail to provide the socially optimal level of cybersecurity, and explore how systemic cyber risk interacts with other financial stability risks. Furthermore, this study examines the current regulatory frameworks and supervisory approaches, and identifies information asymmetries and other inefficiencies that hamper the detection and management of systemic cyber risk. The paper concludes discussing policy measures that can increase the resilience of the financial system to systemic cyber risk.
    Keywords: Systemic risk;Public goods;Cyber risk, cyber insurance, cyber regulation, risk management, information asymmetries, market failure, General, Externalities, Asymmetric and Private Information, General, General
    Date: 2017–08–07
  11. By: A.B. Leonard (The Cambridge Group for the History of Population and Social Structure)
    Keywords: contract enforcement, insurance, law merchant
    JEL: N33
    Date: 2017–11–15
  12. By: David C. Stapleton; David R. Mann; Pragya Singh; Jae Song
    Abstract: We simulate the effects of Social Security Disability Insurance (SSDI) reform proposals that make firms partially responsible for SSDI benefits paid to their former workers. The simulations suggest the proposals (if implemented) would greatly affect firms and the workforces that the firms employ.
    Keywords: economics/social security, employment, labor, policy, system(s) change
    JEL: I J
  13. By: Jaremski, Matthew (Colgate University); Wheelock, David C. (Federal Reserve Bank of St. Louis)
    Abstract: Bank lending booms and asset price booms are often intertwined. Although a fundamental shock might trigger an asset boom, aggressive lending can push asset prices higher, leading to more lending, and so on. Such a dynamic seems to have characterized the agricultural land boom surrounding World War I. This paper examines i) how banks responded to the asset price boom and how they were affected by the bust; ii) how various banking regulations and policies influenced those effects; and iii) how bank lending contributed to rising farm land values in the boom, and how bank closures contributed to falling prices in the bust. We find that rising crop prices encouraged bank entry and balance sheet expansion in agriculture counties. State deposit insurance systems amplified the impact of rising crop prices on the size and risk of bank portfolios, while higher minimum capital requirements dampened the effects. Further, increases in county farm land values and mortgage debt were correlated with the number of local banks ex ante and increases in bank loans during the boom. When farm land prices collapsed, banks that had responded most aggressively to the asset boom had a higher probability of closing, while counties with more bank closures experienced larger declines in land prices than can be explained by falling crop prices alone.
    Keywords: Asset booms and busts; banks; bank lending; bank entry; bank closure; deposit insurance; regulation
    JEL: E58 N21 N22
    Date: 2017–11–03
  14. By: Zied Ben Salah; Jos\'e Garrido
    Abstract: We consider a risk model in which deficits after ruin are covered by a new type of reinsurance contract that provides capital injections which depend on a chosen level of retention. To allow the insurance company's survival after ruin, the reinsurer would have to inject capital. Assuming that these capital injections are not from the shareholders, but rather obtained through such new reinsurance agreements, the problem here is to determine adequate reinsurance premiums. It seems fair to base the net reinsurance premium on the discounted expected value of any future capital injections. Inspired by the results of Huzak et al. (2004) and Ben Salah (2014) on successive ruin events, we show that an explicit formula for this reinsurance premium exists in a setting where aggregate claims are modeled by a subordinator and a Brownian perturbation. This result is illustrated explicitly for two specific risk models and some numerical examples.
    Date: 2017–10
  15. By: Sheheryar Malik; TengTeng Xu
    Abstract: Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—i.e., among all GSIBs and GSIIs—tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.
    Keywords: Equity prices;JEL Classification Numbers: G21, G22 and C32 Keywords: Global systemically important banks and insurers, connectedness, volatility, vector autoregression, Global systemically important banks and insurers, Time-Series Models, JEL Classification Numbers: G21 G22 and C32, Keywords: Global systemically important banks and insurers
    Date: 2017–09–29

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