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on Insurance Economics |
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Issue of 2018‒08‒27
23 papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Ralph Koijen; Stijn Van Nieuwerburgh |
| Abstract: | We estimate the potential gains of life-extending treatments to life insurance companies and apply it to immunotherapy. These treatments promise to dramatically raise durable survival rates for a growing number of cancer patients but are often prohibitively expensive for patients and governments alike. Our main insight is that life insurance companies have a direct benefit from such treatments as they lower the insurer’s liabilities by pushing the death benefit further into the future and raise future premium income. Using detailed survival data from clinical studies, we quantify the insurers’ benefit from immunotherapy for melanoma patients. Extrapolating to 17 other cancer sites, we estimate the insurance sector’s benefit to equal $6.8 billion a year. We discuss various financing mechanisms that exploit this value creation, which depend on the relative bargaining power of insurers and consumers. Moreover, the potential gains for life insurers, which could only accrue if health insurers cover the cost of the treatments and households finance the out-of-pocket expenditure, may warrant some exploration of new boundaries between life and health insurance. We discuss the broader implications for medical innovation and long-term care insurance markets. |
| JEL: | G22 I13 I31 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24730&r=ias |
| By: | Thomas DeLeire |
| Abstract: | This study examines the effect of a Medicaid disenrollment on employment, sources of health insurance coverage, health, and health care utilization of childless adults using longitudinal data from the 2004 Panel of the Survey of Income and Program Participation. From July through September 2005, TennCare, the Tennessee Medicaid program, disenrolled approximately 170,000 adults following a change in eligibility rules. Following this eligibility change, the fraction of adults in Tennessee covered by Medicaid fell by over 5 percentage points while uninsured rates increased by almost 5 percentage points relative to adults in other Southern states. There is no evidence of an increase in employment rates in Tennessee following the disenrollment. Self-reported health and access to medical care worsened as hospitalization rates, doctor visits, and dentist visits all declined while the use of free or public clinics increased. The Tennessee experience suggests that undoing the expansion of Medicaid eligibility to adults that occurred under the Affordable Care Act likely would reduce health insurance coverage, reduce health care access, and worsen health but would not lead to increases in employment. |
| JEL: | I11 I13 I18 J22 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24899&r=ias |
| By: | Barkowski, Scott; McLaughlin, Joanne Song; Ray, Alex |
| Abstract: | State governments have been passing laws mandating insurers to allow young adults to stay on their parents' health insurance plans past the age of 19 since the 1970s. These laws were intended to increase coverage, but research has been inconclusive on whether they were successful. We reconsider the issue with an improved approach featuring three key elements: a new, accurate dataset on state mandates; recognition that effects could differ greatly by age due to take up rate differences; and avoidance of endogenous characteristics when identifying mandate eligible young adults. We find the impact of the state mandates was concentrated among the 19 to 22 age group, for which dependent coverage increased sharply by about 6 percentage points. Overall coverage increased by almost 3 percentage points, with the difference explained by crowd out of public insurance. Crowd out of coverage through young adults own jobs was negligible. For those above age 22, we find little evidence of changes in coverage. We incorporate these insights into analysis of the Affordable Care Act (ACA) dependent coverage mandate, showing its effects were focused among those whom were previously ineligible for state mandates, or were eligible but older than 22. We argue the ACA's impact was broader because it had fewer eligibility conditions that implied parental dependence; young adults could be on their parents' insurance but still be relatively independent. |
| Keywords: | Health Insurance; Dependent Coverage Mandates; Affordable Care Act |
| JEL: | H11 H75 I13 I18 |
| Date: | 2018–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88363&r=ias |
| By: | Joyce Manchester |
| Abstract: | Using 100 percent Medicare Part B fee-for-service (FFS) claims in 2012 for people under age 65, I examine office and outpatient services by state and primary diagnosis for the service. The number of services per Medicare-eligible beneficiary in the U.S. Social Security Disability Insurance (SSDI) program was about 32 in 2012, or 2.7 per month, comparable to services for the 65+ Medicare population. The number of services for SSDI beneficiaries ranged from almost 48 per capita in Minnesota to 23 in Arkansas. Services for musculoskeletal impairments averaged 4.6 per capita, ranging from 6.7 in Minnesota to 2.5 in Hawaii. The greatest variation occurred in services for mental disorders, averaging 3.2 for the U.S. but ranging from 9.1 in Massachusetts to 1.4 in Alabama. Factors such as the number of health care professionals or hospital beds per capita, the share enrolled in Medicare Advantage, and demographic factors are associated with health care utilization across states. Knowledge of health care utilization could inform policy choices for programs such as early intervention efforts both at the federal level and tailored to particular needs at the state level. |
| JEL: | I1 I13 I18 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24759&r=ias |
| By: | Mukhopadhyay, Sankar (University of Nevada, Reno); Wendel, Jeanne (University of Nevada, Reno); Zou, Miaomiao (Nanjing University) |
| Abstract: | States with Section 1332 Waivers to operate high-risk pools (HRPs) or reinsurance programs can receive federal pass through funds equal to reductions in federal expenditures generated by the Waiver. Shifting financial responsibility for high-cost individuals out of the Health Insurance Exchange (HIX) markets is expected to reduce federal expenditures for Advanced Premium Tax Credits, by reducing HIX plan premiums. Simulation models predict that a new HRP or reinsurance program would trigger premium reductions ranging from 7% to 23%. These models assume that insurers do not adjust plan cost-sharing requirements or plan generosity. However, federal requirements specifying the Medical Loss Ratio and plan Actuarial Values give insurers incentives to make multidimensional adjustments. We use plan level fixed effects to generate difference-in-difference estimates of insurer responses to closures of state-operated HRPs during 2014-2016. Silver plan premiums increased 7.7%, deductibles increased 41%, and Maximum-Out-Of-Pocket (MOOPs) expenditures increased 24% following closure of a state HRP. |
| Keywords: | high risk pools, insurance premium, health insurance exchanges, cost-sharing |
| JEL: | I11 I13 I18 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11627&r=ias |
| By: | Finn Kydland (University of California, Santa Barbara); Nicholas Pretnar (Carnegie Mellon University) |
| Abstract: | There has been recent attention to the increasing costs to individuals and families associated with caring for people who are afflicted with diseases such as dementia, including Alzheimer’s. In this paper we ask, what are the quantitative implications of these trends for important aggregates, including going forward in time. We develop an overlapping generations general equilibrium model that features government social insurance, idiosyncratic old-age health risk, and transfers of time on a market of informal hospice care from young agents to old agents. The model implies that the decline in annual output growth in the United States since the 1950s can be partly attributed to decreases in the working-age share of the adult population. When accounting for the time young people spend caring for sick elders, positive Social Security + Medicare taxes lead to reductions in the growth rate of annual output of approximately 20 basis points. Relative to an economy with no old-age insurance systems, Social Security + Medicare taxes lead to future reductions in output of 6% by 2056 and 17% by 2096. We show that depending on the working-age share of the adult population, eliminating Social Security + Medicare is not necessarily Pareto improving, leaving those afflicted by welfare-reducing diseases worse off. Placed in the context of an aging United States population, these phenomena could have dramatic or muted impacts on future economic outcomes depending on the prevalence rate of high-cost diseases and the rate at which labor is taxed to fund old-age consumption under a pay-as-you-go social insurance system. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:271&r=ias |
| By: | Canta, Chiara (Toulouse Business School); Cremer, Helmuth (Toulouse School of Economics) |
| Abstract: | We study the design of public long-term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non-linear policies where the LTC benefit depends on the level of informal care, which is assumed to be observable while children's altruism is not. The traditional topping up and opting out policies are special cases of ours. Both total and informal care should increase with the children's level of altruism. This obtains under full and asymmetric information. Social LTC, on the other hand, may be non-monotonic. Under asymmetric information, social LTC is lower than its full information level for the lowest level of altruism, while it is distorted upward for the higher level of altruism. This is explained by the need to provide incentives to high-altruism children. The implementing contract is always such that social care increases with formal care. |
| Keywords: | long term care, uncertain altruism, private insurance, public insurance, topping up, opting out |
| JEL: | H2 H5 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11619&r=ias |
| By: | J. Carter Braxton (University of Minnesota); Gordon Phillips (Dartmouth College); Kyle Herkenhoff (University of Minnesota) |
| Abstract: | Do the unemployed have access to credit markets? Yes. Do the unemployed borrow? Yes. We link administrative earnings records with credit reports and show that individuals maintain significant access to credit following job loss. Unconstrained job losers borrow, while constrained job losers default and delever. Both default and borrowing allow job losers to boost consumption, and they pay an interest rate premium to do so, i.e. the credit market acts as a limited private unemployment insurance market. We show theoretically that default costs allow credit markets to serve as a market for private unemployment insurance despite adverse selection and asymmetric information about future job loss. We then ask, given the degree of private unemployment insurance household's have in the data, what is the optimal provision of public unemployment insurance? We find that the optimal provision of public insurance is unambiguously lower as credit access expands. The median voter in our simulated economy would prefer to have the replacement rate lowered from the current US policy of 45% to 35%. However, a utilitarian planner would actually prefer to raise UI relative to current US levels, even in the presence of well-developed credit markets. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:564&r=ias |
| By: | Ashimwe, Olive |
| Abstract: | Agriculture remains a major source of livelihood in Rwanda. However, the sector is faced by many covariate risks. A major component of covariate risk in Rwandan agriculture is weather-related production risk. Weather index-based crop insurance is one tool used to improve risk management practices in many drought-prone countries including Rwanda. Despite the existence of crop insurance as a mechanism to mitigate weather-related losses, its impact on household income in Rwanda remains unknown. This study assessed the impact of farmer participation in a crop insurance scheme on household income in Huye District. A multi-stage random sampling strategy was used to collect primary data using a semi-structured questionnaire administered to a sample of 246 households. Descriptive statistics were used to characterize the patterns of farmer participation and uptake of crop insurance in the study area. Propensity score matching (PSM) was then used to assess the impact of farmer participation in crop insurance on household income. This involved an analysis of factors influencing farmer participation in the insurance scheme using a logit model. The results of the logit model showed that cooperative membership (p=0.001), use of irrigation (p=0.060), crop diversification (p=0.001), years of experience with crop insurance (p=0.000), distance to a paved road (p=0.01), and wealthy category (p=0.004) significantly influenced farmer participation in the crop insurance in Huye District. The Nearest Neighbor Matching, Radius Matching and Kernel-Based Matching algorithms showed that the matching process was justified among participants and non-participants in the insurance scheme. An average treatment effect of US$100 was found as the difference between participant and non-participant household income. This shows that the weather index-based insurance had a positive impact on participants’ incomes in Huye District. Accordingly, the study recommends the promotion of the crop insurance among non-participants through educational and awareness campaigns by the Ministry of Agriculture and insurance companies. The government of Rwanda in partnership with Rwanda Cooperative Agency should persuade more farmers to join cooperatives through regular and targeted campaigns. |
| Keywords: | Consumer/Household Economics, Environmental Economics and Policy |
| Date: | 2016–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cmpart:265675&r=ias |
| By: | Ryan Stringer; Nancy Archibald |
| Abstract: | This brief describes how D-SNPs can request and use CMS audit reports to oversee D-SNPs operating in their jurisdictions. |
| Keywords: | Medicare, Medicaid, dual eligibles, audit, managed care oversight, special needs plans |
| JEL: | I J |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:84075f543b08494384c1629897e58d71&r=ias |
| By: | Bauernschuster, Stefan (University of Passau); Driva, Anastasia (Ludwig-Maximilians-Universität München); Hornung, Erik (University of Cologne) |
| Abstract: | We study the impact of social health insurance on mortality. Using the introduction of compulsory health insurance in the German Empire in 1884 as a natural experiment, we estimate flexible difference-in-differences models exploiting variation in eligibility for insurance across occupations. Our findings suggest that Bismarck's health insurance generated a significant mortality reduction. Despite the absence of antibiotics and most vaccines, we find the results to be largely driven by a decline of deaths from infectious diseases. We present evidence suggesting that the decline is associated with access to health services but not sick pay. This finding may be explained by insurance fund physicians transmitting new knowledge on infectious disease prevention. |
| Keywords: | health insurance, mortality, demographic transition, Prussia |
| JEL: | I13 I18 N33 J11 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11628&r=ias |
| By: | Juan Carlos Conesa (Stony Brook University); Akshar Saxena (Harvard University); Daniela Costa (Wharton); Gajendran Raveendranathan (McMaster University); Parisa Kamali (University of Minnesota); Timothy Kehoe (University of Minnesota) |
| Abstract: | This paper develops an overlapping generations model to study the macroeconomic implications of an aging population. We calibrate the model along a transition path from 1950 to 2100 that features rising survival probabilities, an increasing share of college graduates, and rising healthcare costs. The aging of the population leads to increased government spending on Medicare, Medicaid, and Social Security benefits. We find that the increase in the share of college graduates compensates for most of the increase in government spending. Consequently, taxes will only have to rise by a few percentage points to balance the budget in the future even if the current eligibility criteria and benefit levels for social insurance programs are preserved. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:930&r=ias |
| By: | Enrico Ferri |
| Abstract: | We consider the problem of seeking an optimal set of model points associated to a fixed portfolio of life insurance policies. Such an optimal set is characterized by minimizing a certain risk functional, which gauges the average discrepancy with the fixed portfolio in terms of the fluctuation of the interest rate term structure within a given time horizon. We prove a representation theorem which provides two alternative formulations of the risk functional and which may be understood in connection with the standard approaches for the portfolio immunization based on sensitivity analysis. For this purpose, a general framework concerning some techniques of stochastic integration in Banach space and Malliavin calculus is introduced. A numerical example is discussed when considering a portfolio of whole life policies. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1808.00866&r=ias |
| By: | International Monetary Fund |
| Abstract: | The Mauritius authorities have indicated their interest in formalizing and making the resolution and crisis management framework more efficient. Following extensive TA provided by Fund staff on bank resolution and crisis management, the following priorities were identified: ? Formally designate which administrative bodies are to be responsible for the resolution of individual financial institution failures, as well as for the various forms of financial and mixed groups; ? Refine the existing legal framework for early intervention and triggering resolution; ? Adopt new legal powers to support timely and effective resolution of systemically important banks; ? Issue guidance to banks to routinely prepare recovery plans for dealing with potential shocks to their capital and/or liquidity, and to review and provide feedback to banks on those plans; ? Prepare resolution plans for banks and their groups; ? Identify and remedy impediments to timely and effective resolution of banks;? Submit Deposit Insurance Scheme (DIS) legislation to parliament; ? Adopt a formal policy framework for emergency liquidity assistance (ELA); ? Specify the role of the Financial Stability Committee (FinStab) in resolution activities; and ? Put in place cross-border cooperation arrangements with relevant foreign supervisory and resolution authorities. |
| Keywords: | Sub-Saharan Africa;Mauritius; |
| Date: | 2018–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/170&r=ias |
| By: | Péron, M.;; Dormont, B.; |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:18/27&r=ias |
| By: | Hanna Freudenreich; Marcela Ibanez; Stephan Dietrich; Oliver Musshoff |
| Keywords: | Agricultural Finance, Community/Rural/Urban Development, Financial Economics, Risk and Uncertainty |
| Date: | 2018–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gadadp:266532&r=ias |
| By: | Mariacristina De Nardi (UCL, Federal Reserve Bank of Chicago, CE); Giulio Fella (Queen Mary, University of London); Gonzalo Paz Pardo (University College London) |
| Abstract: | Earnings dynamics are much richer than typically assumed in macro models with heterogenous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative (Social Security Administration) and survey (Panel Study of Income Dynamics) data. We study the implications of two household-post-tax earnings processes in a standard life-cycle model: the canonical earnings process (that includes a persistent and a transitory shock) and a rich earnings dynamics process (that allows for age-dependence of moments, non-normality, and nonlinearity in previous earnings and age). Allowing for richer earnings dynamics implies a substantially better fit of the evolution of the cross-sectional consumption inequality over the life cycle and of the individual-level degree of consumption insurance against persistent earnings shocks. Richer earnings dynamics also imply lower welfare costs of earnings risk, but, as the canonical earnings process, do not generate enough concentration at the upper tail of the wealth distribution. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:156&r=ias |
| By: | Marcus Dillender (W.E. Upjohn Institute for Employment Research) |
| Keywords: | Prior authorization, Prescription drug abuse, Workers' compensation, Health care spending, Prescribing behavior |
| JEL: | J28 I13 I18 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:md18&r=ias |
| By: | Md Mahbubur Rahman (McMaster University); Oksana Leukhina (Federal Reserve Bank of St. Louis); Raghav Paul (University of Washington) |
| Abstract: | It is well known that the gap in agricultural labor productivity accounts for most of the output gap between rich and poor countries. Furthermore, development economists have pointed out that the low agricultural productivity in poor countries stems from the persistence of small non-mechanized farms. We propose and quantify a novel explanation for this phenomenon. We begin with a premise that residing in a rural area provides access to a network that effectively insures its residents against income fluctuations. If living in the rural area provides access to "insurance", households are less willing to migrate to the city - where labor earnings risk is uninsured. As a result, labor remains cheap in agriculture, and the incentives for switching to capital-intensive methods of farming are weak. In order to understand the quantitative importance of this mechanism, we calibrate the model to Indian data and study an abstract policy intervention - provision of complete insurance against earnings risk in the city. Our framework successfully accounts for the urban-rural consumption gap. The policy intervention decreases the share of workers in agriculture from 0.59 to 0.52, increases capital demand per firm by 79 percent, the average farm size increases by 9 percent and the labor productivity gap between the two sectors decreases by 32 percent. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1305&r=ias |
| By: | Diersen, Matthew; Fausti, Scott |
| Keywords: | Agricultural Finance, Farm Management, Risk and Uncertainty |
| Date: | 2017–10–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nc1117:263912&r=ias |
| By: | CAPITAINE, Gaëlle; BONTEMPS-CHANEL, Anne-Lise; CARLIER, Charles-Henri; FREY, Laure; GIRAUD, Christophe |
| Abstract: | Cette analyse se concentre sur les engagements liés aux retraites dans le cadre de l’assurance-vie, en regroupant plusieurs catégories de contrats1, représentant 125 milliards d’euros de provisions mathématiques moyennes en 2017. La plus importante de ces catégories, les contrats collectifs en cas de vie, représente 79% des encours moyens des contrats d’assurance-vie à dominante retraite. Le taux de revalorisation moyen des contrats collectifs à dominante retraite (hors retraite à points) s’élève à 2,47% au titre de 2017 (net de frais de chargement et de prélèvements sociaux), contre 2,54%, en 2016 sur le même périmètre et après fiabilisation des données. Cette baisse de 7 points de base est comparable à celle observée sur les taux de revalorisation des contrats individuels (de -10 points de base, le taux moyen étant de 1,83% en 2017) et nettement inférieure à l’année précédente (-30 points de base entre 2015 et 2016). La baisse de la rémunération servie est homogène, quel que soit le type de produits. Les taux de revalorisation moyens des contrats PERP sont les plus faibles du marché à 1,49% (-8 points de base entre 2016 et 2017), alors que ceux des contrats collectifs en cas de vie, baissent de 5 points de base pour s’établir à 2,63%. Les taux techniques rattachés aux contrats collectifs à dominante retraite sont élevés (1,48%). Il existe de plus des contraintes de taux techniques très différentes entre les catégories, les PERP ayant un taux technique nul. Les contrats de Retraite Professionnelle Supplémentaire (RPS) offerts par les Institutions de Retraite Professionnelle (IRP) agréées sont au contraire très contraints par leurs taux techniques plus élevés. Ainsi, l’environnement de taux bas pourrait à terme peser sur ce segment du marché de l’assurance-vie collective. Malgré cela, les contrats collectifs sont majoritairement revalorisés à un niveau supérieur au taux technique sous l’effet de contraintes contractuelles engageant l’organisme au-delà de la réglementation ou de la pression des souscripteurs. |
| Keywords: | assurance-vie, retraite, revalorisation, taux technique. |
| JEL: | G22 G28 D14 D18 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:analys:95&r=ias |
| By: | Benjamin Schoefer (UC Berkeley) |
| Abstract: | We study the role of marginal jobs in employment adjustment, in three steps. First, we provide evidence on job destruction in response to reductions in job surplus from improved worker outside options. Our design exploits a sharp quasi-experimental increase in unemployment benefits for older workers in Austria. The treatment effect is larger for workers with larger outside option increases, proxied for with their ex-ante risk of exhausting the pre-reform maximum benefit duration when unemployed. Second, we isolate and characterize the marginal matches driving this separation response, extending complier analysis to difference-in-difference settings. We find that marginal jobs originate from blue- collar occupations in industries with a high incidence of sickness and disability among older workers. Compared to surviving jobs, marginal jobs had lower earnings and lower worker fixed effects and were more prevalent in shrinking industries and firms. Taken together, our findings indicate that increasing workers’ outside options destroys low-surplus jobs. Third, one direct implication is that outside options shift the composition of surviving jobs towards higher-surplus jobs. To test this prediction, we exploit the abolition of the reform to show that the formerly-treated cohorts indeed exhibit lower extensive-margin aggregate elasticities to subsequent labor demand shocks – due to the missing mass of marginal matches the reform had previously destroyed. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1309&r=ias |
| By: | Liebert, H.; |
| Abstract: | This paper investigates the effects of introducing mandatory external medical review for disability insurance (DI) applications in a system relying on treating physician testimony. Using a unique policy change and administrative data from Switzerland, I show that external medical review reduces DI incidence by up to 23%. Incidence reductions are closely tied to difficult-to-diagnose conditions, suggesting inaccurate assessments by treating physicians. Due to a partial benefit system, reductions in full pension benefit awards are partly offset by increases in partial benefits. More intense screening also increases labor market participation, indicating either moral hazard or substantial income effects on the side of applicants. Existing benefit recipients are downgraded and lose part of their pension when scheduled medical reviews occur. Back-of-the-envelope calculations indicate that external medical review is highly cost-effective. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:18/21&r=ias |