nep-ias New Economics Papers
on Insurance Economics
Issue of 2019‒10‒21
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Household Labor Search, Spousal Insurance, and Health Care Reform By Hanming Fang; Andrew Shephard
  2. The Effects of the Affordable Care Act Medicaid Expansion on Subjective Well-being By Kim, Seonghoon; Koh, Kanghyock
  3. Does Medicare Coverage Improve Cancer Detection and Mortality Outcomes? By Rebecca Myerson; Reginald Tucker-Seeley; Dana Goldman; Darius Lakdawalla
  4. All Medicaid Expansions Are Not Created Equal: The Geography and Targeting of the Affordable Care Act By Craig Garthwaite; John A. Graves; Tal Gross; Zeynal Karaca; Victoria R. Marone; Matthew J. Notowidigdo
  5. The Affordable Care Act and the Market for Higher Education By Rajashri Chakrabarti; Maxim Pinkovskiy
  7. Subsidy Targeting with Market Power By Maria Polyakova; Stephen P. Ryan
  8. A Menu of Insurance Contracts for the Unemployed By Barnichon, Régis; Zylberberg, Yanos
  9. Local Labor Demand and Participation in Social Insurance Programs By Andersen, Asbjørn Goul; Markussen, Simen; Røed, Knut
  10. A generalised CIR process with externally-exciting and self-exciting jumps and its applications in insurance and finance By Dassios, Angelos; Jang, Jiwook; Zhao, Hongbiao
  11. Optimal ratcheting of dividends in insurance By Hansjoerg Albrecher; Pablo Azcue; Nora Muler
  12. A BSDE-based approach for the optimal reinsurance problem under partial information By Matteo Brachetta; Claudia Ceci
  13. Life Cycle Saving and Dissaving Revisited across Three-Tiered Income Groups: Starting Hypotheses, Refinement through Literature Review, and Ideas for Empirical Testing By Holzmann, Robert; Ayuso, Mercedes; Alaminos, Estefanía; Bravo, Jorge Miguel
  14. The Single Resolution Fund and the Credit Default Swap: What is the Coasian fair price of their insurance services? By Naszodi, Anna
  15. Proposition pour l'appel à article « L'industrialisation de la santé » de la Revue Management & Avenir Santé. « L'industrialisation de la médecine libérale : une approche par l'économie des conventions » By Nicolas da Silva
  16. Can your house keep you out of a nursing home? By Maaike Diepstraten; Rudy Douven; Bram Wouterse

  1. By: Hanming Fang (University of Pennsylvania); Andrew Shephard (University of Pennsylvania)
    Abstract: Health insurance in the United States for the working age population has traditionally been provided in the form of employer-sponsored health insurance (ESHI). If employers offered ESHI to their employees, they also typically extended coverage to their spouse and dependents. Provisions in the Affordable Care Act (ACA) significantly alter the incentive for firms to offer insurance to the spouses of employees. We evaluate the long-run impact of the ACA on firms’ insurance offerings and on household outcomes by developing and estimating an equilibrium job search model in which multiple household members are searching for jobs. The distribution of job offers is determined endogenously, with compensation packages consisting of a wage and menu of insurance offerings (premiums and coverage) that workers select from. Using our estimated model we find that households’ valuation of employer-sponsored spousal health insurance is significantly reduced under the ACA, and with an “employee-only” health insurance contract emerging among low productivity firms. We relate these outcomes to the specific provisions in the ACA.
    Keywords: Health, Health Insurance, Labor Market Equilibrium, Household Search
    JEL: G22 I11 I13 J32
    Date: 2019–10–14
  2. By: Kim, Seonghoon (Singapore Management University); Koh, Kanghyock (Korea University)
    Abstract: This study analyzes the effects of the 2014 Affordable Care Act (ACA) Medicaid expansion on the subjective well-being of individuals in the United States. Using data from the Panel Study of Income Dynamics, we find that the expansion has significantly improved the overall life satisfaction of low-income non-elderly adults. Various sensitivity checks and falsification tests confirm the internal validity. Our findings imply that, without considering psychological benefits, the actual benefits of the ACA Medicaid expansion may be underemphasized.
    Keywords: Affordable Care Act Medicaid Expansion, health insurance, subjective well-being, life satisfaction, happiness
    JEL: I13 I18 I31
    Date: 2019–09
  3. By: Rebecca Myerson; Reginald Tucker-Seeley; Dana Goldman; Darius Lakdawalla
    Abstract: Medicare is the largest government insurance program in the United States, providing coverage for over 60 million people in 2018. This paper analyzes the effects of Medicare insurance on health for a group of people in urgent need of medical care – people with cancer. We used a regression discontinuity design to assess impacts of near-universal Medicare insurance at age 65 on cancer detection and outcomes, using population-based cancer registries and vital statistics data. Our analysis focused on the three tumor sites with recommended screening before and after age 65: breast, colorectal, and lung cancer. At age 65, cancer detection increased by 72 per 100,000 population among women and 33 per 100,000 population among men; cancer mortality also decreased by 9 per 100,000 population for women but did not significantly change for men. In a placebo check, we found no comparable changes at age 65 in Canada. This study provides the first evidence to our knowledge that near-universal access to Medicare at age 65 is associated with improvements in population-level cancer mortality, and provides new evidence on the differences in the impact of health insurance by gender.
    Keywords: cancer detection, Medicare, mortality
    JEL: I10 I13 J16
    Date: 2019–10
  4. By: Craig Garthwaite; John A. Graves; Tal Gross; Zeynal Karaca; Victoria R. Marone; Matthew J. Notowidigdo
    Abstract: We use comprehensive patient-level discharge data to study the effect of Medicaid on the use of hospital services. Our analysis relies on cross-state variation in the Affordable Care Act’s Medicaid expansion, along with within-state variation across ZIP Codes in exposure to the expansion. We find that the Medicaid expansion increased Medicaid visits and decreased uninsured visits. The net effect is positive for all visits, suggesting that those who gain coverage through Medicaid consume more hospital services than they would if they remained uninsured. The increase in emergency department visits is largely accounted for by “deferrable” medical conditions. Those who gained coverage under the Medicaid expansion appear to be those who had relatively high need for hospital services, suggesting that the expansion was well targeted. Lastly, we find significant heterogeneity across Medicaid-expansion states in the effects of the expansion, with some states experiencing a large increase in total utilization and other states experiencing little change. Increases in hospital utilization were larger in Medicaid-expansion states that had more residents gaining coverage and lower pre-expansion levels of hospital uncompensated care costs.
    JEL: H51 H75 I13
    Date: 2019–09
  5. By: Rajashri Chakrabarti; Maxim Pinkovskiy
    Abstract: Through changing the connection between insurance and employment, the Affordable Care Act (ACA) has affected people’s incentives to obtain education. We employ a triple-difference strategy comparing counties with different levels of uninsurance pre-ACA and in states with different Medicaid expansion decisions across time to investigate changes in enrollment in different types of higher education institutions. We find that enrollment in less than 2-year for-profit colleges increased more between high- and low-uninsurance counties in states that expanded Medicaid relative to states that didn’t, with nearly all the increase taking place after the 2012 Supreme Court decision that gave states the right to choose not to expand Medicaid. Differential enrollment is at for all other comparable college types. We find this differential increase in less than 2-year for-profit college enrollment to be remarkably general across various demographic groups, although the effect is statistically and economically more significant for Hispanics. Studying effects on certificates awarded, we find strong evidence that the increase in enrollment led to an increase in certificates awarded, most prominently in vocational fields. This pattern is consistent with the notion that by relaxing job-lock, the ACA encouraged individuals to seek training in vocational fields that would facilitate employment in low-insurance industries. Our results are robust to controlling for confounders such as the differential impact of the Great Recession, changes in state appropriations for higher education, differences in age composition across counties, thus ruling out the role of the young adult provision of the ACA in contributing to our results, and survive a plethora of sensitivity checks.
    Keywords: Affordable Care Act, postsecondary education, for-profits schools, health insurance, medicaid
    JEL: H40 I10 I20
    Date: 2019
  6. By: Pervez Wahab
    Abstract: "Indian agricultural sector still depended mostly on monsoons. The erratic and uneven distribution of monsoon rains continued unpredictability and hence farmers exposure to risk and uncertainty. In this scenario of high risk and uncertainty of rain fed agriculture, allocating risk is an important aspect of decision making to farmers. About 70% population of our country depends on agriculture but Indian agriculture depends on monsoon. It leads to operating risk in cultivation of different crops. To cover the risk which may occur in future there is need to some provision. Crop Insurance scheme is the only mechanism available to safeguard against production risk in agriculture. In this research paper I am trying to give focus on Agriculture Insurance scheme in India as well as Agriculture Insurance companies. With the passing of Insurance Regulatory and Development Authority (IRDA) Act 1999 Indian insurance sector opened to a healthy competition by entry of new private insurers into insurance business hitherto the area of public sector. Insurance penetration (premium as % of GDP) in India was merely 1.93% showing 0.54% and 1.39% in nonlife and life insurance sectors respectively, which is far below from the 16.54%, 13.35%, 11.28% & 11.17% of South Africa, South Korea, Japan & UK respectively (table 1). Being an agrarian economy, there are immense opportunities in agricultural/rural insurance in India. The new areas like weather insurance, rainfall insurance and cyclone insurance give scope even for new private insurers and reinsures to exploit the opportunities in the niche areas." Key Words: Crop Insurance, Agriculture, Population, Insurance Companies Policy
    Date: 2019–09
  7. By: Maria Polyakova; Stephen P. Ryan
    Abstract: In-kind public transfers are commonly targeted based on observable characteristics of potential recipients. This paper argues that when the subsidized good is provided by imperfectly-competitive firms, targeting can give rise to a “demographic externality,” creating unintended redistribution of surplus and distorting efficiency. We illustrate this mechanism empirically in the context of means-tested subsidies for privately-provided health insurance plans under the Affordable Care Act (ACA). Using a structural model of supply and demand, we show that market power increases the welfare loss from subsidy targeting, vis-a-vis income-invariant subsidies, by 33 percent.
    JEL: H0 H2 H20 H21 H22 H23 H31 H41 H5 H51 I1 I10 I11 I13 I18 I38 L0
    Date: 2019–10
  8. By: Barnichon, Régis; Zylberberg, Yanos
    Abstract: Unemployment insurance (UI) programs traditionally take the form of a single insurance contract offered to job seekers. In this work, we show that offering a menu of contracts can be welfare improving in the presence of adverse selection and moral hazard. When insurance contracts are composed of (i) a UI payment and (ii) a severance payment paid at the onset of unemployment, offering contracts with different ratios of UI benefits to severance payment is optimal under the equivalent of a single-crossing condition: job seekers in higher need of unemployment insurance should be less prone to moral hazard. In that setting, a menu allows the planner to attract job seekers with a high need for insurance in a contract with generous UI benefits, and to attract job seekers most prone to moral hazard in a separate contract with a large severance payment but little unemployment insurance. We propose a simple sufficient statistics approach to test the single-crossing condition in the data.
    Keywords: Adverse Selection; moral hazard; Unemployment insurance
    JEL: D82 J65
    Date: 2019–08
  9. By: Andersen, Asbjørn Goul (Ragnar Frisch Centre for Economic Research); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: Based on administrative data from Norway, we explore the "grey area" between the roles of unemployment- and temporary disability-insurances by examining how participation in these two program types is affected by local labor demand conditions. Local labor demand is identified by means of a shift-share instrumental variables strategy, where initial local industry-composition is interacted with sub-sequent national industry-specific employment fluctuations. Our results indicate that local labor demand has a large negative effect on the propensity to claim disability insurance, which, for some groups, is remarkably similar to its effect on the propensity to claim unemployment insurance. Based on this finding, we question whether it is meaningful to maintain a sharp distinction between these two programs.
    Keywords: unemployment, disability insurance, program substitution, shift-share analysis
    JEL: J23 J58 J65 H55
    Date: 2019–10
  10. By: Dassios, Angelos; Jang, Jiwook; Zhao, Hongbiao
    Abstract: In this paper, we study a generalised CIR process with externally-exciting and self-exciting jumps, and focus on the distributional properties and applications of this process and its aggregated process. The aim of the paper is to introduce a more general process that includes many models in the literature with self-exciting and external-exciting jumps. The first and second moments of this jump-diffusion process are used to calculate the insurance premium based on mean-variance principle. The Laplace transform of aggregated process is derived, and this leads to an application for pricing default-free bonds which could capture the impacts of both exogenous and endogenous shocks. Illustrative numerical examples and comparisons with other models are also provided.
    Keywords: contagion risk; insurance premium; aggregate claims; default-free bond pricing; self-exciting process; Hawkes process; CIR process
    JEL: G32
    Date: 2019
  11. By: Hansjoerg Albrecher; Pablo Azcue; Nora Muler
    Abstract: We address a long-standing open problem in risk theory, namely the optimal strategy to pay out dividends from an insurance surplus process, if the dividend rate can never be decreased. The optimality criterion here is to maximize the expected value of the aggregate discounted dividend payments up to the time of ruin. In the framework of the classical Cram\'{e}r-Lundberg risk model, we solve the corresponding two-dimensional optimal control problem and show that the value function is the unique viscosity solution of the corresponding Hamilton-Jacobi-Bellman equation. We also show that the value function can be approximated arbitrarily closely by ratcheting strategies with only a finite number of possible dividend rates and identify the free boundary and the optimal strategies in several concrete examples. These implementations illustrate that the restriction of ratcheting does not lead to a large efficiency loss when compared to the classical un-constrained optimal dividend strategy.
    Date: 2019–10
  12. By: Matteo Brachetta; Claudia Ceci
    Abstract: We investigate the optimal reinsurance problem under the criterion of maximizing the expected utility of terminal wealth when the insurance company has restricted information on the loss process. We propose a risk model with claim arrival intensity and claim sizes distribution affected by an unobservable environmental stochastic factor. By filtering techniques (with marked point process observations), we reduce the original problem to an equivalent stochastic control problem under full information. Since the classical Hamilton-Jacobi-Bellman approach does not apply, due to the infinite dimensionality of the filter, we choose an alternative approach based on Backward Stochastic Differential Equations (BSDEs). Precisely, we characterize the value process and the optimal reinsurance strategy in terms of the unique solution to a BSDE driven by a marked point process.
    Date: 2019–10
  13. By: Holzmann, Robert (University of New South Wales); Ayuso, Mercedes (University of Barcelona); Alaminos, Estefanía (University of Barcelona); Bravo, Jorge Miguel (Universidade Nova de Lisboa)
    Abstract: The lifecycle approach is the workhorse to model saving decisions of individuals. It conjectures individuals preferring a constant consumption stream across their lifecycle saving till retirement and dis-saving thereafter. The reality is often at odd with this assumption giving rise to our conjectured three-tier life-cycle model by income groups. The low-income tier does little saving and in consequence little dissaving; the high-income tier does save during active life and profits often from bequests, but no dissaving is taking place unless hit by a major shock; only the middle tier behaves broadly as predicted. The drivers for such a differentiated behavior are conjectured to be threefold: External settings such as a multitude of shocks; preferences deviations such a behavioral bias, and institutional settings and interventions, such as minimum income provisions. The paper outlines these corresponding hypotheses, presents some first conceptual and empirical support, and reviews the international literature on the conjectured drivers. The review of international literature does not shatter our conjecture of a broadly three-tiered and reframed applicability of the life cycle model but offers some first precisions and wrinkles. The paper proposes next conceptual and empirical steps, including enriching existing wealth distribution estimates at retirement with sound estimates of social insurance wealth (pension and health), focused hypothesis testing of the key drivers with household panel data, and formulating policy responses if the new hypotheses are not rejected.
    Keywords: shocks and saving/dissaving, wealth distribution, financial wealth, property, social security wealth
    JEL: D31 E21
    Date: 2019–09
  14. By: Naszodi, Anna
    Abstract: This paper develops an option-based model to analyze the relationship between two insurances both providing protection against bank failures. One of these insurances is offered to European banks by the Single Resolution Fund on a compulsory basis in return for their contributions to the Fund, while the other is by the CDS market. The model provides a theoretical framework for testing whether the contributions of banks are fair in the Coasian sense relative to the CDS spreads.
    Keywords: bank resolution; resolution fund; CDS; Coasian tax; Merton model
    JEL: G13 G28
    Date: 2019–04–02
  15. By: Nicolas da Silva (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The aim of this article is to analyze the industrialization of physician private practice from the French convention theory framework. This industrialization can be illustrated by recent reforms seeking to regulate medical practice around the respect of quantified and standardized norms of quality of health care. Everything happens as if health care was a homogenous product easily reproducible from one patient to another – irrespective to their singularities. Rather than considering it to be a "rationalization", we show that it is a modification of the health care convention of quality – from inspired/domestic convention to industrial convention. Equally legitimate, deliberation or compromise between theses conventions should be the subject of a political debate which is not the case. Worst, in the actual context, it is likely that industrialization, which is a response to legitimates critics, become an accelerator of commodification – harmful for patients and for physicians.
    Abstract: Cet article propose d'analyser l'industrialisation de la médecine libérale à partir du cadre théorique de l'économie des conventions. L'industrialisation du secteur se donne à voir à travers les réformes visant à réguler les pratiques médicales autour du respect de standards quantifiés de qualité des soins. Tout se passe comme si le soin était un produit homogène facilement réplicable d'un patient à un autre, indépendamment de leurs singularités. Plutôt que de considérer ce mouvement comme une « rationalisation », nous montrons qu'il s'agit d'une modification de la convention de qualité des soins médicaux-d'une convention inspirée/domestique à une convention industrielle. Egalement légitimes, la délibération ou le compromis entre ces deux conventions devraient faire l'objet d'un débat politique ce qui n'est pas le cas. Pis, dans le contexte actuel, il est fort probable que l'industrialisation des soins, qui est une réponse à des critiques légitimes de la convention inspirée/domestique, deviennent un accélérateur de la marchandisation des soins-celle-ci étant néfaste tant pour les malades que pour les professionnels.
    Keywords: Physician private practice,doctor,industrialization,quality of health care,commodification,French convention theory.,industrialisation,qualité des soins,marchandisation,médecin,Médecine libérale,économie des conventions.
    Date: 2018
  16. By: Maaike Diepstraten (CPB Netherlands Bureau for Economic Policy Analysis); Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Bram Wouterse (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: We examine the impact of the accessibility of an older individual’s house on her use of nursing home care. We link administrative data on the accessibility of all houses in the Netherlands to data on long-term care use of all older persons from 2011-2014. We find that older people living in more accessible houses are less likely to use nursing home care. The effects increase with age and are largest for individuals aged 90 or older. The effects are stronger for people with physical limitations than for persons with cognitive problems. We also provide suggestive evidence that older people living in more accessible houses substitute nursing home care by home care.
    JEL: I11 I13 H51
    Date: 2019–04

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