nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒03‒01
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. How Would Medicare for All Affect Health System Capacity? Evidence from Medicare for Some By Jeffrey Clemens; Joshua D. Gottlieb; Jeffrey Hicks
  2. Mortality Effects and Choice Across Private Health Insurance Plans By Jason Abaluck; Mauricio Caceres Bravo; Peter Hull; Amanda Starc
  3. Choice of Social Security System By Larsen, Birthe; Waisman, Gisela
  4. A Comparison of Brand-Name Drug Prices Among Selected Federal Programs By Congressional Budget Office
  5. The Insurance Properties of Common Debt Issuance By Daniel Gros
  6. Multivariate higher order moments in multi-state life insurance By Jamaal Ahmad
  7. Survival Pessimism and the Demand for Annuities By Cormac O'Dea; David Sturrock
  8. Productivity Shocks, Long-Term Contracts and Earnings Dynamics By Neele Balke; Thibaut Lamadon
  9. Supporting Jobs In Fragility, Conflict, And Violence By Von Der Goltz, Jan; Mavridis, Dimitris
  10. Hierarchical random effects model for insurance pricing of vehicles belonging to a fleet By Desjardins, Denise; Dionne, Georges; Lu, Yang
  11. Initial Impacts of the Pandemic on Consumer Behavior: Evidence from Linked Income, Spending, and Savings Data By Natalie Cox; Peter Ganong; Pascal Noel; Joseph Vavra; Arlene Wong; Diana Farrell; Fiona Greig
  12. The analysis of digital marketing tactics of selected insurance companies in Croatia By Petra Leonora Cvitanović
  13. The impact of the COVID-19 shock on labour income inequality: evidence from Italy By Francesca Carta; Marta De Philippis
  14. Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes By Atul Gupta; Sabrina T Howell; Constantine Yannelis; Abhinav Gupta
  15. Health financing policy reforms for universal health coverage in eastern, central and southern Africa (ECSA)-health community region By Takondwa Mwase
  16. Nursing Homes in Equilibrium: Implications for Long-term Care Policies By Tatyana Koreshkova; Minjoon Lee

  1. By: Jeffrey Clemens (University of California, San Diego; NBER); Joshua D. Gottlieb (University of Chicago - Harris School of Public Policy; NBER); Jeffrey Hicks (University of British Columbia - Vancouver School of Economics)
    Abstract: Proposals to create a national health care plan such as “Medicare for All†rely heavily on reducing the prices that insurers pay for health care. These changes affect physicians’ short-run incentives for care provision and may also change health care providers’ incentives to invest in capacity, thereby influencing the availability of care in the long term. We provide evidence on these responses using a major Medicare payment change combined with survey data on physicians’ time use. We find evidence that physicians increase their time spent on capacity building when remuneration increases, and that they are subsequently more willing to accept new patients – especially those who may be the residual claimants on marginal capacity. These forces imply that short-run supply curves likely differ from long-run supply curves. Policymakers need to account for how major changes to payment incentives would influence the investments that determine health system capacity.
    JEL: H51 I11 I13
    Date: 2020
  2. By: Jason Abaluck (Yale University - School of Management; NBER); Mauricio Caceres Bravo (Brown University - Department of Economics); Peter Hull (University of Chicago - Becker Friedman Institute for Economics; NBER); Amanda Starc (Northwestern University - Kellogg School of Management; NBER)
    Abstract: Competition in health insurance markets may fail to improve health outcomes if consumers are not willing to pay for high quality plans. We document large differences in the mortality rates of Medicare Advantage (MA) plans within local markets. We then show that when high (low) mortality plans exit these markets, enrollees tend to switch to more typical plans and subsequently experience lower (higher) mortality. We develop a framework that uses this variation to estimate the relationship between observed mortality rates and causal mortality effects; we find a tight link. We then extend the framework to study other predictors of mortality effects and estimate consumer willingness to pay. Higher spending plans tend to reduce enrollee mortality, but existing quality ratings are uncorrelated with plan mortality effects. Consumers place little weight on mortality effects when choosing plans. Moving beneficiaries out of the bottom 5% of plans could save tens of thousands of elderly lives each year.
    Date: 2020
  3. By: Larsen, Birthe (Department of Economics, Copenhagen Business School); Waisman, Gisela (Sulcis, Stockholm University and Finansdepartementet, Stockholm)
    Abstract: This paper examines the impact of unemployment insurance and social assistance on wages, unemployment, education and inequality when educational choice and the decision to pay into an unemployment insurance fund is endogenous and when workers are heterogenous in terms of initial wealth. The higher the worker’s wealth, the lower social assistance the worker receives if unemployed. The model can help shed light on the puzzle why only some workers pay into an unemployment insurance fund as well as the relative compressed wage structure in countries with generous social assistance and unemployment insurance. We use this set up to consider whether we should as society increase social assistance or unemployment insurance, if the aim is to reduce inequality.
    Keywords: Voluntary unemployment insurance; Unemployment; Search; Education; Welfare; Inequality
    JEL: I24 J60
    Date: 2021–02–10
  4. By: Congressional Budget Office
    Abstract: The federal government is a major purchaser of prescription drugs, both directly through federal agencies, such as the Department of Defense, and indirectly through federal health insurance programs, such as Medicare Part D. In this report, CBO describes how the prices of brand-name prescription drugs are determined in different federal programs and compares drug prices among those programs in 2017.
    JEL: I10 I11 I13 I18
    Date: 2021–02–18
  5. By: Daniel Gros
    Abstract: In a federation of sovereign states, common debt can provide insurance against idiosyncratic shocks even without any intended, ex ante transfers. This insurance property arises automatically when the common debt service is financed by a levy on members that is proportional to national income. This is the case in the EU. It implies that if the economy of a member state is hit by a negative shock, i.e., if it grows less than the Union average, its contribution to the service of the common debt is correspondingly reduced. By contrast, the service of national debt, which is typically fixed in nominal terms, becomes more difficult in the case of a negative idiosyncratic shock. Ceteris paribus, common debt issuance is thus akin to linking debt service to GDP growth. Uncertainty about growth increases with the time horizon. The insurance property of common debt thus increases with its maturity.
    Date: 2020
  6. By: Jamaal Ahmad
    Abstract: It is well-known that combining life annuities and death benefits introduce opposite effects in payments with respect to the unsystematic mortality risk on the lifetime of the insured. In a general multi-state framework with multiple product types, such joint effects are less trivial. In this paper, we consider a multivariate payment process in multi-state life insurance, where the components are defined in terms of the same Markovian state process. The multivariate present value of future payments is introduced, and we derive differential equations and product integral representations of its conditional moments and moment generating function. Special attention is given to pair-wise covariances between two present values, where results closely connected to Hattendorff type of results for the variance are derived. Numerical examples are shown in a disability model and a spouse model to illustrate applicability of the results on insurance of a single life as well as two dependent lives.
    Date: 2021–02
  7. By: Cormac O'Dea (Cowles Foundation, Yale University); David Sturrock (University College London and Institute for Fiscal Studies)
    Abstract: The “annuity puzzle†refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that individuals have accurate expectations about their future survival. We provide evidence that individuals misperceive their mortality risk, and study the demand for annuities in a setting where annuities are priced by insurers on the basis of objectively-measured survival probabilities but in which individuals make purchasing decisions based on their own subjective survival probabilities. Subjective expectations have the capacity to explain signiï¬ cant rates of non-annuitization, yielding a quantitatively important explanation for the annuity puzzle.
    Keywords: Annuity Puzzle, Subjective Expectations, Survival Probabilities
    JEL: D14 D84 D91 J14
    Date: 2021–02
  8. By: Neele Balke (University of Chicago - Department of Economics); Thibaut Lamadon (University of Chicago - Department of Economics; NBER)
    Abstract: This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment in an economy with search frictions and firm commitment. We develop an equilibrium search model with worker and firm shocks and characterize the optimal contract offered by competing firms to attract and retain workers. In equilibrium, risk-neutral firms provide only partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. We prove that there exists a unique spot target wage, which serves as an attraction point for smooth wage adjustments. The structural model is estimated on matched employer-employee data from Sweden. The estimates indicate that firms absorb persistent worker and firm shocks, with respective passthrough values of 27 and 11%, but price permanent worker differences, a large contributor (32%) to variations in wages. A large share of the earnings growth variance can be attributed to job mobility, which interacts with productivity shocks. We evaluate the effects of redistributive policies and find that almost 40% of government-provided insurance is undone by crowding out firm-provided insurance.
    JEL: E24 J31 J41 J64
    Date: 2020
  9. By: Von Der Goltz, Jan; Mavridis, Dimitris
    Abstract: This Jobs Solutions Note identifies practical solutions for development practitioners and policymakers to design and implement policies and programs that improve jobs outcomes for in FCV contexts. Based on curated knowledge and evidence for a specific topic and relevant to jobs, the Jobs Solutions Notes are not intended to be exhaustive; they provide key lessons, solutions and approaches synthesized from the experiences of the World Bank Group and partners. This Note draws in part on the Integrated Framework for Jobs in Fragile and Conflict Situations and Generating employment in poor and fragile states: Evidence from labor market and entrepreneurship programs.
    Keywords: Equitable Growth, Finance and Institutions; Fragility, Conflict, and Violence; extreme poverty; Performance Award; health and other social services; disaster risk management; job fair; alternative work schedule; case of emergency; person with disability; source of funding; Post Conflict Reconstruction; investments in education; Priority Placement Premium; Annual Pay Increase; flexible work arrangement; career development; competitive pay; genetic material; security expert; parental leave; global security; work travel; international community; paid leave; monthly contribution; pension benefit; relocation support; other development; local security; Mental health; fragile states; psychological support; Worker's Compensation; resident representative; life insurance; inclusive growth; in work; Technical Training; cultural background; sustainable way; core competencies; Recognition Program; business skill; global partnership; increasing share
    Date: 2020–02–03
  10. By: Desjardins, Denise (HEC Montreal, Canada Research Chair in Risk Management); Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Lu, Yang (Concordia University)
    Abstract: We propose a hierarchical random effect model for the posterior insurance ratemaking of vehicles belonging to a fleet by allowing random effects for fleet, vehicle, and time. The model is an alternative to the gamma-Dirichlet model of Angers et al (2018), which does not allow for a closed form posterior ratemaking formula. Our theoretical extension derives a simple and tractable closed form ratemaking formula based on a hierarchical random effects specification. We estimate the corresponding econometric model and compute insurance premiums in relation to the past experience of both the vehicle and the fleet. Our econometric model can also be applied to any other dynamic count modeling application with random individual, time, and common effects, such as labor contracting, chirurgical accidents, or any other random event implying principals and many agents.
    Keywords: Hierarchical model; vehicle insurance pricing; posterior ratemaking; random effect; hierarchical random effects; panel data
    JEL: C23 C25 C55 G22
    Date: 2021–02–18
  11. By: Natalie Cox (Princeton University - Department of Economics); Peter Ganong (University of Chicago - Harris Public Policy; NBER); Pascal Noel (University of Chicago - Booth School of Business); Joseph Vavra (University of Chicago - Booth School of Business; NBER); Arlene Wong (Princeton University - Department of Economics; NBER); Diana Farrell (JPMorgan Chase Institute); Fiona Greig (JPMorgan Chase Institute)
    Abstract: We use U.S. household-level bank account data to investigate the heterogeneous effects of the pandemic on spending and savings. Households across the income distribution all cut spending from March to early April. Since mid April, spending has rebounded most rapidly for low-income households. We find large increases in liquid asset balances for households throughout the income distribution. However, lower-income households contribute disproportionately to the aggregate increase in balances, relative to their pre-pandemic shares. Taken together, our results suggest that spending declines in the initial months of the recession were primarily caused by direct effects of the pandemic, rather than resulting from labor market disruptions. The sizable growth in liquid assets we observe for low-income households suggests that stimulus and insurance programs during this period likely played an important role in limiting the effects of labor market disruptions on spending.
    Date: 2020
  12. By: Petra Leonora Cvitanović (Microsoft Croatia)
    Abstract: Insurance companies don’t always implement the same marketing tactics as their competitors, which is especially visible in the digital environment, where all of the aspects of digital marketing strategy can be compared more easily. Designing a digital marketing strategy is not an easy task because marketing specialists need to choose between many available digital platforms and select a combination of marketing tactics that will be most effective in a certain period of time. What the situation is like at Croatian insurance market is shown at the example of selected insurance companies. The independently conducted secondary research and analysis include the analysis of Google search results of insurance terms and names of insurance companies, an individual and a comparative analysis of insurance companies’ websites, as well as consolidation of marketing tactics applied at social media sites and YouTube channels in a one-year period. Constructive review of encountered digital marketing tactics is given, and best-practice cases highlighted. The goal of this paper is to determine in which way could the insurance companies improve their digital presence, alongside their clients’ satisfaction, their user experience, and subsequently improve own online sales results. In the research, internet sources were used, together with databases and literature on digital marketing and competitive positioning. The research shows different levels of digital presence of the analyzed insurance companies. While some of them are quite successful in the digital environment, the others are still not using all the benefits of some digital platforms. Through developing awareness of different digital marketing tactics applied in practice, and through learning from competitors through benchmarking, every insurance company can improve own business results.
    Keywords: digital marketing tactics, social media marketing, digital presence, insurance companies, e-Commerce, competitive analysis
    JEL: M31
    Date: 2021–02–19
  13. By: Francesca Carta (Bank of Italy); Marta De Philippis (Bank of Italy)
    Abstract: The spread of the pandemic and the consequent adoption of lockdown measures to prevent infections had severe consequences for business activity and employment. By using data from the Italian Labour Force Survey, this paper simulates the effect of the COVID-19 crisis on the dynamics and distribution of equivalized labour income in the first two quarters of 2020. Moreover, it assesses the effectiveness in smoothing labour income losses of the social insurance benefits that were in place before the crisis and of the temporary measures adopted by the Italian Government to face it. We find that the economic repercussions of the COVID-19 shock impacted low-income households more heavily than higher income families, implying a substantial increase in labour income inequality. However, our results show that the social insurance benefits temporarily introduced by the Italian Government were able, at least in the short term, to compensate for these income losses and for the increased inequality significantly more than the pre-crisis measures.
    Keywords: labour market, inequality, social insurance benefits, recessions, coronavirus, Covid-19
    JEL: H20 J20 D31
    Date: 2021–02
  14. By: Atul Gupta (University of Pennsylvania - Health Care Management); Sabrina T Howell (New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)); Constantine Yannelis (University of Chicago); Abhinav Gupta (New York University (NYU) - Department of Finance)
    Abstract: The past two decades have seen a rapid increase in Private Equity (PE) investment in healthcare, a sector in which intensive government subsidy and market frictions could lead high-powered for-profit incentives to be misaligned with the social goal of affordable, quality care. This paper studies the effects of PE ownership on patient welfare at nursing homes. With administrative patient-level data, we use a within-facility differences-in-differences design to address non-random targeting of facilities. We use an instrumental variables strategy to control for the selection of patients into nursing homes. Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other measures of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%. We observe operational changes that help to explain these effects, including declines in nursing staff and compliance with standards. Finally, we document a systematic shift in operating costs post-acquisition toward non-patient care items such as monitoring fees, interest, and lease payments.
    Date: 2021
  15. By: Takondwa Mwase (College of Medicine, Malawi)
    Abstract: Providing access to health care services and goods to all citizens has long been a cornerstone of modern health financing systems in many countries. In sub-Saharan Africa (SSA), this became evident soon after independence in the 1960s: in order to redress the significant levels of inequality and deprivation during the colonial era, most countries introduced free public health care services, as a way of increasing access to (and utilisation of) modern health services and, hence, achieving the equity goal. However, with the passage of time, countries in SSA have been faced with an increased disease burden and growing demand for quality health care services, amidst limited economic resources, low economic growth, a large informal sector with unregulated labour markets, and high population growth rates. In order to respond to this crisis, in the 1980s and 1990s, many governments with the influence/support of international organisations undertook health sector reforms, with regard to health financing, which saw the reversal of the policy of the provision of free public health care services. User fees for health services at the point of use in public health facilities were introduced in almost all countries in SSA—only a few countries, such as Malawi and Mauritius, resisted the temptation of introducing user fees for public health services at all levels nationally.
    Date: 2021–02
  16. By: Tatyana Koreshkova (Concordia University and CIREQ); Minjoon Lee (Carleton University)
    Abstract: We build an equilibrium model of a nursing home market with decision-makers on both sides of the market. On the demand side, heterogeneous households with stochastic needs for long-term care solve dynamic optimization problems, choosing between in-home and nursing-home care. On the supply side, locally competitive nursing homes decide prices and intensities of care given the household demand. The government subsidizes long-term care of the poorest. The quantitative model successfully generates key empirical patterns. Evaluation of long-term care policies shows that the equilibrium approach is important for the welfare and distributional effects of policies targeting either side of the market.
    Keywords: Long-term Care, Nursing Home, Medicaid.
    JEL: D15 E21 I11 I13
    Date: 2021–01

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