nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒03‒29
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Time Aggregation in Health Insurance Deductibles By Long Hong; Corina Mommaerts
  2. The introduction of Bismarck's social security system and its effects on marriage and fertility in Prussia By Guinnane, Timothy; Streb, Jochen
  3. The Medicaid Expansion and the Uptake of Medication-assisted Treatment for Opioid Use Disorder: Evidence from the Rhode Island All-payer Claims Database, 2012–2018 By Mary A. Burke; Riley Sullivan
  4. Performance Pay and Alcohol Use in Germany By Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe
  5. IFRS 17 : The level of aggregation in the accounting representation of the insurance business By Pierre-Emmanuel Thérond
  6. Corruption and Health Insurance for the Informal Sector in Sierra Leone By Jofre-Bonet, M.; Kamara, J.; Mesnard, A.
  7. The Health Costs of Cost-Sharing By Amitabh Chandra; Evan Flack; Ziad Obermeyer
  8. Does the Added Worker Effect Matter? By Nezih Guner; Yuliya Kulikova; Arnau Valladares-Esteban
  9. Medicaid Managed Long-Term Services and Supports: Summative Evaluation Report By Andrea Wysocki; Jenna Libersky; Jonathan Gellar; Dean Miller; Su Liu; Margaret Luo; Alena Tourtellotte; Debra Lipson
  10. The Effects of Unemployment Assistance on Unemployment Exits By Kyyrä, Tomi
  11. Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands By Julie Tréguier; Simon Rabaté
  12. Does the added worker effect matter? By Nezih Guner; Yuliya A. Kulikova; Arnau Valladares-Esteban
  13. The Value of Annuities By Gal Wettstein; Alicia H. Munnell; Wenliang Hou; Nilufer Gok
  14. Optimal Regional Labor Market Policies By Jung, Philip; Korfmann, Philipp; Preugschat, Edgar
  15. Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment By Verho, Jouko; Hämäläinen, Kari; Kanninen, Ohto
  16. Do Smaller Public Employer Pensions Spur More Saving? By Laura D. Quinby; Geoffrey T. Sanzenbacher

  1. By: Long Hong; Corina Mommaerts
    Abstract: Health insurance plans increasingly pay for expenses only beyond a large annual deductible. This paper explores the implications of deductibles that reset over shorter timespans. We develop a model of insurance demand between two actuarially equivalent deductible policies, in which one deductible is larger and resets annually and the other deductible is smaller and resets biannually. Our model incorporates borrowing constraints, moral hazard, mid-year contract switching, and delayable care. Calibrations using claims data show that the liquidity benefits of resetting deductibles can generate welfare gains of 6-10% of premium costs, particularly for individuals with borrowing constraints.
    JEL: D15 D81 G22 G52 I13
    Date: 2021–02
  2. By: Guinnane, Timothy; Streb, Jochen
    Abstract: Economists have long argued that introducing social insurance will reduce fertility. The hypothesis relies on standard models: if children are desirable in part because they provide security in case of disability or old age, then State programs that provide insurance against these events should induce couples to substitute away from children in the allocation of wealth. We test this claim using the introduction of social insurance in Germany in the period 1881-1910. Bismarck's social-insurance scheme had three pillars: health insurance, workplace accident insurance, and an old age pension. Earlier studies typically focus on the pension alone; we consider all three pillars. We find that Bismarck's social insurance system affected fertility overall only via its effects on the incentive to marry. The old age insurance by itself tended to reduce marriages, but the health and accident-insurance components had the opposite effect. For people exposed to all three pillars of social insurance, the two effects cancelled each other and the aggregate effect on fertility was muted.
    Keywords: Social insurance,pensions,fertility transition,marriage,Bismarck,Prussia
    JEL: H55 I13 J11 N13 N33 N43
    Date: 2021
  3. By: Mary A. Burke; Riley Sullivan
    Abstract: This article uses the all-payer claims database for the state of Rhode Island to assess recent progress in the state toward the goal of expanding access to medication-assisted treatment (MAT) for opioid use disorder (OUD). The analysis highlights the role played by the Affordable Care Act (ACA) and the associated Medicaid expansion in furthering that goal. Using measures that account for changes in health insurance enrollment, we find that the MAT rate per 100,000 enrollees in Rhode Island effectively doubled between 2012 and 2018, while the prevalence of OUD in the sample also doubled over the same period. Taken at face value, it would appear that the growth in the MAT rate over the period was just sufficient to meet the increased need for treatment. However, when we analyze the trends in MAT rates and OUD rates separately for Medicaid enrollees and non-Medicaid enrollees, the progress in treating OUD patients with MAT seems to have been much greater for the Medicaid population. In terms of raw numbers, the largest single-year gain in the number of patients receiving MAT occurred in 2014, the year when the ACA and Medicaid expansion went into effect. Among the first-time enrollees of 2014 who received MAT, over 80 percent were Medicaid enrollees, and those individuals accounted for more than one-third of the overall increase in MAT patients from the previous year. The analysis also suggests that expanded uptake of MAT may have contributed to the decline in opioid-related mortality in Rhode Island that occurred between 2016 and 2018, although more recent (preliminary) evidence suggests that Rhode Island as well as the rest of the country saw a resurgence in opioid-related mortality in 2020.
    Keywords: medication-assisted treatment; opioid use disorder; Rhode Island; all-payer claims database; buprenorphine; methadone; Affordable Care Act; Medicaid
    Date: 2021–03–17
  4. By: Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe
    Abstract: We study the link between performance pay and alcohol use in Germany, a country with mandated health insurance. Previous research from the US argues that alcohol use as a form of "self-medication" may be a natural response to the stress and uncertainty of performance pay when many workers do not have access to health insurance. We find that the likelihood of consuming each of four types of alcohol (beer, wine, spirits, and mixed drinks) is higher for those receiving performance pay even controlling for a long list of economic, social and personality characteristics and in sensible IV estimates. We also show that the total number of types of alcohol consumed is larger for those receiving performance pay. We conclude that even in the face of mandated health insurance, the link found in the US persists in Germany.
    Keywords: Performance Pay,Alcohol,Stress
    JEL: I12 J33
    Date: 2021
  5. By: Pierre-Emmanuel Thérond (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: Publiée en mai 2017 par l'IASB, IFRS 17 : Contrats d'assurance résulte d'un des projets les plus longs qu'ait eu à mener le normalisateur comptable international. Cela est une des marques de la difficulté de concevoir des principes d'évaluation des provisions correspondantes aux engagements d'assurance, et surtout à la reconnaissance du produit de ces activités et, in fine, du résultat qui en découle. Difficultés liées au business model si particulier de cette activité : un business model marqué par l'inversion du risque de production et une grande hétérogénéité de produits, notamment en assurance vie. Dans ce contexte, et compte tenu des principes d'évaluation des provisions qu'a retenus l'IASB, la question du niveau d'agrégation, i.e. de l'unité de comptabilisation à laquelle le revenu doit être déterminé s'est imposée comme cruciale. En effet, l'articulation de préoccupations comptables naturelles telles que le non-report de pertes attendues ou encore le non-report de gains au-delà du terme des contrats auxquels ils se rapportent se voient confrontés au business model de l'assurance vie fondé autour du principe de la mutualisation et du partage du sort. Ainsi, s'agissant des contrats d'assurance vie avec participation aux bénéfices discrétionnaire, la notion de groupe de contrats, telle que définie par l'IASB, associée aux principes d'évaluation des provisions conduit à une représentation artificielle et potentiellement très volatile de la profitabilité de ces contrats. Contrats qui partagent des éléments sous-jacents et une mutualisation intergénérationnelle. Dans ce travail, nous mettons en évidence les limites du modèle comptable proposé par l'IASB et, en particulier, de sa disposition de considérer des groupes de contrats participatifs correspondant à des cohortes (a minima) annuelles pour la détermination de la CSM, et donc de la maille à laquelle le revenu est comptabilisé. En conclusion, nous proposons, pour certains types de contrats participatifs, une évolution normative qui consisterait à lever cette exigence de regroupement par cohortes de souscription. Ce qui, sans conduire à une perte d'information pour les utilisateurs d'états financiers, serait d'une plus grande cohérence avec le business model de ces activités et conduirait à éviter des coûts importants chez les préparateurs. Coûts qui n'ont pas de contrepartie en matière de gains d'information par les utilisateurs des états financiers.
    Date: 2020–04
  6. By: Jofre-Bonet, M.; Kamara, J.; Mesnard, A.
    Abstract: Most governments cannot provide the necessary health services required for their citizens either as a result of scarcity of resources or corruption (Mostert et al., 2012). Lack of credibility and trust in fund managers has been highlighted as one of the reasons why people do not join health insurance schemes in developing countries, especially in Africa (Escobar et al., 2010). This work investigates the impact of corruption on household’s willingness to participate and pay for health insurance in the presence of corruption. To do so, we use (1) a binary logit model to study the relationship between household characteristics and experienced corruption; (2) an ordered probit model to explore how household characteristics are associated to the intensity of corruption perceived; and (3) a Mixed Logit model to estimate the association of corruption and participation and willingness to pay for a health insurance scheme. We find that corruption decreases the willingness to participate and pay for a public Health Insurance Scheme (HIS). Comparing experienced and perceived corruption, we observe that experienced corruption affects less WTP for a HIS than perceived corruption. Households experiencing corruption, are willing to pay more for a public HIS than those that perceive high levels of corruption. The implications of our findings are in line with the literature and stress the perverse spillover effects of corruption. Not only corruption hinders the effectiveness of health care systems and thus health outcomes, but it also undermines the willingness to pay for them and thus imperils the sustainability of health care systems in the countries that are most in need of them.
    Date: 2021
  7. By: Amitabh Chandra; Evan Flack; Ziad Obermeyer
    Abstract: We use the design of Medicare’s prescription drug benefit program to demonstrate three facts about the health consequences of cost-sharing. First, we show that an as-if-random increase of 33.6% in out-of-pocket price (11.0 percentage points (p.p.) change in coinsurance, or $10.40 per drug) causes a 22.6% drop in total drug consumption ($61.20), and a 32.7% increase in monthly mortality (0.048 p.p.). Second, we trace this mortality effect to cutbacks in life-saving medicines like statins and antihypertensives, for which clinical trials show large mortality benefits. We find no indication that these reductions in demand affect only ‘low-value’ drugs; on the contrary, those at the highest risk of heart attack and stroke, who would benefit the most from statins and antihypertensives, cut back more on these drugs than lower risk patients. Similar patterns exist for other drug–disease pairs, and irrespective of socioeconomic circumstance. Finally, we document that when faced with complex, high-dimensional choice problems, patients respond in simple, perverse ways. Specifically, price increases cause 18.0% more patients (2.8 p.p.) to fill no drugs, regardless of how many drugs they had been on previously, or their health risks. This decision mechanically results in larger absolute reductions in utilization for those on many drugs. We conclude that cost-sharing schemes should be evaluated based on their overall impact on welfare, which can be very different from the price elasticity of demand.
    JEL: I12 I13
    Date: 2021–02
  8. By: Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros); Yuliya Kulikova (Banco de España); Arnau Valladares-Esteban (University of St. Gallen)
    Abstract: The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners' job loss. We propose a new method to calculate the AWE, which allows us to estimate its effect on any labor market outcome. We show that the AWE reduces the fraction of households with two non-employed members. The AWE also accounts for why women's employment is less cyclical and more symmetric compared to men. In recessions, while some women lose their employment, others enter the labor market and nd jobs. This keeps the female employment relatively stable.
    Keywords: Household labor supply, intra-household insurance, female employment, cyclicality, skewness.
    JEL: D1 E32 J21 J22
    Date: 2020–01
  9. By: Andrea Wysocki; Jenna Libersky; Jonathan Gellar; Dean Miller; Su Liu; Margaret Luo; Alena Tourtellotte; Debra Lipson
    Abstract: This report presents findings from a multi-state evaluation examining how managed long-term services and supports (MLTSS) beneficiaries compare to those receiving long-term services and supports (LTSS) in fee-for-service (FFS) on spending, service use, quality of care, access to care, and beneficiary experience and quality of life.
    Keywords: managed long-term services and supports, MLTSS, Medicaid, 1115 evaluation
  10. By: Kyyrä, Tomi
    Abstract: Many countries have a two-tiered unemployment compensation system which provides earnings-related unemployment insurance for a limited period of time and less generous unemployment assistance thereafter. This study evaluates the effects of a reform in Finland that increased the level of unemployment assistance by 22%. The reform led to a drop of 9% in the unemployment exit hazard, which can be attributed to fewer exits to both employment and inactivity. The implied elasticities suggest that a 10% increase in unemployment assistance reduces the unemployment exit hazard by 4% and the job finding hazard by 6%. These effects are relatively small compared to the existing evidence on the effects of unemployment insurance benefits.
    Keywords: unemployment assistance, labor market subsidy, hazard rate, unemployment duration, Social security, taxation and inequality, Labour markets and education, J64, J68,
    Date: 2021
  11. By: Julie Tréguier (INED - Institut national d'études démographiques, IPP - Institut des politiques publiques, EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Simon Rabaté (CPB - Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper investigates the impact of survivors insurance on marital behavior. We study the 1996 Dutch reform which considerably tightened eligibility rules to survivors' benefits. Exploiting a discontinuity in date of birth eligibility to survivors insurance and using a rich and exhaustive of the Dutch population administrative dataset, we carry out a regression discontinuity design and we find no evidence of the reform on divorce probability. Exploring possible explanations for our zero-effect result, we study how labor supply responses can compensate the income drop the reform induced. We find a strong increase in the labor force participation of widows after the reform. However this response does not completely offset the decrease in income generated form the cut in survivors benefits.
    Date: 2021–03–02
  12. By: Nezih Guner (CEMFI); Yuliya A. Kulikova (Banco de España); Arnau Valladares-Esteban (University of St. Gallen and Sew)
    Abstract: The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners’ adverse labor market outcomes. We propose a new method to calculate the AWE that allows us to estimate its effect on any labor market outcome. The AWE reduces the fraction of households with two non-employed members by 16% for the 1977-2018 period; 28% in the 1990 recession and 23% during the great recession. The AWE also accounts for why women’s employment is much less cyclical and more symmetric than men’s. Without the AWE, married women’s employment would be as volatile as men and display negative skewness (declining quickly in recessions and recovering slowly in expansions). In recessions, while some women lose their employment, others enter the labor market and find jobs. This keeps female employment relatively stable.
    Keywords: added worker effect, household labor supply, intra-household insurance, female employment, cyclicality, skewness
    JEL: D1 E32 J21 J22
    Date: 2021–03
  13. By: Gal Wettstein; Alicia H. Munnell; Wenliang Hou; Nilufer Gok
    Abstract: Annuities could benefit retirees, but these products can also be costly. Yet, despite significant changes in factors that can affect annuity pricing and value, the moneyÕs worth of individual annuities in the United States has not been addressed in the research literature in 25 years. This paper revisits this topic to: 1) identify underlying pricing trends as interest rates and mortality rates have declined; 2) evaluate new products, such as deferred and indexed annuities; and 3) explore the implications of the divergent trends in mortality by socioeconomic status (SES). The analysis involves not only calculating the present value of payments relative to premiums but also estimating the welfare gains from such longevity insurance. The results show that moneyÕs worth and wealth equivalence have remained stable over time despite dramatic changes in mortality and interest rates; that deferred annuities provide better longevity insurance than immediate annuities and, therefore, involve higher premiums; and that growing gaps in mortality across SES groups yield widening gaps in the value of immediate annuities across racial and educational groups.
    Date: 2021–03
  14. By: Jung, Philip (TU Dortmund); Korfmann, Philipp (TU Dortmund); Preugschat, Edgar
    Abstract: We document large and persistent spatial dispersion in unemployment rates, vacancies, labor market tightness, labor market flows, and wages for Germany on a granular regional level. We show that in the 1990s differences in inflows from employment to unemployment were the key driver of regional dispersion in unemployment rates while in the 2000s outflows became more important. To account for the documented regional dispersion we develop a spatial search and matching model with risk-averse agents, endogenous separations and unobservable search effort that leads to moral hazard and quantify the relative importance of 4 potential structural driving forces: dispersion in productivity, in the bargaining strength of workers, in idiosyncratic risk components and in regional matching efficiency. Based on region-specific estimates of these factors we then study the resulting policy trade-off between insurance, regional redistribution and efficiency. We design (optimal) region-specific labor market policies that can be implemented using hiring subsidies, layoff taxes, unemployment insurance benefits and transfers financed by social insurance contributions. We find that a move towards an optimal tax system that explicitly conditions on regional characteristics could lead to sizable welfare and employment gains.
    Keywords: optimal labor market policies, regional unemployment
    JEL: J50
    Date: 2021–03
  15. By: Verho, Jouko; Hämäläinen, Kari; Kanninen, Ohto
    Abstract: This paper provides evidence that replacing minimum unemployment benefits with a basic income of equal size has minor employment effects at best. We examine an experiment in Finland in which 2,000 benefit recipients were randomized to receive a monthly basic income. The experiment lowered participation tax rates by 23pp for full-time employment. Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the first year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.
    Keywords: Employment, Field experiment, Social insurance, Unemployment benefits, Social security, taxation and inequality, Labour markets and education, C93, H55, I38, J65,
    Date: 2021
  16. By: Laura D. Quinby; Geoffrey T. Sanzenbacher
    Abstract: A simple lifecycle model predicts that employees should react to variation in their expected pension income by adjusting their supplemental retirement saving. Whether this prediction is accurate may turn out to be very important for state and local workers. While a common narrative holds that state and local workers spend a full career in government and retire with substantial defined benefit pensions, in practice, their defined benefit wealth varies widely across jurisdictions, and a subset of plans are so poorly funded that they may not be able to pay full benefits. In addition, about 25 percent of state and local workers are not covered by Social Security in their current job. To see whether public workers are likely to augment their pensions with outside savings, this brief, based on a recent study, explores the relationship between participation in a supplemental defined contribution plan and three factors that could impact the need to save: low wealth accumulation in a defined benefit plan, low plan funded levels, and lack of Social Security coverage. The discussion proceeds as follows. The first section describes what we know about the interaction between saving in defined benefit pensions (employer plans and Social Security) and supplemental saving. The second section discusses the data used to examine how supplemental saving relates to public employer defined benefit plans. The third section describes the methodology that relates supplemental savings to an employeeÕs pension plan savings, the planÕs funded ratio, and Social Security coverage. The fourth section presents the results, which show that workers modestly increase their participation in a defined contribution plan in response to lower required contributions to their pension, but not to a low pension funded ratio or a lack of Social Security coverage. The final section concludes that if states and localities hope their workers will make up for reduced pension income through supplemental savings, that hope may be ill-founded.
    Date: 2021–03

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