nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒07‒12
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Risk of High Out-of-Pocket Health Spending among Older Americans By Helen Levy
  2. Recent Trends in Disability and the Implications for Use of Disability Insurance By Timothy A. Waidmann; HwaJung Choi; Robert F. Schoeni; John Bound
  3. When implementation goes wrong: Lessons from crop insurance in India By Nirmal, Rajalakshmi; Babu, Suresh Chandra
  4. UI Generosity and Job Acceptance: Effects of the 2020 CARES Act By Petrosky-Nadeau, Nicolas; Valletta, Robert G.
  5. Layoffs during the COVID-19 Pandemic: Four Findings from WARN Act Data By Ruben Hernandez-Murillo; Pawel Krolikowski
  6. Young and Hungry? Employment Levels for Young People During Spring 2021 By Winters, John V.
  7. Effects of Unanticipated Income Shocks on Consumption in Mexico, 2000-2016 By Llamosas-Rosas Irving;Rangel González Erick
  8. Fragmentation by design: universal health coverage policies as governmentality in Senegal By Mladovsky, Philipa
  9. Life Expectancy and Income Levels in Chile By Gonzalo Edwards; Raimundo Soto; Felipe Zurita

  1. By: Helen Levy (University of Michigan and NBER)
    Abstract: Traditional Medicare imposes significant cost-sharing on beneficiaries. Most but not all beneficiaries obtain supplemental insurance through Medigap, Medicare Advantage, Medicaid, or employer-sponsored retiree coverage, which may vary in how well they protect against the risk of high spending. This paper uses data from the Health and Retirement Study for the years 2002 through 2016 to document how supplemental coverage for Medicare beneficiaries 65 and older has changed over time, and to estimate the distribution of out-of-pocket spending for enrollees with different coverage types. I find that the shares of beneficiaries with employer-sponsored supplemental coverage or Medigap declined between 2002 and 2016, whereas the shares with Medicare Advantage or no supplemental coverage for doctor and hospital bills have increased. The majority of those with no supplemental coverage for doctor and hospital bills have Medicare Part D, which covers prescription drug expenses. I find that all supplemental coverage types are associated with lower observed dispersion in out-of-pocket medical care spending, measuring dispersion as the ratio of the 90th to the 50th percentile or the standard deviation. All supplemental insurance types are associated with a lower probability that out-of-pocket medical care spending exceeds 10% of household income, while all but Medicaid are associated with a significantly higher probability that total out-of-pocket health spending (that is, medical care plus health insurance premiums) exceeds this threshold. Thus, all supplemental insurance forms effectively function as insurance, translating uncertain medical costs into more predictable — although still potentially burdensome — premiums.
    Date: 2020–09
  2. By: Timothy A. Waidmann (Urban Institute); HwaJung Choi (University of Michigan); Robert F. Schoeni (University of Michigan); John Bound (University of Michigan)
    Abstract: The health of the working-aged population is a key driver of enrollment in and spending by the two most important federal disability programs, Social Security Disability Insurance (DI) and Supplemental Security Income (SSI). Recent studies have found that some dimensions of the population’s health approaching retirement age have worsened relative to earlier cohorts. Other things equal, these unfavorable health trends would be expected to cause both applications and disability awards to increase and portend fiscal challenges for DI and SSI. Using two nationally representative surveys, this study examines the health trends of adults ages 51 to 61 between the mid-1990s and the mid-2010s and finds updated evidence confirming prior conclusions of unfavorable trends. It then summarizes the likely effect of these unfavorable health trends on the demand for DI and SSI benefits by simulating the effect on applications and awards of observed health changes over time while holding constant other factors likely to affect DI/SSI use. These estimated effects suggest an increase in demand for disability benefits due to worsening health of 9 to 16% for men over the 20-year period depending on the age group and survey. Estimated effects of health trends on DI/SSI for women were not significant. If these trends for men continue, they may require adjustments in planning for the future of important social insurance programs.
    Date: 2019–10
  3. By: Nirmal, Rajalakshmi; Babu, Suresh Chandra
    Abstract: Based on experiments to bring about comprehensive crop insurance coverage over the last 50 years, the Indian government introduced a new crop insurance program, called Pradhan Mantri Fasal Bima Yojana (PMFBY), in April 2016. Coming after two successive years of drought, the scheme aimed at reducing the burden of smallholders who borrow at high rates of interest but remain at the mercy of the “weather god†to reap optimal returns. Although this new program filled many gaps in the previous crop insurance interventions, it still could not attract smallholder and marginal farmers to fully subscribe to it. It also faced its own set of challenges. It earned farmers’ wrath because of lack of transparency in crop loss assessments and delayed settlement of claims. The government of India had to make the program voluntary under pressure from farmers’ associations, although it was designed as mandatory for famers seeking institutional credit. This paper’s focus is identifying the reasons for failure of PMFBY in most of the states despite its improved features, and comparing these states with a state where it has been relatively successful. It does this through evidence collected from a field study in Marathwada—a drought-prone region in western India, with the nation’s highest rate of farmer suicides. It takes learnings from stakeholder interviews in Marathwada to design implementation strategies for PMFBY’s success and win back the confidence of farmers. The state of Karnataka, in contrast to Marathwada, is an outlier among states in India, with a record of successful implementation of the PMFBY program. This paper studies PMFBY program implementation in Karnataka through a positive deviance case study approach. Though Karnataka hasn’t yet seen full success in terms of penetration achieved in crop insurance, its model can help develop best practices for implementation of PMFBY. The paper argues that getting buy-in from all stakeholders, adopting remote sensing technologies, strengthening infrastructure and institutional capacity, conducting outcome evaluation, and putting in place a monitoring system could be effective mechanisms to mainstream the program among smallholder farmers.
    Keywords: INDIA; SOUTH ASIA; ASIA; crop insurance; crops; insurance; risk management; agriculture; remote sensing; technology; mobile telephones; adaptation; sustainability; agricultural risk management; implementation science
    Date: 2021
  4. By: Petrosky-Nadeau, Nicolas (Federal Reserve Bank of San Francisco); Valletta, Robert G. (Federal Reserve Bank of San Francisco)
    Abstract: To provide economic relief following the onset of the COVID-19 pandemic, the U.S. CARES Act granted an extra $600 per week in unemployment insurance (UI) benefit payments from late March through July 2020. This unprecedented increase in UI generosity caused weekly benefit payments to exceed prior earnings for most recipients, raising concern that many would be unwilling to accept job offers, slowing the labor market recovery. To assess the impact of the UI supplement, we analyze the job acceptance decision in a dynamic framework in which job seekers weigh the value of a job against remaining unemployed, accounting for the perceived state of the labor market and expected weeks of UI benefits. We derive a reservation level of benefit payments at which an individual is indifferent between accepting and refusing a job offer at their prior wage. Calculating the reservation benefit and comparing it to imputed benefit payments for a wide range of U.S. workers suggests that only a small fraction would turn down an offer to return to work at their previous wage under the CARES Act expanded UI payments. We supplement this quantitative assessment of reservation benefits with direct empirical analysis of labor force transitions using matched Current Population Survey (CPS) data, linked to annual earning records from the CPS income supplement to form UI replacement rates. The results show moderate disincentive effects of the $600 supplemental payments on job finding rates and by extension small effects of the $300 weekly supplement available during 2021.
    Keywords: unemployment, unemployment insurance, job acceptance, COVID-19, CARES Act
    JEL: J64 J65
    Date: 2021–06
  5. By: Ruben Hernandez-Murillo; Pawel Krolikowski
    Abstract: With economic conditions changing so rapidly during the COVID-19 pandemic, the standard layoff indicators that policymakers and analysts use are falling short. These indicators are either not released frequently enough, or they lack geographic or industry information. Some indicators, such as initial unemployment insurance claims, may be less accurate under the current extreme conditions because of processing delays, duplicate claims, and fraud.2
    Keywords: COVID-19; unemployment
    Date: 2020–08–27
  6. By: Winters, John V.
    Abstract: This article examines employment rates for persons in their teens and early 20s during April and May 2021 compared to April and May 2019. Employment rates for teens are significantly higher in Spring 2021 than in Spring 2019. However, individuals ages 20-24 experienced significantly lower employment rates in Spring 2021 than in Spring 2019. Differing employment patterns for these two age groups are unlikely to reflect childcare issues or lingering COVID-19 concerns. Restaurant employment rates suggest that weak labor demand is likely not the predominant factor. One plausible explanation is that teenagers are less influenced by generous unemployment insurance benefits.
    Date: 2021–06–23
  7. By: Llamosas-Rosas Irving;Rangel González Erick
    Abstract: Changes on consumption of Mexican households generated by unexpected shocks in income, both permanent and transitory, are analyzed during the period 2000-2016 following the methodology developed by Blundell et al. (2008), which allows to evaluate which hypothesis on the response of consumption is more in line with the empirical evidence in Mexico: permanent income, complete markets, or partial insurance. The results suggest the presence of partial insurance on consumption in the face of permanent income shocks at the national level, although results are also consistent with the permanent income hypothesis. However, differences are found between regions when replicating the same analysis. Regarding temporary shocks, the coefficient of the effect of income shocks on consumption is not statistically significant at the national or regional level, which suggests a consumption smoothing by households in the face of temporary changes in their income.
    JEL: D12 D31 E21
    Date: 2021–07
  8. By: Mladovsky, Philipa
    Abstract: There is increasing international consensus that countries need to reduce health system fragmentation in order to achieve universal health coverage (UHC). Yet there is little agreement on what drives fragmentation, in particular the extent to which fragmentation has a political purpose. This study analyses a highly fragmented health financing system through a UHC policy that aims to remove user fees for people aged 60 and over in Senegal. 53 semi-structured interviews (SSIs) and focus group discussions with the target population were conducted in four regions in Senegal over a period of six months during 2012. A further 46 SSIs were conducted with key informants at the national level and in each of the four regions. By analysing explanations of the successes and failures of policies, an understanding of power relations in state institutions, communities and individuals is gained. The concept of governmentality is used to interpret the results. The interviewees’ main concern was to implement or resist various techniques of control over the conduct of bureaucrats, health workers, patients and the wider population. These techniques included numeracy and calculation, referral letters, ID cards, data collection, new prudentialism, active citizenship and ethical self-formation through affinities of the community. The techniques sought to make two types of subjects; citizens subjects of rights and obligations; and autonomous subjects of choice and self-identity. A key implication is that in Senegal, and perhaps elsewhere, fragmentation of the health system plays a key role in the formation and control of subjects, in the name of “freedom”. As such, fragmentation may be an inherent feature of UHC. Interventions that aim to reduce fragmentation based on evidence of its inefficiency, inequity and ineffectiveness in reducing poverty and ill health may be missing this point.
    Keywords: universal health coverage; Africa; Senegal; Health systems; fragmentation; governmentality; citizenship; older people
    JEL: E6
    Date: 2020–09–01
  9. By: Gonzalo Edwards; Raimundo Soto; Felipe Zurita
    Abstract: We document that life expectancies at the age of retirement differ significantly by income levels and gender in Chile. Using a sample of over 500 thousand workers that retired under the annuity system, we find that, conditional on reaching retirement age, there is a three-year difference in life expectancy between the lower and higher income groups. Differences are similar for men and women. We also find that as income per capita in Chile expanded over the past three decades, poverty levels have decreased quite markedly among pensioners. The evidence on income distribution is less clear cut. While income inequality is lower for the new generations, it increases after retirement within each generation as the poor die younger than the rich workers. Gender differences are also noteworthy. First, income among women is less unequal than that of men at retirement age and afterwards. Second, income inequality among retired men progressively worsens over time, while among women it remains stagnant over time. Our results have important implications for welfare projections, the allocation of health subsidies among pensioners, and the structure and management of the reserves required to life-insurance companies.
    Date: 2020

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