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on Insurance Economics |
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Issue of 2008‒03‒25
twelve papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Richard W. Johnson; (Urban Institute); ; |
| Abstract: | Because most workers receive health benefits from their employers, retirement often disrupts health insurance coverage. Some employers offer health insurance to retirees, but many firms are cutting retiree health benefits by passing more costs to retirees or eliminating benefits altogether. Few alternatives exist. Private nongroup coverage is generally quite expensive, and few people in their 50s and early 60s qualify for publicly financed benefits. Many workers who cannot obtain retiree benefits from their own employers or their spouses’ employers delay retirement to age 65, when Medicare coverage begins. This brief examines the availability and cost of health insurance coverage at ages 55 to 64 and changes in coverage after retirement. Today most workers with employer health benefits retain their coverage when they retire early, although their required premium contributions have increased sharply over the past ten years. In the future, however, steady declines in the share of younger workers with access to retiree health benefits may jeopardize income security for the next generations of retirees. |
| Keywords: | retirement, health benefits, disrupt, cutting benefits, health insurance coverage |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwob:wob_7&r=ias |
| By: | Howard Gleckman |
| Abstract: | Private insurance currently plays a small, but potentially important role in financing the long-term care of the elderly in the United States. Some believe it can be a significant element in a restructured long-term care financing system. However, to date, the demand for such insurance has been modest. This brief will discuss the potential benefits of long-term care insurance, review its current structure and status, and explore possible explanations for low takeup rates. Finally, it will consider future issues surrounding the role of this product. |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2007-7-13&r=ias |
| By: | Eduardo A. Cavallo; Patricio Valenzuela; Eduardo Borensztein |
| Abstract: | Natural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has one of the lowest levels of insurance coverage. This paper examines the vulnerability of Belize's public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belize's debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year. |
| Keywords: | Insurance , Belize , Public finance , Debt , |
| Date: | 2008–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/44&r=ias |
| By: | Carriquiry, Miguel A.; Osgood, Daniel E. |
| Abstract: | Index insurance and probabilistic seasonal forecasts are becoming available in developing countries to help farmers manage climate risks in production. Although these tools are intimately related, work has not been done to formalize the connections between them. We investigate the relationship between the risk management tools through a model of input choice under uncertainty, forecasts, and insurance. While it is possible for forecasts to undermine insurance, we find that when contracts are appropriately designed, there are important synergies between forecasts, insurance, and effective input use. Used together, these tools overcome barriers preventing the use of imperfect information in production decision making. |
| Keywords: | basis risk, climate forecast, index insurance, input decisions, insurance, risk management. |
| Date: | 2008–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12884&r=ias |
| By: | Miguel Carriquiry; Daniel E. Osgood |
| Abstract: | Index insurance and probabilistic seasonal forecasts are becoming available in developing countries to help farmers manage climate risks in production. Although these tools are intimately related, work has not been done to formalize the connections between them. We investigate the relationship between the risk management tools through a model of input choice under uncertainty, forecasts, and insurance. While it is possible for forecasts to undermine insurance, we find that when contracts are appropriately designed, there are important synergies between forecasts, insurance, and effective input use. Used together, these tools overcome barriers preventing the use of imperfect information in production decision making. |
| Keywords: | basis risk, climate forecast, index insurance, input decisions, insurance, risk management. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:08-wp465&r=ias |
| By: | Sherry A. Glied |
| Abstract: | Inequality in access to health care services, through private purchase, appears to pose policy challenges greater than inequality in other spheres. This paper explores how inequality in access to health care services relates to social welfare. I examine the sources of private demand for health insurance and the ramifications of this demand for health, for patterns for government spending on health care services, and for individual and social well-being. Finally, I evaluate the implications of a health tax as a response to the externalities of health service consumption, and provide a rough measure of the tax in the context of the Canadian publicly-financed health care system. |
| JEL: | H23 I18 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13885&r=ias |
| By: | Erik Schokkaert; Tom van Ourti; Diane De Grave; Ann Lecluyse; Carine Van De Voorde |
| Abstract: | It has been suggested that the unequal coverage of different socio-economic groups by supplemental insurance could be a partial explanation for the inequality in access to health care in many countries. We analyse the situation in Belgium, a country with a very broad coverage in compulsory social health insurance and where supplemental insurance mainly refers to extra-billing in hospitals. We find that this institutional background is crucial for the explanation of the effects of supplemental insurance. We find no evidence of adverse selection in the coverage of supplemental health insurance, but strong effects of socio-economic background. A count model for hospital care shows that supplemental insurance has no significant effect on the number of spells, but a negative effect on the number of nights. This is in line with patterns of socio-economic stratification that have been well documented for Belgium. It is also in line with the regulation on extra-billing protecting patients in common rooms. For ambulatory care, we find a positive effect of supplemental insurance on visits to a dentist and on number of spells at a day centre but no effect on visits to a GP, on drugs consumption and on visits to a specialist. |
| Keywords: | supplemental insurance, adverse selection, moral hazard, hospital spells, equality of access, health care use. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0729&r=ias |
| By: | Sherry A. Glied |
| Abstract: | This paper examines the efficiency and equity implications of alternative health care system financing strategies. Using data across the OECD, I find that almost all financing choices are compatible with efficiency in the delivery of health care, and that there has been no consistent and systematic relationship between financing and cost containment. Using data on expenditures and life expectancy by income quintile from the Canadian health care system, I find that universal, publicly-funded health insurance is modestly redistributive. Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles. Finally, a review of the literature across the OECD suggests that the progressivity of financing of the health insurance system has limited implications for overall income inequality, particularly over time. |
| JEL: | H42 H51 I18 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13881&r=ias |
| By: | Jay Bhattacharya; Mikko Packalen |
| Abstract: | It is well known that public or pooled insurance coverage can induce a form of ex-ante moral hazard: people make inefficiently low investments in self-protective activities. This paper points out another ex-ante moral hazard that arises through an induced innovation externality. This alternative mechanism, by contrast, causes people to devote an inefficiently high level of self-protection. As an empirical example of this externality, we analyze the innovation induced by the obesity epidemic. Obesity is associated with an increase in the incidence of many diseases. The induced innovation hypothesis is that an increase in the incidence of a disease will increase technological innovation specific to that disease. The empirical economics literature has produced substantial evidence in favor of the induced innovation hypothesis. We first estimate the associations between obesity and disease incidence. We then show that if these associations are causal and the pharmaceutical reward system is optimal the magnitude of the induced innovation externality of obesity roughly coincides with the Medicare-induced health insurance externality of obesity. The current Medicare subsidy for obesity therefore appears to be approximately optimal. We also show that the pattern of diseases for obese and normal weight individuals are similar enough that the induced innovation externality of obesity on normal weight individuals is positive as well. |
| JEL: | I1 O3 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13863&r=ias |
| By: | Erik Schokkaert; Carine Van De Voorde |
| Abstract: | Direct and indirect standardization procedures aim at comparing differences in health or differences in health care expenditures between subgroups of the population after controlling for observable morbidity differences. There is a close analogy between this problem and the issue of risk adjustment in health insurance. We analyse this analogy within the theoretical framework proposed in the recent social choice literature on responsibility and compensation. Traditional methods of risk adjustment are analogous to indirect standardization. They are equivalent to the so-called conditional egalitarian mechanism in social choice. In general, they do not remove incentives for risk selection, even if the effect of non-morbidity variables is correctly taken into account. A method of risk adjustment based on direct standardization (as proposed for Ireland) does remove the incentives for risk selection, but at the cost of violating a neutrality condition, stating that insurers should receive the same premium subsidy for all members of the same risk group. Direct standardization is equivalent to the egalitarianequivalent (or proportional) mechanism in social choice. The conflict between removing incentives for risk selection and neutrality is unavoidable if the health expenditure function is not additively separable in the morbidity and efficiency variables. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0733&r=ias |
| By: | Anthony Webb (Center for Retirement Research, Boston College); Guan Gong; Wei Sun |
| Abstract: | Immediate annuities provide insurance against outliving one’s wealth. Previous research has shown that this insurance ought to be valuable to risk-averse households facing an uncertain lifespan. But rates of voluntary annuitization remain extremely low. Many explanations have been offered for retired households’ reluctance to annuitize. One prominent explanation is that annuities suffer from a considerable degree of actuarial unfairness. That is, for the average household, the expected value of the income, discounted by a rate of interest and annual survival probabilities, is considerably less than the premium paid. But it seems likely that households are also influenced by a reluctance to give up access to their life savings... |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2007-7-10&r=ias |
| By: | Guan Gong; Steven A. Sass (Center for Retirement Research, Boston College) |
| Abstract: | Although annuities provide longevity insurance that should, in theory, be attractive to risk-averse households facing an uncertain lifespan, rates of voluntary annuitization remain extremely low. We evaluate a proposed annuity product, the Advanced Life Deferred Annuity, an annuity purchased at retirement, providing an income commencing in advanced old age. Using numerical optimization techniques, we show that this product would provide a substantial proportion of the longevity insurance provided by an immediate annuity, at a small fraction of the cost. At plausible levels of actuarial unfairness, households should prefer it to both immediate and postponed annuitization, and an optimal decumulation of unannuitized wealth. We show that few households would suffer significant losses were it used as a 401(k) plan default. |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2007-15&r=ias |