nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒05‒21
twelve papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management
  1. The Effect of Public Insurance Expansions on Substance Use Disorder Treatment: Evidence from the Affordable Care Act By Maclean, J. Catherine; Saloner, Brendan
  2. Cost of Service Regulation in U.S. Health Care: Minimum Medical Loss Ratios By Steve Cicala; Ethan M.J. Lieber; Victoria Marone
  3. Risk of Life Insurers: Recent Trends and Transmission Mechanisms By Ralph S.J. Koijen; Motohiro Yogo
  4. The Effectiveness of Consumption Taxes and Transfers as Insurance against Idiosyncratic Risk By Tomoyuki Nakajima; Shuhei Takahashi
  5. Nudging Households to Take Up Health Insurance: Evidence from a Randomized Experiment in Burkina Faso By Bocoum, Fadima; Grimm, Michael; Hartwig, Renate; Zongo, Nathalie
  6. Healer or Gatekeeper? Physicians' Role Conflict When Symptoms Are Non-Verifiable By Carlsen, Benedicte; Nyborg, Karine
  7. Innovations in Protecting the Old: Mostly Social Insurance and Some Assets By Teresa Ghilarducci
  8. Unemployment Insurance and Reservation Wages: Evidence from Administrative Data By Thomas Le Barbanchon; Roland Rathelot; Alexandra Roulet
  9. The Effects of Health Insurance Parity Laws for Substance Use Disorder Treatment on Traffic Fatalities: Evidence of Unintended Benefits By Popovici, Ioana; Maclean, J. Catherine; French, Michael
  10. "Midium-sized Social Spending with Low Tax Burden -tax payer’s attitude about Japan’s fiscal conundrum-" (in Japanese) By Nobuki Mochida
  11. Preparation for old age in France: The roles of preferences and expectations By Bénédicte H. Apouey
  12. Assessing the Euro Area’s Shock-Absorption Capacity - Risk sharing, consumption smoothing and fiscal policyAbstract: Based on a combination of quantitative analysis and a qualitative forward-looking approach, this paper assesses both the state of play and the future capacity of the EMU to respond and adapt to asymmetric shocks. The objective is to provide a basis upon which to gauge the potential value added of a European Unemployment Benefit Scheme (EUBS), against the background of the recent plans for the Banking Union, the Capital Markets Union and the reform of the fiscal governance framework. We find that the capacity of the system to deal with asymmetric shocks (and in principle reduce their occurrence) is likely to increase due to these changes; but it will remain limited in the medium term and certainly lower than in the US. We also argue that given the broad pro-cyclicality of fiscal policy, the idea that national policies alone can deal alone with asymmetric shocks is not realistic. Lastly, we maintain that an ex-ante fiscal insurance mechanism can provide some degree of income smoothing and is likely to catalyse market insurance. Fiscal and market insurance can reduce the role of credit and borrowing, which until now has been the main channel for shock absorption in the euro area but also the least effective in times of crisis. We conclude that, from a macroeconomic point of view, an EUBS is a useful tool to improve shock absorption capacity and is not mutually exclusive with market risk sharing. This report was prepared in the context of a research project on “The Feasibility and Added Value of a European Unemployment Benefits Scheme”, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is published by CEPS with the kind permission of the European Commission. By Alcidi, Cinzia; Thirion, Gilles
  1. By: Maclean, J. Catherine (Temple University); Saloner, Brendan (Johns Hopkins University)
    Abstract: We examine the early effects of U.S. state Medicaid expansions under the Affordable Care Act (ACA) on substance use disorder (SUD) treatment utilization. We couple administrative data on admissions to specialty SUD treatment and prescriptions for medications used to treat SUDs in outpatient settings with a differences-in-differences design. We find no evidence that admissions to specialty treatment changed in expanding states relative to non-expending states. However, post expansion, Medicaid-reimbursed prescriptions for medications used to treat SUDs in outpatient settings increased by 33% in expanding states relative to non-expanding states. Among patients admitted to specialty SUD treatment, we find that in expanding states Medicaid insurance and use of Medicaid to pay for treatment increased by 58% and 57% following the expansion. In an extension to the main analyses we find no evidence that the expansions affected fatal alcohol poisonings or drug-related overdoses. Overall, our findings provide evidence on the early effects of the ACA on SUD treatment utilization with the newly-eligible Medicaid population.
    Keywords: healthcare, public insurance, Medicaid, substance use disorders
    JEL: I1 I13 I18
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp10745&r=ias
  2. By: Steve Cicala; Ethan M.J. Lieber; Victoria Marone
    Abstract: In health insurance markets, an insurer's Medical Loss Ratio (MLR) is the share of premiums spent on medical claims. As part of the goal of reducing the cost of health care coverage, the Affordable Care Act introduced minimum MLR provisions for all health insurance sold in fully-insured commercial markets as of 2011, thereby explicitly capping insurer profit margins, but not levels. This cap was binding for many insurers, with over $1 billion of rebates paid in the first year of implementation. We model this constraint imposed upon a monopolistic insurer, and derive distortions analogous to those created under cost of service regulation. We test the implications of the model empirically using administrative data from 2005–2013, with insurers persistently above the minimum MLR threshold serving as the control group in a difference-in-difference design. We find that rather than resulting in reduced premiums, claims costs increased nearly one-for-one with distance below the regulatory threshold, 7% in the individual market, and 2% in the group market.
    JEL: I10 L5 L98
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:23353&r=ias
  3. By: Ralph S.J. Koijen; Motohiro Yogo
    Abstract: We summarize recent trends in risk exposure for U.S. life insurers from variable annuities, shadow insurance, securities lending, and derivatives. We discuss how these sources of risk could be amplified and transmitted to the rest of the financial sector and the real economy. More complete and transparent financial statements are necessary to accurately assess the overall risk mismatch in the insurance industry. We suggest ways to disclose relevant information and discuss some implications for insurance regulation.
    JEL: G12 G21 G22
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:23365&r=ias
  4. By: Tomoyuki Nakajima (Institute of Economic Research, Kyoto University); Shuhei Takahashi (Institute of Economic Research, Kyoto University)
    Abstract: We quantitatively evaluate the effectiveness of a consumption tax and transfer pro- gram as insurance against idiosyncratic earnings risk. Our framework is a heterogeneous- agent, incomplete-market model with idiosyncratic wage risk and indivisible labor. The model is calibrated to the U.S. economy. We find a weak insurance effect of the transfer program. Extending the transfer system from the current scale raises consumption un- certainty, which increases aggregate savings and reduces the interest rate. Furthermore, consumption inequality shows a small decrease.
    Keywords: Consumption taxes; Transfers; Risk sharing; Consumption inequality; Indivisible labor; Incomplete markets
    JEL: E62 D31 J22 C68
    Date: 2017–03
    URL: http://d.repec.org/n?u=RePEc:upd:utppwp:074&r=ias
  5. By: Bocoum, Fadima (Institute de Recherche en Sciences de Santé (IRSS)); Grimm, Michael (University of Passau); Hartwig, Renate (University of Namur); Zongo, Nathalie (Association Songui Manégré- Aide au développement Endogène (ASMADE))
    Abstract: In this paper we analyze the impact of a randomized information package on the understanding and uptake of community based health insurance. The information package consists of a detailed brochure which is distributed to households through home visits, a video also presented in people's homes and a personalized phone reminder. Overall, we find significant treatment effects on insurance uptake at the margin, although insurance uptake is low in general. We also find evidence for a better understanding of insurance principles among treated households, in particular in poorer households and in households with literate household heads. Finally, we see that treated households share the information they received with their neighbors and this also has positive effects on their understanding of insurance principles. We find further suggestive evidence that information sharing remains locally concentrated and does not surpass a radius of 1 km. Our findings contribute to the understanding how knowledge about the functioning of insurance can be enhanced in a context where the concept of insurance is largely unknown and where strong cultural beliefs prevail, and eventually, how insurance uptake can be increased, although the latter may take more time.
    Keywords: health insurance, take-up, encouragement design, learning, financial education
    JEL: D83 G22 I13 M31 O33
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp10744&r=ias
  6. By: Carlsen, Benedicte (Uni Research Rokkan Centre); Nyborg, Karine (University of Oslo)
    Abstract: Although physicians are often expected to be gatekeepers to health insurance benefits such as paid sick leave, research indicates a substantial reluctance to reject patient requests for sickness certificates. We show that private information on the patient's part creates a conflict between the healer and gatekeeper roles: if a patient reports subjective symptoms indicating a need for sick leave, the physician is unable to tell if the patient is truly sick or a shirker. We show that even if most physicians prefer to be good gatekeepers, all of them may trust their patients in Nash equilibrium. These ideas are illustrated using results from focus group interviews with Norwegian primary care physicians.
    Keywords: sicklisting, subjective diagnoses, asymmetric information, focus group interviews
    JEL: D11 D21 H42 I11 I18
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp10735&r=ias
  7. By: Teresa Ghilarducci (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Currently, there is an ideological commitment to individual asset building and an emphasis on individual wealth for retirement and superannuation. However, this focus embeds fatal flaws in old age income support programs. As a result, access to government subsidies for retirement savings is varied and has generated new sources of inequality. This paper was submitted to the Initiative for Policy Dialogue at Columbia University for an edited volume on “Innovations in the Welfare State” edited by Joseph Stiglitz.
    Keywords: Social Security, Individual Assets, Retirement Policy
    JEL: H55 H2
    Date: 2017–05
    URL: http://d.repec.org/n?u=RePEc:epa:cepawp:2017-06&r=ias
  8. By: Thomas Le Barbanchon; Roland Rathelot; Alexandra Roulet
    Abstract: Although the reservation wage plays a central role in job search models, empirical evidence on the determinants of reservation wages, including key policy variables such as unemployment insurance (UI), is scarce. In France, unemployed people must declare their reservation wage to the Public Employment Service when they register to claim UI benefits. We take advantage of these rich French administrative data and of a reform of UI rules to estimate the effect of the potential benefit duration (PBD) on reservation wages and on other dimensions of job selectivity, using a difference-in-difference strategy. We cannot reject that the elasticity of the reservation wage with respect to PBD is zero. Our results are precise and we can rule out elasticities larger than 0.006. Furthermore, we do not find any significant effects of PBD on the desired number of hours, duration of labor contract and commuting time/distance. The estimated elasticity of actual benefit duration with respect to PBD of 0.3 is in line with the consensus in the literature. Exploiting a regression discontinuity design as an alternative identification strategy, we find similar results.
    JEL: J64 J65
    Date: 2017–05
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:23406&r=ias
  9. By: Popovici, Ioana (Nova Southeastern University); Maclean, J. Catherine (Temple University); French, Michael (University of Miami)
    Abstract: Each year, 10,000 individuals die in alcohol-impaired traffic accidents in the United States, while psychoactive drugs are involved in 20% of all fatal traffic accidents. We investigate whether state parity laws for substance use disorder (SUD) treatment have the unintended benefit of reducing fatal traffic accidents. Parity laws compel insurers to cover SUD treatment in private insurance markets, thereby reducing the financial costs of and increasing access to treatment for beneficiaries. We employ over 20 years of administrative data from the national Fatal Accident Reporting System coupled with a differences-in-differences research design to investigate the potential spillover effects of parity laws to traffic safety. Our findings indicate that passage of a state parity law reduces fatal traffic accident rates by 4.1 to 5.4%. These findings suggest that government regulations requiring insurers to cover SUD treatment can significantly improve traffic safety, possibly by reducing the number of impaired drivers on roadways.
    Keywords: traffic fatalities, substance use disorder (SUD) treatment, traffic safety, health insurance parity laws
    JEL: I1 I13 I18
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp10746&r=ias
  10. By: Nobuki Mochida (Faculty of Economics, University of Tokyo)
    Abstract: Taxes and social insurance contributions amounted to only 29% of GDP in Japan, the eighth-lowest share in the OECD. The share of social spending allocated to programmes focused on the elderly – pensions, long-term care and health, which rises sharply with age – is more than four-fifths, the second highest in the OECD. Ensuring fiscal sustainability will require measures to boost revenues from their relatively low levels while constraining the growth of spending, particularly that related to population ageing. On the other given that the increase in government expenditures is driven by the rise in social security spending from 12¾ of GDP in 1990 to 26¾ in 2016, social security reform is the priority. This paper analyses tax payers' attitude about low tax, medium-sized social spending and large fiscal deficits by using micro data. It became clear that closing the fiscal gap defies any attempt at a quick and simple solution.
    Date: 2016–12
    URL: http://d.repec.org/n?u=RePEc:tky:jseres:2016cj283&r=ias
  11. By: Bénédicte H. Apouey (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This study takes a unified approach to assess the roles of preferences and expectations on preparation for old age in France. Our sample is representative of the customers of a large notfor-profit insurance company (“mutuelle”) and contains 1231 individuals aged 50 year and above. We use information on the general feeling to prepare for old age, specific preparation activities in various domains (e.g. the purchase of long-term care insurance or home adaptation), risk and time attitudes, family and social altruism, and expected disability and longevity. Half of the sample reports preparing for old age. Time preference emerges as an important predictor of preparation: indeed, making plans in general increases preparation for old age by 8.5 percentage points. Family altruism is positively associated with preparation in the finances and housing domains, whereas social altruism is not. While risk attitudes and altruism matter for preparation for old age, their effect may be less systematic across outcomes than that of time preference. Individuals who expect to become disabled or to live longer are more likely to prepare for old age. Policies promoting healthy aging should include messages targeting present-oriented individuals and try to make people more future-oriented.
    Keywords: Preparation for old age,risk aversion,time preference,altruism,expected longevity
    Date: 2017–03
    URL: http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01489215&r=ias
  12. Assessing the Euro Area’s Shock-Absorption Capacity - Risk sharing, consumption smoothing and fiscal policyAbstract: Based on a combination of quantitative analysis and a qualitative forward-looking approach, this paper assesses both the state of play and the future capacity of the EMU to respond and adapt to asymmetric shocks. The objective is to provide a basis upon which to gauge the potential value added of a European Unemployment Benefit Scheme (EUBS), against the background of the recent plans for the Banking Union, the Capital Markets Union and the reform of the fiscal governance framework. We find that the capacity of the system to deal with asymmetric shocks (and in principle reduce their occurrence) is likely to increase due to these changes; but it will remain limited in the medium term and certainly lower than in the US. We also argue that given the broad pro-cyclicality of fiscal policy, the idea that national policies alone can deal alone with asymmetric shocks is not realistic. Lastly, we maintain that an ex-ante fiscal insurance mechanism can provide some degree of income smoothing and is likely to catalyse market insurance. Fiscal and market insurance can reduce the role of credit and borrowing, which until now has been the main channel for shock absorption in the euro area but also the least effective in times of crisis. We conclude that, from a macroeconomic point of view, an EUBS is a useful tool to improve shock absorption capacity and is not mutually exclusive with market risk sharing. This report was prepared in the context of a research project on “The Feasibility and Added Value of a European Unemployment Benefits Scheme”, commissioned by DG EMPL of the European Commission and carried out by a consortium of researchers led by CEPS. It is published by CEPS with the kind permission of the European Commission.
    By: Alcidi, Cinzia; Thirion, Gilles
    Date: 2016–09
    URL: http://d.repec.org/n?u=RePEc:eps:cepswp:11875&r=ias
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