Unraveling the Health Insurance Underwriting Cycle, by Patricia Born, Rexford E. Santerre
The health insurance underwriting cycle reflects the tendency for health insurance premiums and insurer profitability to systematically fluctuate over time. A number of alternative explanations have been offered for insurance underwriting cycles, but no study to date has empirically evaluated this tendency in the health insurance industry. This study uses national data over the period from 1960 to 2004 to test if various theories pertaining to price movements in the property and casualty insurance industry can also explain premium behavior in the health insurance industry. The empirical results provide strong support for the capacity constraint, fluctuation in interest rate and rational expectations with institutional intervention hypotheses.
In April 2006, the state of Massachusetts passed legislation aimed at achieving near universal health insurance coverage. A key provision of this legislation, and of the national legislation passed in March 2010, is an individual mandate to obtain health insurance. In this paper, we use hospital data to examine the impact of this legislation on insurance coverage, utilization patterns, and patient outcomes in Massachusetts. We use a difference-in-difference strategy that compares outcomes in Massachusetts after the reform to outcomes in Massachusetts before the reform and to outcomes in other states. We embed this strategy in an instrumental variable framework to examine the effect of insurance coverage on outcomes. Among the population discharged from the hospital in Massachusetts, the reform decreased uninsurance by 28% relative to its initial level. Increased coverage affected utilization patterns by decreasing length of stay and the number of inpatient admissions originating from the emergency room. We also find evidence that outpatient care reduced hospitalizations for preventable conditions. At the same time we find no evidence that the cost of hospital care increased. The reform affected nearly all age, gender, income, and race categories. We identify some populations for which insurance had the greatest direct impact on outcomes and others for which the impact on outcomes appears to have occurred through spillovers.
In this paper, we provide an assessment of the effect of Medicare Part D on the previously uninsured. We examine the effect of gaining prescription drug insurance as a result of Medicare Part D on use of prescription drugs, use of other medical services, and health for a nationally representative sample of Medicare beneficiaries. Given the heightened importance of prescription drugs for those with chronic illness, we provide separate estimates for those in poorer health. We find that gaining prescription drug insurance through Medicare Part D was associated with an 63% increase in the number of annual prescriptions, but that obtaining prescription drug insurance is not significantly related to use of other health care services or health, as measured by functional status and self-reported health. Among those in poorer health, we find that gaining prescription drug insurance was associated with a 56% increase in the number of annual prescriptions, and is not significantly related to health. For this group, there is some evidence that prescription drug insurance was associated with a decrease in the use of outpatient services.
The authors review experimental and nonexperimental causal inference methods,focusing on assumptions for the validity of instrumental variables and propensity score (PS) methods. They provide guidance in four areas for the analysis and reporting of PS methods in medical research and selectively evaluate mainstream medical journal articles from 2000 to 2005 in the four areas, namely, examination of balance, overlapping support description, use of estimated PS for evaluation of treatment effect, and sensitivity analyses. In spite of the many pitfalls, when appropriately evaluated and applied, PS methods can be powerful tools in assessing average treatment effects in observational studies. Appropriate PS applications can create experimental conditions using observational data when randomized controlled trials are not feasible and, thus, lead researchers to an efficient estimator of the average treatment effect.
[Book] Economics of Regulation and Antitrust, by W. Kip Viscusi, Joseph E. Harrington and John M. Vernon. Summary of the 4th edition from the MIT Press website:
This … text on business and government focuses on the insights economic reasoning can provide in analyzing regulatory and antitrust issues. Departing from the traditional emphasis on institutions, Economics of Regulation and Antitrust asks how economic theory and empirical analyses can illuminate the character of market operation and the role for government action and brings new developments in theory and empirical methodology to bear on these questions. …
Part I, on antitrust, has been given a major revision to reflect advances in economic theory and recent antitrust cases, including the case against Microsoft and the Supreme Court’s Kodak decision. Part II, on economic regulation, updates its treatment of the restructuring and deregulation of the telecommunications and electric power industries, and includes an analysis of what went wrong in the California energy market in 2000 and 2001. Part III, on social regulation, now includes increased discussion of risk-risk analysis and extensive changes to its discussion of environmental regulation. The many case studies included provide students not only pertinent insights for today but also the economic tools to analyze the implications of regulations and antitrust policies in the future.
