Insurance Design Research Articles

Can Alternative Payment Models And Value-Based Insurance Design Alter The Course Of Diabetes In The United States?

Diabetes process and outcome measures are common quality measures in payment reform models, including Alternative Payment Models (APMs) and value-based insurance design (VBID). In this commentary we review evidence from selected research to examine whether these payment models can improve the value of diabetes care. We found that higher-risk APMs yielded greater improvements in diabetes process measures than lower-risk APMs, and that VBID models appeared to improve medication adherence but not other quality measures. We argue that these models are promising first steps in redesigning the payment system to improve diabetes care. However, greater coordination and alignment across models is needed to enhance their impact on providers' behavior, diabetes care processes, and patient health outcomes.

CO28 Impact of Value-Based Insurance Design on Medication Adherence in Patients with Asthma and/or COPD in an Employee Health Plan: An Interrupted Time Series Analysis

Value-Based Insurance Design (VBID) is intended to incentivize the use of services that are most cost-effective for patient care. One strategy is to reduce patient cost-sharing of medications that are crucial for chronic disease, such as inhalers for asthma and/or chronic obstructive pulmonary disease (COPD). Recently, several benefit changes have been introduced into an employee health plan for a large health system in Texas, including co-pay reductions, deductible elimination, and income-based premium subsidies. This study evaluated the impact of these interventions.

PCR98 The Continued Success of Value-Based Insurance Design (VBID): Blue Cross and Blue Shield of Louisiana's $0 Drug Co-Pay Program

Blue Cross and Blue Shield of Louisiana (BCBSLA) implemented the $0 Drug Co-pay (ZDC) program in 2014 for members with certain chronic conditions (diabetes, chronic heart disease, hypertension, chronic kidney disease, chronic obstructive pulmonary disease and asthma). Designed to reduce financial barriers by offering $0 copay for select drugs commonly prescribed to treat cardiovascular, diabetes, cholesterol, depression, and respiratory conditions, the program has achieved savings and improved medication adherence for these targeted members.

HPR47 Impact of Zero-Dollar Copayment and Premium Changes on Medication Adherence in Diabetic Patients in an Employee Health Group

Value-based insurance design (VBID) lowers out-of-pocket costs for drugs known to improve medical outcomes. Previous studies have evaluated VBID programs that only reduced copays for select medications. The objective of this study was to assess the impact of a zero-dollar copayment policy and lower premiums on adherence in an employee group.

Insurance Design and Pharmaceutical Innovation

This paper studies how insurance coverage policies impact pharmaceutical innovation. In the United States, most patients obtain prescription drugs through insurance plans administered by Pharmacy Benefit Managers (PBMs). Beginning in 2012, PBMs began refusing to provide coverage for many newly approved drugs when cheaper alternatives were available. We document a shift in pharmaceutical R&D strategies after this policy took effect: therapeutic classes at greater risk of exclusion experienced a relative reduction in investments. This shift reduced development of drug candidates that appear more incremental: that is, those in drug classes with more preexisting therapies and less scientifically novel research. (JEL G22, I13, L65, O31)

Attainment of universal health coverage in the occupied Palestinian territory assessed by a general equilibrium approach: is informality an irreversible hurdle for universality?

BackgroundAchieving universal health coverage (UHC) has recently received attention in response to calls from international organisations to expand health coverage to hard-to-reach segments of the population (eg, informal workers, and unemployed and poor people). Despite the strong commitment to achieving UHC, its implementation continues to spark vigorous debate among policy makers, scholars, and the international health community. Much of the recent debate has focused on the macro-fiscal challenges that many developing countries face in implementing and sustaining UHC-oriented reforms, and there has also been debate in relation to challenges of the micro-behavioural sphere (at the level of the individual). Some of these challenges pertain to the structure of the labour market in developing countries, which is characterised by the large size of non-contributory segments of the population, mainly informal workers and unemployed individuals. This raises the important policy questions of the feasibility of expanding health coverage to the informal sector and the unemployed on a contributory basis. MethodsWe assessed the feasibility of UHC using a dynamic general equilibrium approach while accounting for heterogeneity across households in terms of their employment and socioeconomic status. The model was calibrated using the Palestinian Expenditures and Consumption Survey (PECS, 2011), and the Social Accounting Matrix (SAM, 2011). We assessed alternative health insurance designs proposed to target the informal workers. Fiscal sustainability of the reforms was examined using the debt-to-GDP ratio and the microeconomic impact was assessed using the concept of consumption equivalent variation (CEV), defined as the amount of additional consumption a household would give up to move from the pre-insurance to the post-insurance level of welfare. A positive CEV value indicates that individuals are willing to pay for the health insurance. The higher the CEV value, the higher the gains of health insurance. FindingsA simultaneous expansion of UHC coverage of the population and health-care costs would enhance welfare for all households. However, such an expansion would reduce government expenditure that is allocated to other sectors; for example, it was estimated that the reduction would have been approximately 10% in 2020. To finance this UHC-driven debt, we examined the impact of a tax-financed UHC-oriented reform and a low-premium, low-coverage government-sponsored health insurance that targets informal workers. Although both policies would generate additional revenues to serve the UHC debt, government-sponsored health insurance targeting informal workers seems to be more feasible in terms of its impact on household welfare. That is, the informal workers would be better off under the government-sponsored health insurance scheme. InterpretationIn the absence of precise information on the ability to pay of informal workers, which in some cases might be comparable to that of formal workers, it is reasonable for the government to charge better-off informal workers rather than naively exempting them. The findings corroborate previous evidence suggesting that informal workers are willing to join health insurance schemes that charge them lower premiums for a slightly less generous benefit package than the health insurance schemes of formal workers. This health insurance might be deemed equitable in terms of the degree of financial protection that informal workers can obtain compared with the scenario in which they are left to bear high out-of-pocket health-care costs. FundingThe A*MIDEX project (number ANR-11-IDEX-0001-02).

The diabetes health plan and medication adherence among individuals with low incomes.

To test the impact of the Diabetes Health Plan (DHP), a diabetes-specific insurance plan that lowers out-of-pocket costs for diabetes-related medications and clinical visits, on adherence to oral hypoglycemic medications among low-income adults with Type 2 Diabetes (T2DM). Cohort of adults (18-64) with T2DM, an annual household income <USD 30,000, and who were continuously enrolled in an employer-sponsored UnitedHealthcare plan for at least two years between 2009 and 2014. We employed a linear regression Difference-In-Differences (DID) approach with a matched comparison group. To assess for differential DHP effects across adherent versus non-adherent patients, we ran a Difference-in-Difference-in-Differences (DDD) analysis by including an interaction term that included indicators for DHP exposure status and time, and low versus high baseline medication adherence. The analytic data set is limited to employer groups that purchased the DHP and standard benefit plans from UnitedHealthcare, had internal pharmacy contracts; complete pharmacy claims data, and sufficient medical claims and lab data to identify employees and their dependents with T2DM. Our DID analysis did not show improved medication adherence associated with employer DHP adoption. However, the DDD model suggested a difference between DHP-exposed and comparison beneficiaries when comparing the relative effect on individuals who were adherent versus non-adherent at baseline, as suggested by the significant three-way interaction term (10.2,p=0.028). This effect was driven by the 8.2 percentage point increase in medication adherence for the DHP subsample that was non-adherent at baseline. The DHP may benefit low-income patients with low baseline medication adherence. Value-based insurance design may be an important strategy for mitigating income disparities in T2DM outcomes.

Health Insurance Design Meets Saving Incentives: Consumer Responses to Complex Contracts

To lower health care costs, Health Savings Accounts (HSAs) offer tax incentives encouraging people to trade off current consumption against future consumption. This paper tests whether consumers use HSAs as self-insurance over the life cycle. Using administrative data from a large employer and a regression discontinuity design, I estimate the marginal propensity to consume from HSA assets is 0.85 and reject the neoclassical benchmark of 0. Comparisons with 401(k) saving show most employees do not treat HSA money as fungible with retirement savings. In this setting, HSAs did not reduce health spending and instead increased the share that was financed tax-free. (JEL D15, D82, G22, G51, I13)

Revisiting the optimal insurance design under adverse selection: Distortion risk measures and tail-risk overestimation

This paper studies the design of optimal insurance from an insurer's perspective when it is subject to adverse selection issue. Different from the literature, the insureds who are exposed to different types of risks are allowed to apply different preference measures. By assuming that the insureds' preferences are dictated by some distortion risk measures that always over-estimate the tail risk, we figure out the optimal policy menu without assuming the parametric form of indemnity functions. We also find that the insureds who deem their losses riskier than those of others will always purchase full insurance, which is consistent with the results in past studies. Furthermore, we show that in the presence of adverse selection the optimal policy menu always outperforms the optimal single policy in the sense that the former can yield a larger expected profit for the insurer. This outcome also echoes some existing results in the literature.

Employer Incentives and Distortions in Health Insurance Design: Implications for Welfare and Costs

This paper studies employer incentives in designing health insurance provider networks and whether observed offerings reflect preferences that are aligned with employees. I estimate a model of supply and demand where I endogenize employer health plan offerings with respect to hospital and physician networks. I find that employers “overprovide” broad networks by overweighting the preferences of certain employees, specifically older workers and those in regions with less provider competition, over the preferences of the average employee household. Shifting employers toward offering different provider networks in different geographic markets could yield substantial gains to surplus, with minimal distributional or selection effects. (JEL G22, G28, I13, J32, M52)

Cyber Insurance Against Cyberattacks on Electric Vehicle Charging Stations

Cyberattacks in the energy sector are commonplace. Load-altering cyberattacks launched via the manipulations of high-wattage appliances and assets are particularly alarming, as they are not continuously monitored by electric power utilities. Public Electric Vehicle Charging Stations (EVCSs) are among such high-wattage assets. Even EVCSs monitored by the electric power utilities and protected by state-of-the-art defense mechanisms are vulnerable to cyberattacks. Such cyberattacks cause financial losses to the EVCSs. In this paper, we propose cyber insurance for EVCSs to hedge the economic loss due to such cyberattacks and develop a data-driven cyber insurance design model for public EVCSs. Under mild modeling assumptions, we derive an optimal cyber insurance premium. Then, we ensure the robustness of this optimal premium and investigate the risk of insuring the EVCSs using a suitable risk assessment metric (Conditional Value-at-Risk). A case study with data from EVCSs in Manhattan, New York illustrates our results. Our results demonstrate that risk assessment is crucial for designing insurance premiums. Furthermore, the premium increases in proportion to the loss coverage offered for the EVCSs. This work informs the stakeholders involved in the roll-out and operation of public EVCSs about the benefits of cyber insurance and suggests that insurance premiums can be reduced by deploying state-of-the-art defense mechanisms.

Pareto-optimal insurance under heterogeneous beliefs and incentive compatibility

This paper studies the design of Pareto-optimal insurance under the heterogeneous beliefs of the insured and insurer. To accommodate a wide range of belief heterogeneity, we allow the likelihood ratio function to be non-monotone. To prevent the ex post moral hazard issue, the incentive compatibility condition is exogenously imposed to restrict the indemnity function. An implicit characterization of the optimal indemnity function is presented first by using the calculus of variations. Based on the point-wise maximizer to the problem, we partition the domain of loss into disjoint pieces and derive the parametric form of the optimal indemnity function over each piece through its implicit characterization. The main result of this paper generalizes those in the literature and provides insights for related problems.

Explicit deposit insurance design: International effects on bank lending during the global financial crisis✰

Studies find that during the 2007–2009 global financial crisis, loan spreads rose and corporate lending tightened, especially for foreign borrowers (a flight-home effect). We find that banks in countries with explicit deposit insurance (DI) made smaller reductions in total lending and foreign lending, experienced smaller increases in loan spreads, and had quicker post-crisis recoveries. These effects are more pronounced for banks heavily relying on deposit funding. Evidence also reveals that more generous or credible DI design is associated with a stronger stabilization effect on bank lending during the crisis, confirmed by the difference-in-differences analysis based on expansion of DI coverage during the crisis. The stabilization effect is robust to the use of country-specific crisis measures and control of temporary government guarantees.

Getting to 100%: Research Priorities and Unanswered Questions to Inform the US Debate on Universal Health Insurance Coverage.

A majority of Americans favor universal health insurance, but there is uncertainty over how best to achieve this goal. Whatever the insurance design that is implemented, additional details that must be considered include breadth of services covered, restrictions and limits on volumes of services, cost-sharing for individuals, and pricing. In the hopes that research can inform this ongoing debate, we review evidence supporting different models for achieving universal coverage in the US and identify areas where additional research and stakeholder input is needed. Key areas in need of further research include how care should be organized, how costs can be reduced, and what healthcare services universal insurance should cover.

Risk measures induced by efficient insurance contracts

The Expected Shortfall (ES) is one of the most important regulatory risk measures in finance, insurance, and statistics, which has recently been characterized via sets of axioms from perspectives of portfolio risk management and statistics. Meanwhile, there is large literature on insurance design with ES as an objective or a constraint. A visible gap is to justify the special role of ES in insurance and actuarial science. To fill this gap, we study the characterization of risk measures induced by efficient insurance contracts, i.e., those that are Pareto optimal for the insured and the insurer. One of our major results is that we characterize a mixture of the mean and ES as the risk measure of the insured and the insurer, when contracts with deductibles are efficient. Characterization results of other risk measures, including the mean and distortion risk measures, are also presented by linking them to different sets of contracts.

Temperature effects on crop yields in heat index insurance

Heat can cause substantial yield losses in crop production and climate change is increasing the risk of this kind of damage. Weather index insurance can help to reduce the financial losses resulting from heat exposure. This paper introduces crop-specific payout functions based on restricted cubic splines in heat index insurance. The use of restricted cubic splines is a cutting-edge method to reflect empirically estimated temperature effects on crop yields and to estimate temperature-related yield losses. The integration of these temperature effects in payout functions facilitates insurance design and allows hourly temperatures to be used as the underlying index. An empirical analysis is used to assess heat stress effects for a panel of East German winter wheat and winter rapeseed producers, to calibrate insurance contracts accordingly and simulate the resulting risk reducing capacities. We find that the insurance scheme introduced here leads to statistically and economically significant out-of-sample risk reducing capacities for farmers, i.e. risk premiums are reduced by up to approximately 20% at the median, in comparison to the uninsured status and at the actuarially fair premium. Moreover, we highlight that policy-makers can support the cost-efficient provision of market-based weather index insurance by fostering data collection and data provision.

Challenges facing pharmaceutical care provision in Nigerian tertiary hospitals: A short review

&lt;abstract&gt; &lt;p&gt;Pharmaceutical care is the core of pharmacy practice. The reform and development of this practice are essential for the optimization of patient care and improvement of population safety. While pharmaceutical care has been established to have a long history in Nigeria, the implementation of the practice in Nigeria's tertiary health system is very limited and, in some regions, non-existent. Challenges such as knowledge deficits of pharmacists and the inadequacy of practice guidelines, a lack of knowledge, support, and an enabling environment to foster inclusiveness, limited access to patient records, the absence of documentation of interventions and the paucity of policy support and implementation, among others, stall pharmaceutical care provision in Nigeria's tertiary institutions. Here, we recommend that improving the interprofessional environment through collaboration, adequate regulations and policy development, the design of insurance and health support, pharmacy education, training and research optimization will bolster the pharmaceutical care practice in Nigerian tertiary hospitals. Moving the practice of pharmaceutical care in Nigerian tertiary hospitals requires transformational change and strategic collaboration among the pharmacists and health community.&lt;/p&gt; &lt;/abstract&gt;

Optimal health insurance with constraints under utility of health, wealth and income

&lt;p style='text-indent:20px;'&gt;We consider an optimal health insurance design problem with constraints under utility of health, wealth and income. The preference framework we establish herein describes the trade-off among health, wealth and income explicitly, which is beneficial to distinguish health insurance design from other nonlife insurance designs. Moreover, the work takes into account the case that if the insured is severely or critically ill, the insured may not fully recover even after necessary medical treatment. By taking these special features into account, the health insurance design problem is formulated as a constrained optimization problem, and the optimal solutions are derived by using the Lagrange multiplier method and optimal control technique. Finally, two numerical examples are given to illustrate our results. Our research work gives new insights into health insurance design.&lt;/p&gt;

Sequenced Crop Evapotranspiration and Water Requirement in Developing a Multitrigger Rainfall Index Insurance and Risk-Contingent Credit

Abstract Weather index insurance (WII) has been a promising innovation that protects smallholder farmers against drought risks and provides resilience against adverse rainfall conditions. However, the uptake of WII has been hampered by high spatial and intraseasonal basis risk. To minimize intraseasonal basis risk, the standard approaches to designing WII based on seasonal cumulative rainfall have been shown to be ineffective in some cases because they do not incorporate different water requirements across each phenological stage of crop growth. One of the challenges in incorporating crop phenology in insurance design is to determine the water requirement in crop growth stages. Borrowing from agronomy, crop science, and agrometeorology, we adopt evapotranspiration methods in determining water requirements for a crop to survive in each stage that can be used as a trigger level for a WII product. Using daily rainfall and evapotranspiration data, we illustrate the use of Monte Carlo risk modeling to price an operational WII and WII-linked credit product. The risk modeling approach that we develop includes incorporation of correlation between rainfall and evapotranspiration indices that can minimize significant intertemporal basis risk in WII.

An Application of Geographically Weighted Quantile Lasso to Weather Index Insurance Design

ABSTRACT Objective: this article studies the efficiency of a novel regression approach, the geographically weighted quantile lasso (GWQlasso), in the modeling of yield-index relationship for weather index insurance products. GWQlasso allows regression coefficients to vary spatially, while using the information from neighboring locations to derive robust estimates. The lasso component of the model facilitates the selection of relevant explanatory variables. Methodology: a weather index insurance (WII) product is developed based on one-month standardized precipitation index (SPI) derived from a daily precipitation dataset for 41 weather stations in the state of Paraná (Brazil) for the period from 1979 to 2015. Soybean yield data are also used for the 41 municipalities from 1980 to 2015. The effectiveness of the GWQlasso product is evaluated against a classic quantile regression approach and a traditional yield insurance product using the spectral risk measure (SRM) and the mean semi-deviation. Results: while GWQlasso proved as effective as quantile regression, it outperformed the yield insurance product. Conclusion: the GWQlasso is an alternative to the crop insurance market in Brazil and other locations with limited data.