In a recent study by the Rand Corporation titled – How Will The Patient Protection and Affordable Care Act Affect Liability Insurance Costs? – the authors found that the ACA will possibly affect major forms of liability insurance costs in both the short and long terms. Automobile insurance as well as workers’ compensation costs may be lowered in the future. This is because both coverages pay for medical costs to people without health insurance.
According to the report, a great deal of health spending in the U.S. comes from liability coverage such as car insurance and workers’ compensation. In 2007 alone, auto insurers paid about $35 billion for medical costs involving car accidents, or 2 percent of all of the U.S. health care expenses for that year, the authors wrote. In 2008, Workers’ Compensation programs paid $29 billion in medical claims, and property and casualty insurers paid an additional $30 billion in injury allegations.
“Health insurance expansions mean that there is a new source of payment for medical care resulting from accidental injuries that can reduce liability awards in some cases,” the authors wrote. “…Because the ACA reduces provider fees, liability insurers will, in some cases be able to adopt those lower fees in their own payment schedules.”
The study estimates that Obamacare will reduce the costs from auto insurance companies by a 2 percent average. However, the possibility for a bigger impact can be achieved thanks to a reduction in Medicare payments made possible through the ACA. Auto insurers source payments via Medicare and private health insurer rates, which could potentially shrink auto insurer payments by an additional 1 percent. The amount consumers will pay for car insurance could be reduced by as much as 5 percent, depending on the state.
The writers of the study emphasize that while there might be a reduction in liability coverage payments, the amount isn’t going to be a huge change. However, reduction in payments are predicted to start as early as 2016.
The study also notes that there could be more significant impacts on insurance claim costs in the long run via changes in tort law, physician supply, new pricing approaches under the accountable care organization model, and changes in overall population health.
“Looking further into the future, the ACA carries with it at least the potential to foster broader changes in the U.S. healthcare system that could also have significant ramifications for the costs of providing liability insurance,” the authors wrote. “To effectively understand the long-term health and trajectory of the U.S. liability insurance marketplace, stakeholders will need to continue to monitor ACA implementation and how it progresses.”