Here’s something the White House probably didn’t see
coming: It turns out the Affordable Care Act, President Obama’s big
health-reform effort, could affect the cost of other types of insurance. And
unlike several unwelcome surprises that have undermined support for the ACA,
this development might save consumers a few bucks.
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| USA President, Barack Obama |
The biggest open question about Obamacare, as the ACA is
known, is how it will change the market for medical care and the health of
people newly covered by insurance. But Obamacare is also likely to change the
market for other types of insurance as well, with researchers just beginning to
probe how that might play out.
A new study by the nonprofit Rand Corp. finds Obamacare is
likely to lower the cost of auto insurance and worker’s compensation plans,
while raising the cost of medical malpractice coverage for doctors and other
healthcare providers. The connection between Obamacare and other types of
insurance might not seem obvious, but it’s intuitive once you think about how
insurance works.
A meaningful drop
Most auto insurance, for instance, includes coverage for
medical costs when people are injured in a crash — including the person paying
for the policy and unknown third parties who might be injured as well. With
Obamacare, however, more people will have regular health insurance, leading to
fewer claims against auto insurers for medical costs. On top of that,
healthcare insurers typically negotiate the lowest costs for medical care,
since they effectively buy in bulk. Auto insurers don’t, and are more likely to
pay “list price” for medical services. So fewer medical claims could lead to a
meaningful drop in costs for auto insurers.
In some states — mostly those with the lowest Obamacare
participation rates — the drop might be too small to notice. But Rand estimates
that in states such as Florida, Colorado, Montana, Oregon and several others,
costs could decline by somewhere between 3% and 5% by 2016, which would surely
be a welcome savings to insurers. If they were to pass on the savings to
customers through lower premiums, a driver with a $1,000 annual premium would
save $30 to $50, with higher savings for people with costlier policies, such as
families with teenage drivers.
The cost of workers' compensation coverage could fall for
similar reasons — it sometimes pays for medical bills that may now be covered
by private health insurance. Cost savings could hit 1% to 2% in many states,
with insurers passing on some of that saving to businesses that pay for
coverage.
A different dynamic is likely to affect the market for
medical malpractice coverage. With more people insured, there are likely to be
more medical procedures, more problems and more malpractice claims. Rand
estimates overall malpractice claims — which have been declining during the
last decade — could increase by 5% or so under Obamacare. More claims will
boost payouts by insurers and therefore raise the cost of coverage, by an
average of about 3.4% in Rand’s diagnosis.
Longer-term changes?
Obamacare could change the insurance industry in other
ways that are harder to predict and might take longer to play out. Many states
require no-fault auto insurance, so coverage is available no matter what in
accidents that cause costly injuries. But as more people have health insurance,
states may decide no-fault auto coverage is no longer needed. Since no-fault tends
to be more expensive than traditional coverage, that could be another source of
savings.
The same could go for workers' comp, with states possibly
deciding it’s less important to include medical coverage in such policies, and
maybe even questioning the need for workers' comp altogether. “If most of the
population has private health insurance that can provide treatment immediately
following an injury,” the Rand study theorizes, “this rationale for the
existence of [workers' comp] is undermined.”
It also stands to reason that, if more people have health
insurance, then more people will get needed medical care and the overall health
of the U.S. population will improve. There’s no guarantee that will happen, but
if it does, then healthcare costs could decline overall, pushing insurance
costs lower, while Americans also enjoy the less measurable benefits of better
health. President Obama can only wish.
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