The Impact of the Affordable Care Act on the Insurance Industry

The much-debated Affordable Care Act has just recently implemented some of its major changes. While many are focused purely on the effects it will have on the health care industry, it changes enacted by ACA could have an effect on the cost of other types of insurance, such as Property/Casualty Insurance and the data seen on insurance lists.

According to a new study by RAND researchers1, the cost of auto insurance, workers’ compensation, and general liability insurance could potentially go down as a result of ACA because these insurers will have to pay less for treating injuries. However, there is also a possibility of medical malpractice premiums going up as a result of the same changes.

Because of this, insurance lists, particularly Property/Casualty insurance lists could change noticeably in the next couple years. Some of the expected positive effects include:

  • Increased wellness
  • Decreased incentive to file questionable P&C claims
  • Increased fraud detection supported by government funding
  • Fewer emergency room visits
  • Decreased need to over treat patients

However, there are also several potential negative effects that ACA could have on the Property/Casualty insurance industry, including:

  • Decreased access to care, increasing indemnity costs as immediate access to physicians is reduced and return to work is delayed.
  • A cost shift from Medicare to Property/Casualty insurance consumers by physicians and hospitals because of declining Medicare reimbursement rates.
  • Increased pharmacy costs
  • Increased DME medical costs due to new taxes for consumers
  • Decreased network discounts because of the increased bargaining power of physicians and hospitals, as well as the decreased need to drive volume, which will increase medical costs.

These changes come as a result of having potentially more Americans covered by health insurance under ACA who were previously going without any health insurance. Because the cost of providing the insurance could go down, consumers could see drops in their premiums.

There are also many variables that could affect these changes below the federal level, however. This includes whether states require medical costs to be deducted from liability awards or if they choose to implement ACA’s optional Medicaid expansion.

These effects are, in essence, all focused on the short term. When looking at the potential long-term effects of the Affordable Care Act, there could be even more significant changes seen in insurance lists and the industry as a whole. The next few months will be crucial in seeing the beginnings of these changes and determining how to adapt to help improve the insurance industry.

1http://www.rand.org/pubs/research_briefs/RB9768.html