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The expansion of health insurance accomplished under the Affordable Care Act (ACA) might raise the cost medical malpractice coverage as much as 5%, according to a new report from the RAND Corp., a prominent non-profit think tank based in Santa Monica, CA.
Automobile, workers’ compensation and general business liability insurance costs might fall under the ACA, the study found, while costs for medical malpractice coverage could be higher. Researchers say the changes could be as much as 5% of costs in some states, but they caution there is considerable uncertainty surrounding such estimates. The findings are from one of the first systematic studies of how the ACA could influence costs for liability and related lines of insurance, says David Auerbach, the study’s lead author and a policy researcher at RAND.
"The ACA is unlikely to dramatically affect liability costs, but it may influence small and moderate changes in costs over the next several years," he says. "For example, auto insurers may spend less for treating injuries, while it may cost a bit more to provide physicians with medical malpractice coverage."
Researchers at the RAND Corp. examined how the ACA might operate across different liability lines and how the impacts might vary across states given existing laws, population demographics, and other factors. (The full RAND Corp. report is free, and it can be found online at http://tinyurl.com/costincrease. .)
"There are many ways that the ACA might affect the cost of malpractice insurance, and the increase in the number of insured people seeking care is only one of them," Auerbach says. "The increased number of patients in the system increases the amount of care, and that increases the number of things that can go wrong."
Another factor is the changing reimbursement for healthcare, most of it focused on efficiency and meeting quality standards, Auerbach says.
"The federal government is reducing Medicare payments to hospitals, and we expect that to have some influence over patterns of care and related liability," he says.
Liability insurance companies reimburse tens of billions of dollars each year for medical care related to auto accidents, workplace injuries, and other types of claims, he notes. Consider this example: Auto insurers collectively paid $35 billion for medical costs associated with accidents in 2007, about 2% of all U.S. healthcare costs in that year, Auerbach says.
But some of those costs might be covered by regular health insurance as more Americans become newly covered under the ACA, according to the study. As that happens, the cost of providing automobile insurance, workers compensation and homeowners insurance might decline. Ultimately, any cost changes experienced by insurance companies could be passed on to consumers through changes in premiums and coverage options.
Meanwhile, an increase in the number of people using the healthcare system might trigger a corresponding increase in the number of medical malpractice claims made against physicians and other healthcare providers, according to the study. Such a shift could drive malpractice costs modestly higher, Auerbach explains.
"We do expect that states and areas that have had an increase in insurance coverage will have an increase in claims," he says. "How much it will be we don’t know yet, but it could be enough to make a difference for some providers.
Researchers say there are many state-level variables that will influence any impacts on liability costs created by the ACA. These variables include items such as whether states require medical costs to be deducted from liability awards or whether states choose to implement the ACA’s optional Medicaid expansion.
While the study primarily focuses on the short-term impacts of healthcare reform on the cost of liability insurance, RAND researchers also suggest that the ACA could have additional long-run impacts.
Costs of liability insurance could be reduced further if reforms aimed at driving down healthcare costs are successful, for example. Other potential long-run changes include modifications of tort law, shifts in pricing of medical services, changes in the number of practicing physicians and increased efforts by Medicaid to recover a portion of injury payments.
Auerbach also notes that any increase in claims or liability insurance costs could be offset by quality improvements that come as a result of the ACA and other reforms.
"It seems to reasonable that we will see an increase in the use of standardized measures and best practices as providers try to meet the quality and efficiency goals that will be drivers under the ACA," Auerbach says. "If there is an increase there and it has the effect of improving patient care, that may result in savings that can offset other costs."