The Insurance Research Council (IRC) has studied the possible impact of the Affordable Care Act (ACA) on the property-casualty industry. The IRC’s study concludes that there will be significant and long-lasting consequences to the property-casualty industry due to the change in healthcare markets and health insurance systems in the United States. Summarized below are some of the issues raised by the IRC’s research.
The first potential impact, which the IRC predicts will be major, is cost shifting from health insurance systems to property-casualty insurance systems. To offset anticipated reductions in revenues from health insurance providers due to cost containment efforts and initiatives by public and private health insurers, medical providers may seek to increase revenues from other payers, including property-casualty insurers. To do so, medical providers may seek higher reimbursements from other payers and increase the volume and mix of services provided to patients covered by other payers.
The widely varying levels of reimbursement leave some payers, including property-casualty insurers, particularly vulnerable to cost-shifting efforts by hospitals and other providers. While large health insurers are able to negotiate lower prices or significant discounts for medical services, the authority and ability of property-casualty insurers to negotiate reimbursement levels varies from state to state. This leaves the property-casualty insurer vulnerable to cost shifting from medical provider to insurer.
A second potential impact of the ACA is to prompt individuals with injuries to file a claim with a property-casualty insurer instead of a health insurer. The reason for the “claim shift” is that the ACA may have made it more expensive or difficult for the individual to file a health insurance claim. Many people are insured under health insurance plans that have high deductibles and coinsurance provisions that increase out-of-pocket costs for insured individuals. The claimant, therefore, may be motivated to file their claim with a property-casualty insurer, if possible, in order to avoid incurring costs due to high deductibles and cost-sharing requirements.
Additionally, health insurers may become more aggressive under the ACA in refusing to provide coverage for certain procedures. If insureds fear that their desired treatment will be denied by the health insurer, they may contend—legitimately or not—that their claim is covered by property-casualty insurance. Fraudulent or not, either way a claim shift will have occurred.
A third important potential impact of the ACA is a rise in fraudulent claims due to increased fraud-fighting emphasis. The IRC refers to a paper published by the National Insurance Crime Bureau (NICB) in which the NICB concludes: “because property-casualty insurance is not covered by the ACA, career criminals and unscrupulous medical providers will shift their attention to the property-casualty business to avoid increased scrutiny from health insurers.” The NICB did not estimate the magnitude of this potential effect, but did suggest some actions that property-casualty insurers could take to mitigate its potential impact (e.g., market-based fee schedules and bill review authority).
In conclusion, although not specifically targeted by the ACA, property-casualty insurers may nonetheless experience significant and long-lasting effects from the implementation of the ACA. The IRC recommends that property-casualty insurers begin considering and implementing tools to reduce the ACA’s potentially negative impact on the industry.
Click on the link to read the IRC study.