A benefit of the Affordable Care Act (ACA) may be a drop in car insurance premiums as health care providers shoulder more of the treatment costs tied to accidents and injuries, according to a new report from a leading think-tank.

The non-profit Rand Corporation says the rise in the number of people with medical coverage under the ACA, also known as Obamacare, could result in a "modest" drop in claims against auto insurers. In turn, the cost savings could be passed to consumers as insurance companies and state regulators evaluate and refine coverage rates, according to Rand's report, "How Will the Affordable Care Act Affect Liability Insurance Costs?"

"The Affordable Care Act is unlikely to dramatically affect liability costs, but it may influence small and moderate changes in costs over the next several years," says David Auerbach, a Rand policy researcher and the study's lead author. "For example, auto insurers may spend less for treating injuries, while it may cost a bit more to provide physicians with medical malpractice coverage."

Besides auto insurance rates, expenses tied to homeowners insurance, workers' compensation and general business liability insurance may also fall once the ACA further takes hold. But on the downside, expenses for malpractice coverage could rise, according to the report.

Obamacare to trim insurance costs by up to 5 percent?

"Researchers say the changes could be as much as 5 percent of costs (for auto, home and the other forms of liability insurance) in some states, but caution there is considerable uncertainty surrounding such estimates," the study notes.

Auerbach and Rand point out that liability insurers currently reimburse tens of billions of dollars each year for medical care related to car crashes and workplace injuries, among other claims. "For example, auto insurers collectively paid $35 billion for medical costs associated with accidents in 2007, about 2 percent of all U.S. health care costs in that year," according to Rand.

The reason for a possible jump in malpractice claims faced by doctors and health providers is simple: Rand says that more claims could be filed as more people get medical coverage.

"Insured individuals have more contacts with physicians, make more visits and receive more procedures," according to the report. "Such a shift could drive malpractice costs modestly higher."

The malpractice figures are already significant. The study points out that "In 2012, nearly 12,000 medical malpractice claims paid on behalf of individual physicians and other providers accounted for $4.3 billion in costs. A substantial additional number of claims were paid on behalf of institutions, such as hospitals, some of which self-insure, that are not included in the $4.3 billion number."

The study was sponsored by Swiss Re, which stresses the powerful effects the ACA may ultimately have on the insurance industry and elsewhere. "Businesses and policymakers need to understand how and why their risk profiles might change as the Affordable Care Act is implemented," says Jayne Plunkett, Swiss Re's head of casualty reinsurance, in a statement.

A surge in medical insurance enrollments

In a separate survey released this week, Rand says that 9.3 million more Americans have health insurance now than in September 2013, largely because of the ACA. While noting that any survey has a margin of error, Rand adds that its findings don't include the 3.2 million who signed up for coverage in late March and early April. That enrollment surge could "dramatically affect" the total figures, according to Rand.

Rand estimates that Americans without insurance fell to 15.8 percent, from 20.5 percent.

Of those who secured new medical coverage, 8.2 million didn't buy it on the ACA's federal or state-run exchanges, but through an employer. Rand says the increase is likely because of a drop in unemployment, which opened the door for many to be eligible for workplace plans, and ACA incentives encouraging employees to get coverage.

Rand adds that 3.9 million secured health insurance through the exchanges, 36 percent of them previously uninsured. The number is expected to rise as the March and April numbers come in, according to the survey.

In declaring the ACA an unfolding success, the Obama administration recently said that more than 7 million people have signed up for coverage through the marketplace exchanges.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  2. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  3. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  4. Markets

    The 5 Biggest Canadian Insurance Companies

    Learn more about the insurance industry as a whole, how it functions in Canada, and the five largest Canada-based insurance companies.
  5. Stock Analysis

    What Drives Ford's Profits? Not Just Cars

    Ford, an experienced legacy car manufacturer, sells a lot of cars around the world and makes a lot of money in the money lending and leasing business.
  6. Investing

    Things Nursing Homes Are Not Allowed to Do

    What rights do a home's residents have? The same ones they they had before they entered the facility.
  7. Retirement

    How Much Medicaid and Medicare Cost Americans

    Medicaid & Medicare cost Americans plenty out of their paychecks. But how much, really? And what does that money buy?
  8. Insurance

    Healthcare Premiums Keep Rising, But Salaries Aren’t

    Learn how college and health insurance costs have skyrocketed while wages have stagnated, and how, given the necessity of these services, consumers are stuck.
  9. Fundamental Analysis

    The Insurance Industry's Future in Visual Tech Investment

    A growing number of automobile insurers are choosing to invest in developing digital infrastructure.
  10. Taxes

    20 Medical Expenses You Didn't Know You Could Deduct

    To lower your tax bill, be sure not to miss out on these commonly overlooked medical tax deductions.
RELATED TERMS
  1. Basic Reparations Benefits

    Automobile insurance coverage benefits that provide medical, ...
  2. Net Collections

    A term used in medical accounting to describe the amount of money ...
  3. Corridor Deductible

    Expenses that are paid by the insured in excess of an insurance ...
  4. Omnibus Clause

    An automobile liability insurance policy clause which extends ...
  5. Insurance Consortium

    A group of businesses or organizations that join together to ...
  6. Anti-Stacking Provisions

    An insurance policy provision which prevents more than one limit ...
RELATED FAQS
  1. What happens if my insurance claim falls below the deductible level?

    Though the ins and outs of health insurance are often confusing, the concept of the insurance deductible is relatively straightforward. ... Read Full Answer >>
  2. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  3. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  4. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  5. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>
  6. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!