How Obamacare Could Affect P/C Insurance

Key changes in federal health care reform remain months away, but property/casualty actuaries are already trying to determine what impact they will have on their business, particularly workers’ compensation and medical malpractice.

Elements of the Affordable Care Act have been phased in since the law’s 2010 passage, but many key reforms begin Jan. 1, 2014. P/C actuaries need to consider the potential impact so they can adjust rates and reserves when changes occur.

At the recent Casualty Actuarial Society’s (CAS) Ratemaking and Product Management Seminar, two fellows discussed how the reforms may affect P/C lines.

Many of the measures have already been enacted but, according to Laura N. Cali, chief actuary and manager of product regulation for the Oregon Insurance Division, the biggest changes remain, including requiring everyone to buy insurance and eliminating health insurers’ ability to deny coverage.

Key questions include:

• How effective will the individual mandate be?
• Will the uninsured population entering the market be healthier or less healthy than current insureds?
• How much pressure will fall upon primary caregivers like physicians, as millions of new insureds seek treatment?
• Will more treatment be handled by non-physicians, such as nurse practitioners, and what impact will that have?
• How will medical specialists be affected? They may not face an instant influx of patients, the way primary care physicians will, but demand for specialists’ services will increase as new insureds work their way through the system.

The law is creating “a lot of new regulations,” Cali said, “and it’s happening quickly.”

The changes could significantly affect P/C insurance, although as of now it is difficult to tell what impact the reforms will have on liability and costs, said Anne M. Petrides, a director and consulting actuary with Towers Watson.

The changes could increase or decrease liability and costs in medical malpractice and workers’ comp, but the impact will differ by state as both lines are sensitive to state laws and regulations, Petrides said.

Health care reform will increase the number of people who have health insurance, which could reduce medical malpractice liabilities if new insureds can visit doctors and receive earlier treatment earlier.

Early treatment could lead to better medical outcomes and prevent adverse outcomes that can trigger malpractice lawsuits.

But the increase in the insured population could raise liabilities, as more patients per unit exposure would imply more potential risk. Also a physician shortage could impact the frequency of medical errors.

The same change could lower costs in workers’ comp if greater access to health care creates a healthier workplace. But it could increase costs if a doctor shortage delays treatment and a return to work.

Workers’ comp costs could go down if research creates greater agreement on what are now questionable treatments. But costs could go up if the research indicates more, or more expensive treatment, is warranted.

Reform’s attempt to create financial incentives for improved care and patient safety could lower medical malpractice liability if the incentives work as intended. But liability could increase if failure to qualify for an incentive becomes considered as evidence of negligence.

Topics Legislation Workers' Compensation Property Casualty Medical Professional Liability