The ACA’s Anticipated Effect on P/C and Workers’ Comp Lines

Though parts of the Affordable Care Act have been in place since 2010, key reforms began on January 1, 2014. According to industry experts, the ACA won’t affect the medical bill payment process; however, insurers will likely see an increase in the cost of medical care for auto accident patients, more subrogation liens from health insurers and the potential for delayed treatment in workers’ compensation claims.

According to a Travelers white paper, The ACA and its Potential Impact on the P&C Industry, some key ACA components expected to affect the P/C industry include:

• Extended healthcare coverage – a 15 percent increase in demand for a fixed supply of healthcare services.

• A potential increase in costs in pharmacy and durable medical equipment (DME) taxes and assessments by 1.5 percent and 2.3 percent respectively.

• Enhanced electronic record keeping and sharing of medical data among providers.

Michele Hibbert‑Iacobacci, vice president of information management and support for San Diego-based Mitchell International, has been with the company since 1994, since they acquired the property/casualty bill review company that she worked for at that time.

She described Mitchell’s general predictions for the ACA’s impact on property/casualty lines and workers’ compensation in 2014.

“We don’t see any changes in the way bills are paid. However, because of the extensive amount of population predicted that would be joining the health care system that didn’t have it before, it could impede patients from getting care as quickly as they do today,” said Hibbert-Iacobacci, emphasizing that for auto injuries, in particular, patients will flock to emergency rooms because they won’t be able to get in to see their primary care physician.

“In Florida, before 2013, about 11 percent of patients were seen in the emergency room for automobile accidents. We do have a benchmark that we’re going to be looking at. Florida’s one of our largest transaction states, because it’s a PIP state in auto,” Hibbert-Iacobacci said. “We plan on looking at that metric and seeing if it changes over time.”

David Wendt, a property casualty insurance broker for more than 25 years and general manager with Minn.- based Associated Professionals Inc., said there is concern that auto and workers’ compensation insurance could be added to the exchange.

“Our concern is that there’s enough medical insurance in auto insurance they may decide to put auto insurance on the exchanges and workers’ comp,” Wendt said.

Though unlikely, Wendt said, given the poor reception the program has had to date.

“The worse this does [the ACA], the better the property casualty industry will do,” he said.

As an example, Manitoba, Canada, has both health insurance and auto insurance.

Another prediction, according to the Mitchell exec, is that subrogation is going to become an even bigger deal as more patients become insured.

“Today, if you and I get in an automobile accident, we may go to the emergency room, if we have insurance, and usually we get referred to our primary care to start directing our care. They’re being paid by the healthcare [carrier], but the healthcare [carrier] is not going to tolerate that for a very long period of time. They’re going to want their money from the property/casualty insurer,” said Hibbert-Iacobacci.

Auto is particularly vulnerable because there are policy limits for available just for medical expenses.

“We will see that in auto, because auto has the money. They’ve got it there in their pocket. They plan on spending it, up to the policy’s limit, if need be, for the patient. It’ll just be more frequent than it ever was before. The carriers need to really have an expectation that their process of subrogation is going to take more time than it ever did before,” said Hibbert-Ioabacci.

As far as workers’ compensation, Hibbert-Iacobacci doesn’t think the ACA will have an immediate effect.

“In workers’ comp, we do not see an immediate change initially,” she said.

During the Casualty Actuarial Society’s (CAS) Ratemaking and Product Management Seminar held last year, Anne M. Petrides, a director and consulting actuary with Towers Watson, noted that greater access to healthcare could lower costs in workers’ compensation if it created a healthier workplace.

Ruth Estrich, chief strategy officer for MedRisk, a company that specializes in return to work treatment programs, thinks the ACA will impact workers’ compensation in two ways.

Like Petrides, she said there could be a benefit if injured people turn to their healthcare provider instead of potentially claiming a work injury.

On the flip side, Petrides said that if there was a provider shortage or delayed treatment, it could increase costs.

Estrich said that if there is a provider shortage, treatment could take longer for the majority of workers’ compensation claimants.

“Reducing access to primary physicians could have a significant impact on workers’ comp,” said Estrich.

Estrich said that given the choice, primary care physicians will treat regular patients before workers’ compensation claimants. That’s due to the necessary authorization for treatment, fee schedules, litigious nature of those types of claims and the extensive paperwork involved.

The Travelers white paper also noted some possible positive effects of the ACA on the P&C industry could include:

• Increased wellness.

• Decreased incentive to file questionable P&C claims.

• Increased fraud detection supported by government funding.

• Fewer emergency room visits.

• A decreased need to over-treat.

In addition, the Conn.-based insurer’s white paper noted some potential negative consequences of the ACA on the P&C industry:

• Decreased access to care, increasing indemnity costs as immediate access to physicians is reduced and return to work is delayed.

• Increased cost shifting from Medicare to P&C payers by physicians and hospitals

due to declining Medicare reimbursement rates.

•Increased pharmacy and DME medical costs due to new taxes and fees passed on to

consumers.

• Decreased network discounts due to increased bargaining power of physicians/hospitals and less need to drive volume, increasing medical costs.