How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?

How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?

How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?

How Will the Patient Protection and Affordable Care Act Affect Liability Insurance Costs?


The Patient Protection and Affordable Care Act (ACA) will greatly expand private coverage and Medicaid while making major changes to payment rates and the health care delivery system. These changes will affect traditional health insurers, individuals, and government payers. In addition, a considerable amount of health care is paid for directly by or is indirectly paid for via legal settlements after the care occurs, by liability insurers. This report identifies potential mechanisms through which the ACA might affect claim costs for several major types of liability coverage, especially auto insurance, workers' compensation coverage, and medical malpractice. The authors discuss the conceptual basis for each mechanism, review existing scholarly evidence regarding its importance, and, where possible, develop rough estimates of the size and direction of expected impacts as of 2016. They examine how each mechanism might operate across different liability lines and discuss how variation across states in legal rules, demographics, and other factors might moderate each mechanism's operation. Overall, expected short-term effects of the ACA appear likely to be small relative to aggregate liability insurer payouts in the markets in question. However, under reasonable assumptions, some mechanisms can generate potential cost changes as high as 5 percent or more in particular states and insurance lines. The authors also discuss longer-run changes that could be fostered by the ACA that might exert more significant effects on insurance claim costs, including shifts in tort law, changes in physician supply, new pricing approaches under the accountable care organization model, and changes in population health.


The Patient Protection and Affordable Care Act (ACA) (Pub. L. 111–148, 2010) promises to bring substantial changes to the U.S. health care system, including potentially expanding coverage to millions of uninsured Americans. Although considerable research is already under way examining how the aca will affect medical providers, consumers, and private health insurers, much less is known about how the aca will affect liability insurers, despite the fact that liability insurers reimburse tens of billions of dollars for medical care each year in the United States. This report identifies several channels through which the aca might affect liability insurance payments—also referred to here as insurer costs—summarizes the conceptual basis for and existing evidence for these channels and, where possible, calculates rough estimates of the sizes and directions of expected impacts. Although lingering uncertainties surrounding how the aca implementation will proceed make offering precise quantitative predictions of the law’s impact unrealistic at this point, the report does aim to identify lines and states where the ACA’s effects may be more profoundly felt, areas in which impacts are expected to be modest, and highlight domains in which substantial uncertainty still exists. It represents one of the first systematic empirical explorations of the ACA’s potential effects on liability insurers and, as such, should be informative to insurance industry professionals, policymakers, and regulators.

This research was supported by Swiss Re and also in part by pooled contributions to the rand Institute for Civil Justice. the Swiss Re Group is a leading wholesale provider of reinsurance, insurance, and other insurance-based forms of risk transfer. Dealing directly and working through brokers, Swiss Re’s global client base consists of insurance companies, medium-sized to large corporations, and public-sector clients. Swiss Re’s public research program supports research on cutting-edge topics at the intersection of risk management, insurance, and public policy.

Rand Institute for Civil Justice

The rand Institute for Civil Justice (ICJ) is dedicated to improving the civil justice system by supplying policymakers and the public with rigorous and nonpartisan research. Its studies identify trends in litigation and inform policy choices concerning liability, compensation, regulation, risk management, and insurance. the institute builds on a long tradition of rand Corporation research characterized by an interdisciplinary, empirical approach to public policy issues and rigorous standards of quality, objectivity, and independence.

Icj research is supported by pooled grants from a range of sources, including corporations, trade and professional associations, individuals, government agencies, and private foun-

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