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Might ‘Obamacare’ Bolster Non-Health Insurer Bottom Lines?

Posted by Sam Friedman, insurance research leader, Deloitte Services LP, on August 27, 2013 

Much of the insurance industry buzz regarding the Patient Protection and Affordable Care Act (PPACA) has revolved around its likely impact on the operation of health carriers. But perhaps additional attention should be directed to the law’s potential effects on property and casualty insurers.

While bracing for the worst, property and casualty players with big medical components in their loss costs — particularly those covering workers’ compensation — may actually have good reason to hope for the best, when the law, better known as “Obamacare,” is fully implemented.

A serious potential concern for workers’ comp carriers may be trouble getting timely access to medical care and rehabilitation services once the PPACA’s mandate goes into effect next year – when nearly everyone will be required to produce proof of health insurance or pay a penalty on their income tax forms.

It’s Economics 101: supply and demand. With tens of millions who are currently uninsured expected to have coverage next year, pent-up demand for even routine medical services could overload the healthcare system.

Any delays associated with seeing a doctor, diagnostic testing, or scheduling physical therapy, may be mere inconveniences for patients injured off the job and paying with standard health coverage. But such bottlenecks could turn out to be significant cost-drivers for time-sensitive workers’ comp carriers, which place a priority on providing fast and intensified treatments to get people back on the job and off wage indemnity payments as quickly as possible.

However, while lessened availability of care could conceivably undermine the workers’ comp system’s bottom line, the PPACA mandate may conversely produce a number of positive effects as well.

For one, some without health insurance who are hurt outside of work have been reported to falsely claim an on-the-job injury so that comp insurers fully cover their medical expenses. Having millions more with healthcare under PPACA might reduce the temptation to fraudulently shift costs to comp carriers, thereby reducing false claims. 

Additionally, a potential flood of newly insured patients could accelerate the already growing use of physician assistants, nurse practitioners and perhaps even telemedicine to cope with the overflow. Delegating more routine care might help mitigate any anticipated rise in wait times, alleviating indemnity cost concerns for workers’ comp insurers.

Workers’ comp carriers might also benefit if having health insurance prompts more people to get regular checkups, address minor health issues before they become major ones and seek treatment for chronic medical conditions. The law may further bolster good health practices by providing incentives for employers to establish wellness programs and to encourage employees to participate.

With Obamacare’s emphasis on preventative care, earlier detection and quicker treatment of sudden and chronic illnesses, we may eventually see a healthier workforce that is less likely to be injured on the job — and if injured, to perhaps recover more quickly — resulting in fewer and less severe comp claims.

Such positive outcomes may not only nullify, but may eventually surpass any negative consequences from the likely stress to the healthcare system with the influx of millions of new patients under Obamacare.

Have you spoken with your property and casualty insurance clients about the potential impact of the PPACA on their operations and loss costs? If so, what concerns have they been raising? What advice have you been providing to them?

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