‘Obamacare’ Might Impact Non-Health Insurer Bottom Lines

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

Most of the buzz about the Patient Protection and Affordable Care Act (PPACA) has understandably revolved around its likely impact on the operation of health-insurance carriers. But not nearly enough attention is being paid to the law’s potential effects on the other side of the industry.

The biggest concern for workers’ comp carriers is the havoc that might be created in terms of getting timely access to medical care and rehabilitation services for claimants once the PPACA’s mandate goes into effect next year, requiring most people to produce proof of health insurance or pay a penalty on their income tax forms.

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

Any resulting delays getting in to see a doctor, taking a diagnostic test, or scheduling a physical therapy session may merely be an inconvenience for patients injured off the job and paying with standard health coverage.

But if such bottlenecks do materialize, they could turn out to be a major cost-driver 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 availability of care is a legitimate concern that might conceivably undermine the workers’ comp system’s bottom line, there is a flip side to this coin in that the mandate could end up producing a number of positive effects as well.

For one, some of those without health insurance who get hurt away from work have been known to falsely report that they were injured on the job so they can have comp insurers fully cover their medical expenses. Having millions more get health insurance thanks to PPACA might erase or at least ease the temptation to scam comp carriers, thereby reducing the frequency of fraudulent claims.

Meanwhile, 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 mitigate any anticipated rise in wait times, alleviating indemnity cost concerns for workers’ comp insurers.

In more general terms, workers’ comp carriers could benefit if the expansion of health insurance coverage 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 further bolsters mitigation by providing incentives for employers to establish wellness programs and for employees to participate.

Bottom line, once all the pieces of Obamacare are in place emphasizing prevention, earlier detection, and quicker treatment of sudden and chronic illnesses, we might eventually see a far healthier workforce that is less likely to be injured or become ill on the job, as well as recover more quickly, resulting in fewer and less severe comp claims.

Such positive outcomes may not only negate, but perhaps surpass any negative consequences from the stress that will be put on the system by the influx of millions of new patients under Obamacare.

At least that’s the optimistic view. Whenever radical change is imposed upon a huge, long-established system such as healthcare, chaos theory is the order of the day. The truth is we really have no way of knowing how Obamacare will turn out, for insurers or their policyholders.  

What are your thoughts, predictions, concerns, fears about how Obamacare might impact the insurance markets?

About the Author
Sam J. Friedman

Sam J. Friedman

Sam J. Friedman is  Research Team Leader at the Deloitte Center for Financial Services. For many years, he was the Editor in Chief of National Underwriter’s P&C edition. He may be reached at samfriedman@deloitte.com.

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