There is nothing like uncertainty to cast a chilling effect on a major segment of the marketplace.
With the passage of the Affordable Care Act, and the Supreme Court ruling upholding the constitutionality of the law, the health care industry is attempting to understand the law's implications on their business activities.
A plethora of Accountable Care Organizations (ACOs) have been created under the auspices of a Medicare shared-savings program in an attempt to create financial incentives for improved care and patient outcomes. However, the way in which they are supposed to operate and interface with patients while saving money and driving better outcomes is still subject to interpretation.
From the analyses I have read and heard, multitude theories abound.And what if an ACO fails to qualify for financial incentives? Will this amount to prima facie evidence that they do not treat patients properly?
Of course, the salient feature of the law is the requirement that everyone buy health insurance (the individual mandate), and the lack of an option for group health insurers to deny coverage regardless of pre-existing medical factors. At this stage, no one knows how this will be carried out in a practical manner.
While the health care industry scrambles to conceive strategy and tactics to deal with the many signal reforms that begin on Jan. 1, 2014, the P/C arena is trying to ascertain the impact on workers' compensation, medical malpractice, auto bodily injury and med pay, general liability, etc. In other words, all of the P/C lines of insurance that deal with bodily injuries to human beings.
Considering the murky nature of the law, it is no wonder that the P/C arena is having a great deal of difficulty in attempting to gauge the potential impact on the lines the casualty insurance carriers underwrite.
There are myriad questions that P/C actuaries and underwriters are mulling about the effectiveness of the law to improve the general health of the population at large. Nobody can accurately predict what is going to transpire.
Some believe there will be a shortage of physicians, and care will slowly but inevitably be rationed leading to deteriorating outcomes. Others insist that treatment by non-physicians (such as nurse practitioners) will ably fill the gap, with the result that more professional care will be dispensed to the entire population.
The new law may increase, decrease, or cause no changes to liability and costs in P/C lines such as WC and medical malpractice. To add additional complexity, state laws (particularly in WC) must be taken into consideration when attempting any projections.
The ultimate purpose of the law was to have everyone in the country covered by health care insurance, regardless of their individual desires. Obviously, the increase in people accessing the health care system may result in increased liabilities simply based on the law of large numbers.
If a shortage of physicians does develop, the number of medical errors may increase, having a pejorative effect on medical malpractice liability. The counter argument, of course, is that med malpractice claims may be reduced because individuals will have more timely access to better medical treatment.
In the WC area, costs may escalate if additional medical research yielded a consensus that more treatments are needed for certain injuries, thus driving up claim costs, though hopefully yielding a better ultimate result. Some have countered this line of reasoning by saying that better access to health care for the general population will result in healthier people, thus lowering treatment costs in the long run.
Of course, cost shifting is always a concern for the P/C area. If the Affordable Care Act results in unintended consequences in the group health arena, are third-party payers more at risk to make up untoward financial shortfalls?
Clearly, there are more questions than answers at this stage. The conclusion is there is no way to know, at this juncture, the impact of the Affordable Care Act on P/C insurance lines. However, you can be assured that the law will continue to garner a great deal of attention from the P/C carriers as they try to divine what implementation will mean to the business.
Hopefully, the fog will begin to lift at some point in the next six months as the January 2014 date approaches. But as of now, that fogbank is fairly impenetrable, and the debates continue unabated.
May 15, 2013
Copyright 2013© LRP Publications