The growing practice of overcharging for medical provider services is impacting U.S. P&C insurance companies and the cost of auto insurance.
Boston, March 2, 2012 – A new report from Aite Group explores the impact of rising healthcare costs on the U.S. property and casualty (P&C) insurance industry. Based on Aite Group interviews with 14 North American P&C industry stakeholders, the report considers why this issue has not received greater scrutiny, describes the various approaches and solutions that should be pursued to address it, and highlights innovative insurance technology and services vendors that are providing effective thought leadership, approaches, and solutions.
The Patient Protection and Affordable Care Act, enacted in 2010, has affected every organization conducting business within the healthcare system, including P&C insurers. While it is well understood that the U.S. healthcare system is under tremendous pressure from government fee reductions, declining private-sector program enrollments, provider and supplier cost and price increases, and the uncertainties of impending regulatory demands, what may not be well understood are the repercussions of this pressure on the cost of auto injury claims and the subsequent impact on U.S. auto insurers. The significant and growing practice of overcharging for medical provider services—specifically hospital services—is impacting U.S. P&C insurance companies and thereby the cost of auto insurance. This phenomenon is referred to as “medical cost shifting.”
“The Patient Protection and Affordable Care Act raised the possibility of increased medical cost shifting from the healthcare system to insurers of workers’ compensation and automobile liability,” says Stephen Applebaum, senior analyst with Aite Group and author of this report. “Cost shifting is occurring because the P&C industry has been slow to adopt effective medical-bill analysis technologies, primarily due to its traditional reliance on the expertise of individual adjusters. P&C insurance has survived in spite of this lag because it remains well capitalized, and, more importantly, because it is able to absorb and pass along the price increases caused by medical cost shifting and actually derives increased profits from increases in loss costs and premiums.”
Firms mentioned or profiled in this report for their activity relating to medical cost shifting include HCI (HealthCare Insight), a unit of Verisk Health; ISO/Verisk Analytics; LexisNexis Data and Risk Solutions; MedNeutral; Mitchell Auto Casualty Solutions; SAS; and Trillium Software.
This 19-page Impact Note contains three figures. Clients of Aite Group’s P&C Insurance service can download the report.