obamacare could cut the cost of car insurance

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Page 1: Obamacare could cut the cost of car insurance

Obamacare could cut the cost of car insurance

Whether you like or hate Obamacare, there's no argument it's having big and unexpected impacts onmany aspects of American life. One of the most unexpected: It may lower how much you pay for carinsurance.

According to a new study from RAND, the Affordable Care Act may indirectly lower the cost of bothauto insurance and worker's compensation. That's because those types of policies have also had toprovide payments for injuries to people without medical coverage.

Every year U.S. insurance companies have to pay out billions of dollars for medical care because ofinjuries in the workplace, car crashes and similar claims. According to the report, in 2007 medicalcosts from auto accidents forced insurers to pay out $35 billion, about 2 percent of all health carecosts that year.

As more of the previously uninsured get coverage through Obamacare, insurers won't have to putaside as much money to pay for their care -- and that could mean lower premiums. Also, somepatients now use automobile liability insurance to get treatment for medical problems unrelated toan accident. With the ACA, they'll be able to use their regular medical insurance to pay for that.

"The Affordable Care Act is unlikely to dramatically affect liability costs, but it may influence smalland moderate changes in costs over the next several years," David Auerbach, the study's lead authorand a policy researcher at RAND, said in a statement. "For example, auto insurers may spend lessfor treating injuries, while it may cost a bit more to provide physicians with medical malpracticecoverage."

As Auerbach notes, this isn't going to be a huge change. The study predicts Obamacare cuts averagecosts incurred by auto insurance companies by about 2 percent. But that's not the only impact itcould have.

Obamacare will also reduce the size of Medicare payments. Most car insurers base their paymentson rates paid by Medicare and private health insurers, so cuts in what those companies pay is likelyto reduce the amount auto insurers pay. The report estimates this could mean an additional 1percent cut for car insurers. Depending on what state you live in, this could mean you'll pay up to 5percent less for car insurance.

But there's also a possible downside. As the report notes: "An increase in the number of people usingthe health care system may trigger a corresponding increase in the number of medical malpracticeclaims made against physicians and other health care providers. Such a shift could drive malpracticecosts modestly higher."

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