Obamacare, the government program also known as the Affordable Care Act, could either raise or lower your auto insurance bill depending upon whom you ask. Forbes blogger Bruce Japsen believes Obamacare could lower car insurance premiums by as much as 5%.
It’s easy to see how Obamacare could lower auto insurance costs. The biggest expense paid by car insurance is medical care for those injured in accidents. By increasing the number of people with health insurance coverage, Obamacare could cover some of those costs.
It could also give people less incentive to sue after auto accidents. The main reason why people file lawsuits after accidents is to cover medical costs. Uninsured persons and lower income people are more likely to file personal injury lawsuits because it is often the only way that they can pay for their medical care.
Expanding both the number of people with private health insurance and those on Medicaid could reduce the number of personal injury lawsuits. Such lawsuits are what drive up auto insurance costs in states like Louisiana and Michigan.
The problem with this theory is that it will only apply if Obamacare works. If the program crashes, which appears to be happening, it could make things worse and raise auto insurance premiums in the process.
How Obamacare Could Raise Car Insurance Rates
The Wall Street Journalreported that medical costs in some areas are increasing. Obamacare is driving up medical costs by creating demand for some medical services, such as back surgery. More people have insurance so they are now are seeking medical care.
Older and sicker people and poor people, who tend to be sicker than the more affluent, are now able to get the healthcare they need or want. A lot of these people are in sorry shape because they deferred healthcare since they simply didn’t have the money. Many of these people require expensive procedures, such as surgeries, and drugs.
This could increase auto insurance premiums by increasing medical costs. The Journal estimated that medical costs in some areas have increased by 4%. This might be enough to offset the savings from the number of covered people.
Another way that Obamacare could drive up medical care costs is the nature of the plans. A lot of the policies have very high deductibles—sometimes as high as $10,000. That means a person has to buy $10,000 worth of healthcare in order for the plan to start covering expenses. If a lower income person with such a plan seeks treatment, a clinic or hospital has a strong incentive to jack the costs up to $10,000 because that’s the only way they are guaranteed payment. This might be the real reason for the high costs, The Journal discovered.
Another problem is that a lot of people still don’t have insurance. A lot of people are simply going to pay the tax penalty for not having health insurance because it is cheaper than health insurance for some people.
Others are on Medicaid, which a lot of doctors don’t take. In many parts of the country, all you can do on Medicaid is go over to the emergency room and sit on the bench, waiting for care. A lot of poor people don’t even bother to sign up for Medicaid because it doesn’t give them any real advantages. Why go through all the bureaucratic bother to get a plan that only covers medical care you can get now?
In fact, Medicaid is so lousy it gives lower income people an incentive to file personal injury lawsuits. Why settle for the substandard care that Medicaid provides when I can get first class treatment from top specialists paid for by your insurance company? If lower income people aren’t thinking this way, there are plenty of personal injury attorneys out there to remind them.
If Obamacare fails to reduce the number of the uninsured or increases them, it won’t have any effect on car insurance rates. Instead medical costs could be just as high or higher.
This means the rate you pay for car insurance next could be riding on the success or failure of Obamacare. Perhaps it is time to start reforming Obamacare to make sure it works before it drives auto insurance premiums through the roof.