The Financial Impact of Medical Malpractice Claims After the Affordable Care Act on the Property & Casualty Insurance Industry

Abstract

In 2010, the Affordable Care Act was signed into law with various provisions taking effect over the following years, specifically the individual mandate in 2014. This reform drastically impacted the entire insurance industry, not simply health insurance. Many prior studies, however, focused only on how ACA impacted health insurance. Early estimates indicated that health insurers might transfer costs to property and casualty insurers, which would significantly impact the profitability of these companies. Despite the association of medical malpractice with healthcare, property and casualty insurers actually write the policies for medical malpractice incidents. Therefore, I chose to exclusively examine how the Affordable Care Act impacts the practices of property and casualty insurers that write medical malpractice policies. My study worked to answer three questions: (i) the change in the number of medical malpractice reports, especially in Medicaid expansion states, (ii) the change in the dollar amount of these claims, and (iii) the impact to the industry’s net income. Using statistical tests and regressions based on sample data of the number of medical malpractice reports and the inflation-adjusted dollar amounts of these claims in each of the 50 states from 2003 to 2018, healthcare consumption expenditures, and the number of individuals with health insurance, I concluded that the number of malpractice reports has increased and the dollar amount of claims has decreased since the enactment of the Affordable Care Act. However, only a portion of these changes can be attributed to the Affordable Care Act, as the additional number of people insured played a small role in the variations of the medical malpractice environment; rather, healthcare consumption expenditures substantially altered the medical malpractice statistics. Ultimately, I concluded that the changes that occurred in the medical malpractice claims after the passage and enactment of the Affordable Care Act had very little impact on the profitability of the property and casualty insurance industry.

Comments from Mentors

Kelli’s treatise on the financial impact of the Affordable Care Act on the casualty and property industry offers analysis at the depth of scholarly reviewed journals. She invested numerous hours collecting and analyzing large data sets with advanced statistical methods. Her independent research skills thoroughly impressed me. While Kelli’s academic talents and business acumen are well demonstrated in this thesis alone, I will always remember Kelli for the four-year record she established at TCU. Kelli’s remarkable commitment to learning and her kindness in ensuring her fellow classmates’ success will remain my strongest memories of her.

—Susan Staples

Aside from being a pleasant person, the most noteworthy characteristic of Kelli's honors research was her ability to move the project successfully in the direction she wanted it to go. With only a little guidance and a few nudges from me, she was able to take the raw idea and turn it into a compact, interesting, quantitative and qualitative analysis. Kelli is self-starter with an already mature sense of project management.

—Paul Irvine