Governor’s Report Finds Switch To Tort Auto Insurance System Injured Providers And Consumers

Cuts in payments to providers and increased consumer health insurance premiums quantified in report

A report released today by Governor Ritter’s Office of Policy and Initiatives verifies what trauma care providers have been saying for four years: the sudden switch from a no-fault auto insurance system to a tort system left Colorado’s trauma care providers with millions of dollars in unpaid costs after providing medical transports and treatments.

These costs are shifted onto health insurers and consumers through higher charges for other services and increased co-pays or deductibles.

The Governor’s office contracted with BBC Research and Consulting, an independent research firm, to study the effects of Colorado’s change from a no-fault auto insurance system to a tort system in July 2003. The scope of work for the study was developed through a collaborative process with the Trauma Care Preservation Coalition (TCPC) and representatives of the auto insurance industry.

BBC’s key findings are as follows:

• Hospitals are losing tens of millions of dollars every year for treating motor vehicle accident patients. In 2002, hospitals were reimbursed for 60 percent of the care they provided to motor vehicle accident patients. But by 2006, after the switch to tort, that percentage had plummeted to only 36 percent: “Non-reimbursed charges related to inpatient care for auto injuries totaled about $90 million in 2002 and about $175 million in 2006” (page 12). While hospitals did see a drop in the reimbursement rate for other types of care, the change for motor vehicle accidents was notably more extreme (an 8 percent drop for all care compared to a 24 percent drop for motor vehicle accident patients).
  
   
• Ambulance companies and fire departments have suffered similar declines in reimbursement. For Colorado’s first responders, 18 percent of patient transports from motor vehicle accidents went uncompensated in 2002. By 2006, that number had more than doubled, rising to 37 percent (page 12).
  
   
• Many factors have led to reductions in auto insurance premiums in the last few years, with the switch from no-fault to tort only one factor. The report cites a 35% decrease in auto insurance rates, based on auto insurance reports to the state. But the report also indicates that auto insurance rates after the switch decreased as a result of many factors, including a significant drop in auto insurance coverage since no-fault and a statewide decrease in the number of accidents that result in injuries or fatalities.

Additionally, the report shows actual expenditures by consumers for their auto insurance policies does not reflect the same decreases.

• Health insurance premium increases have negated any auto insurance savings for consumers. Savings that consumers may have experienced in their auto insurance policies have been negated by the increases seen in health insurance premiums as a result of the switch to a tort system. BBC’s report finds that health insurers in Colorado predicted a 1.6% premium hike in 2003 that was attributable to the change from no-fault to tort (page 9). This could amount to hundreds of dollars in additional health insurance costs for the average Colorado family.
  
   
• Insurance coverage for medical payments would benefit consumers. If the General Assembly were to mandate that all Coloradans carry medical payments coverage (“med pay”) on their auto insurance policies, it would help consumers cover out-of-pocket medical expenses such as co-pays and deductibles (page 16). Contrary to the arguments of the auto insurers, very few Coloradans have the extremely high level of health care coverage that would make a mandatory med pay truly duplicative of health insurance.

By substantiating a small portion of the economic losses that Colorado’s trauma system has incurred since the switch from no-fault auto insurance to a tort system, the report demonstrates the unintended consequences.

It is important to note the report significantly underestimates the financial impacts on Colorado’s trauma system. It does not quantify the impacts of unreimbursed care on physicians who treat auto accident patients; nor does the report address the majority of auto accident patients who are treated in the emergency departments and discharged the same day. Researchers were only able to report data that relates to the small percent of patients admitted to hospitals.

Additionally, the report makes the case for all drivers to carry medical payments coverage on their auto policies. (The Trauma Care Preservation Coalition is advocating this private sector solution for a small, reasonable med-pay; state funding solutions are not feasible under current budget and taxing constraints.) This solution would ensure that their health care would be fully covered if they were at fault in a car accident. Currently, bodily injury coverage is required in Colorado, but it only covers the people who are injured by the at-fault driver. Without med pay, the at-fault driver has no bodily injury coverage for him/herself or any relatives in that car.

“Many people don’t realize that their auto insurance no longer covers medical expenses unless they specifically elect (and pay for) an optional med-pay coverage,” said Dave Bressler, Director of Weld County Paramedic services. “We feel a deep responsibility and sense of service to help save the lives of every accident victim in our county. Like other EMS agencies across the state, we’re caught between a rock and a hard place – we’re doing everything in our means to save lives, but our resources are being bled away. More and more Coloradans don’t have health insurance, and their medical bills aren’t covered by their auto insurance anymore. As a result, in more and more cases we’re not paid for our services, and we’re left with no means to recoup those costs. Our patients face bills they cannot pay.”

Steven Summer, President and CEO of the Colorado Hospital Association, commended BBC for their efforts and stated, “After years of educating policymakers about this issue and advocating for a mandatory med pay solution, we are thrilled that an objective third party has validated what the healthcare community has been saying all along. Colorado patients expect and deserve to be covered in the event of an accident, and this study proves that they are not.”

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