Presented to the Interim Committee on Auto Insurance

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The shift from no-fault to tort auto insurance
Is the jury still out?
Presented to the Interim Committee on Auto
Insurance July 27, 2005
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Colorado Health Institute

• Non-profit 501(c)3 corporation
• Independent, nonpartisan
• Mission provide objective, non-biased
  information to inform policy decision-making
  process
• Core activities information clearinghouse,
  policy research and analysis, information
  dissemination

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Three key objectives

• To suggest a policy framework by highlighting
  major findings from the 2004 CHI report (informed
  choice, adverse impacts)
• To answer the question on the title slide
• To suggest ways to improve the flow of data
  (i.e., information) to facilitate informed policy
  decision-making with regard to consumer and
  system impacts resulting from the shift to a tort
  auto insurance system

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• Three Things You Should Know . . .
• The shift to a full tort system in Colorado will
  have differential fiscal impacts depending on the
  individual and family circumstances of
  policyholders
• In evaluating the trade-offs associated with
  greater consumer choice, it is important to
  ensure that Coloradans have access to complete,
  accurate, and easily understood information
• 3) With less than one full year of claims
  experience in Colorado from which to draw, the
  jurys out regarding the policy and fiscal
  impacts resulting from the shift to a tort system

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• Sources consulted for the policy brief
• Insurance Research Council, a division of
  AICPCU, and other insurance industry documents
• State insurance commissioners offices
• Kaiser Family Foundation and US Census Bureau
• Key informants within Colorado and states where
  no-fault insurance statutes had been repealed

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• Policy intent of moving to a tort system
• To provide Coloradans more choice and increased
  flexibility to choose from a menu of coverage
  options and greater ability to manage their
  premiums.
• Question
• Have changes in the types of auto insurance
  policies and products marketed benefited
  consumers in the form of lower auto insurance
  premiums and out-of-pocket expenses? If so, what
  products generate the greatest savings for
  consumers?

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• What do we know about the savings accruing to
  Colorado drivers?
• Questions that need answers
• For those consumers that are realizing cost
  savings in their auto insurance premiums, for
  what products are the greatest savings being
  realized?
• How many auto insurers doing business in Colorado
  offer the Med Pay optional coverage? In what
  increments?
• How many insured drivers in Colorado are opting
  for an umbrella policy? At what levels?
• How many insured Colorado drivers are opting for
  Med Pay coverage? In what increments?
• What is the premium differential between PIP
  coverage and comparable coverage under the new
  tort system?

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• For consumers to truly have the ability to make
  informed choices, it is imperative that the full
  range of information is available in an easily
  accessible format and location(s)

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• Consequences of the shift from no-fault to tort
• The timeliness of payments to individuals injured
  in an auto accident and the providers who treat
  them depends on the regulatory framework of the
  system in force.
• In general, delays in payments to medical
  providers are more common and lengthy in tort
  liability states.
• Question
• Have there been any documented changes in the
  quality and delivery of health care services for
  traumatic injuries resulting from auto
  accidents?

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(No Transcript)
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• Consequences of the shift from no-fault to tort
  cont.
• (2) Under the new tort system hospitals,
  particularly emergency departments and trauma
  centers have reported increased payment delays
  and administrative coststhis new cost burden
  could, over time, result in higher health
  insurance premiums and increased costs to
  Medicaid
• Question
• Has there been a shift in medical and
  rehabilitation costs associated with serious auto
  injuries to health insurers, government programs,
  health care providers, employers and consumers?

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• Issues we suggest be monitored with regard to
  adverse impacts
• Cost-shifting from PIP coverage to health
  insurance, government programs (Medicaid and
  CICP), health care providers, employers and
  consumers
• Trade-offs for consumers in the form of lower
  auto premiums but for less than adequate coverage
• Changes in treatment options and access to
  medical and rehabilitative care
• Over- and under-insuring for medical coverage
• Widening inequities between population groups in
  terms of adequacy of coverage and restitution for
  damages
• Secondary impacts in excessive claims
  processing, administrative and court-related
  delays

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Switching gears What do the data tell us?
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• The regulatory landscape A national perspective
• In the past 25 years, five states have repealed
  their no-fault laws
• Nevada (1980)
• Pennsylvania (repealed 1984, re-enacted 1990)
• Georgia (1991)
• Connecticut (1993)
• Colorado (2003)

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• A Quick look at the data
• In 2001, among the states where no fault has been
  repealed, average premiums still vary widely and
  remain on the high side
• Nevada - 851 (7)
• Pennsylvania - 726 (19)
• Georgia - 702 (22)
• Connecticut - 912 (5)
• (2004 Auto Outlook, Insurance Information
  Institute)

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• What about the states where no-fault is still in
  force?
• These figures represent average premiums among
  no-fault states in 2001
• Kansas - 556 compulsory (44)
• Minnesota - 735 compulsory (17)
• Utah - 640 compulsory (29)
• Kentucky - 645 choice, no-fault (27)
• Oregon - 643 add-on, compulsory (28)
• (2004 Auto Outlook, Insurance Information
  Institute)

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• No-fault states tort liability thresholds (2001)
• Kansas - 2,000
• Minnesota - 4,000
• Utah - 3,000
• Kentucky - 1,000
• Colorado - 2,500
• (2004 Auto Outlook, Insurance Information
  Institute American Insurance Association Law
  Publications, 2004)

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What the data tell us is that the issue is
more complex than the cost of PIP coverage or the
savings achieved from a bare bones auto policy
that may leave individuals uncovered for the
costs associated with an auto injury.
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What can we learn from sister states? Colorado,
Kansas and Utah are contiguous states with
similar political cultures, demographics and auto
insurance laws (as of 2001)
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Another example of data that could be
instructive, but which unfortunately tell only a
small part of the story
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Source Colorado Division of Insurance, 2005
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• The key point to be made is that we have much to
  learn to inform the policy decision-making with
  regard to our new tort system
• Informed decision-making relies on good,
  objective information and sound unbiased analysis
• The availability of data ranges from readily
  available to not-yet-collected
• CHI was created to serve as an information
  clearinghouse for objective, nonpartisan
  information
• CHI stands ready to work with the auto insurance
  industry, DOI, and health care providers to
  assemble, analyze and report data to support the
  policy decision-making process

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• Contact Information
• Pamela Hanes, Ph.D.
• President and CEO
• Colorado Health Institute
• 303.831.4200
• hanesp_at_coloradohealthinstitute.org
• www.coloradohealthinstitute.org