The IRC study, "Hospital Cost Shifting and Auto Injury Insurance Claims," is based on data from more than 42,000 auto injury claims closed with payment under the five principal private passenger coverages. Twenty-two insurers, representing 58% of the private passenger auto insurance market in the Unites Sates in 2006, participated in the study. The IRC closed claim study collected detailed data on injury, medical treatment, claimed losses and total payments, claim handling techniques and attorney involvement.
IRC estimates that for bodily injury liability claims in 38 tort and add-on states, cost shifting in 2007 resulted in $1.2 billion in excess hospital charges. The full impact of hospital cost shifting, including that occurring in other insurance coverages and in other states, is likely much greater.
"The conventional wisdom is that hospitals aggressively seek to shift costs from public insurance programs to private payers such as auto insurance companies," said Elizabeth Sprinkel, SVP of the IRC. "With this study, we now have information on the magnitude of cost shifting, and a better understanding of the need for supportive state laws and effective tools that will enable auto insurers to pay hospitals appropriately and help control auto injury claim costs.”
Whether health care reform, if enacted, would alleviate or aggravate cost shifting to private insurance plans is currently unknown, according to the report. What is known, however, is that cost shifting is occurring now, and that it involves significant costs for the property/casualty insurance industry. Policymakers may consider options to address current and future cost shifting by hospitals. Findings in the IRC report suggest that doing so could help control the cost of hospital treatment for auto injury claimants as well as the administrative costs insurance companies incur to review medical bills from hospitals and physicians.
"Health care legislation enacted by Congress last month underscores the complexity of this relationship," Sprinkel says. "It will take months, if not years, to understand the full impact of the reforms on hospital cost shifting and the auto insurance system."