Study finds car insurance cheaper, hospitals losing money
February 19, 2008
DENVER – Colorado drivers are paying an average of $322 less for auto insurance now than under the state’s previous no-fault system, according to a study commissioned by the governor’s office.The study released Tuesday by BBC Research and Consulting found that average premiums decreased 35 percent from July 2003 to December 2007. Colorado went from being the ninth most expensive state to insure a car in 2002 to the 21st in 2005.The study cautioned that premiums vary based on what type of coverage drivers chose to buy and that differences in average premiums can’t necessarily be linked to a single cause.The state switched from a no-fault system to a tort system in 2003. Under no-fault, auto insurers covered medical costs immediately for the injured. Under the tort system, auto insurers don’t have to make payments until they determine which driver caused the accident.The study found that 26 percent of the average premium before the switch to the tort system was for personal injury protection, which paid the hospital bills for car crash victims regardless of who was at fault.Hospitals and ambulance services have complained that the elimination of that coverage has left them with millions of dollars in unpaid bills, leading lawmakers to periodically consider requiring that drivers get medical coverage. Opponents say that would be unfair to drivers who already have health insurance policies that would cover their hospital bills from a car accident.Drivers are now required to have bodily injury coverage to pay for people injured by the driver found to be at fault but it doesn’t cover the medical costs of the driver or other people injured in their car.The study found that most Coloradans who have health insurance would still have to pay co-payments and deductibles if they’re injured in an accident, bills which could be covered by mandated medical coverage. However they said those with better health insurance plans would essentially be paying for coverage they don’t need. They concluded there wasn’t enough information to estimate how many people would benefit or be hurt by requiring medical coverage.The study found that hospitals were reimbursed for 60 percent of their $168 million in charges for auto injuries in 2002 but only 36 percent for the $209 million in charges in 2006. Researchers concluded that was due both to more patients not having health insurance and more insurers paying hospitals based on negotiated reimbursement rates rather than actual charges.Emergency responders records showed that there weren’t reimbursed for 18 percent of their charges in 2002 but that the amount grew to 37 percent in 2006, when it took them twice as long on average to get paid than it did in 2002. No agencies reported an increase in their emergency response time.