Could the ACA reduce workers’ compensation expenses?

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Many people speculate that the ACA will shift medical care from being paid for by workers' compensation insurance to being paid for through health insurance. This shifting care could increase health insurance premiums and result in firms neglecting safety since they will have to pay less for work-related injuries. A new working paper by Institute economist Marcus Dillender studies the effect of workers having health insurance on the likelihood that they file for workers' compensation by examining Texas workers' compensation claims to see how the Affordable Care Act's expansion of dependent coverage to age 26 has affected whether young adults file for workers’ compensation.

Adults under 35 years of age make up more than half of noninsured, nonelderly adults. Although they tend to be healthier than adults as a group, young adults are more likely to work jobs with greater physical demands and harsher environmental conditions than older worker. Because of this, they are more likely to be injured on the job. For example, between 2005 and 2013, people under 35 accounted for over one-third of workers' compensation claims in Texas.

Dillender compares the numbers of workers' compensation claims filed between 2011 and 2013 by young people between the ages of 24 and 27 and finds that whether or not a young worker had health insurance mattered in deciding whether to bill workers' compensation for medical services. In fact, a 10-percentage-point decline in the numbers of young adults with health care was associated with a 15 percent increase in workers’ compensation bills.

Although workers' compensation received more bills once young people lost health insurance, the additional cost to the system was surprisingly small, since most claims came from small bills. For example, bills for physical therapy and office visits were both responsive to health insurance.

The results suggest that ACA’s health insurance expansion could result in workers' compensation insurance paying for less medical care. However, because cheaper services are more responsive to health insurance, the cost savings to workers' compensation systems and the impact on employers' safety incentives will likely be small.

Read The Effect of Health Insurance on Workers' Compensation Filing: Evidence from the Affordable Care Act's Age-Based Threshold for Dependent Coverage, by Marcus Dillender.