February 20, 2008
Colorado's Fault-Based Car Insurance System: Lower Premiums, But Higher Hospital Costs
The Denver Post reports on a study of Colorado's switch from a no-fault auto insurance system to a fault-based system:
Two years after the insurance change in 2003, the average annual premium for a car dropped 10 percent to $827 in Colorado, while the national average stayed steady, according to the report prepared for Gov. Bill Ritter by Denver-based BBC Research & Consulting.
At the same time, state drivers had less insurance protection and reimbursements to hospitals that treated auto accident victims dropped by nearly half, leaving $85 million more in unpaid bills in 2006.
KRDO (via AP) notes the limitations of this study: (1) "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," and (2) "money lost by hospitals was due both to more patients not having health insurance and more insurers paying hospitals based on negotiated reimbursement rates rather than actual charges."
Finally, according to Post's report, personal injury lawsuits in Colorado also have increased: "A state database also shows a 21 percent increase in the number of motor-vehicle personal injury cases filed in Denver District Court since 2002, with 3,117 cases filed last year."
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