The Impact of Tort Reform on Private Health Insurance Coverage

Abstract

This study evaluates the impact of tort reform on private health insurance coverage using the Current Population Survey’s March Demographic Files. Proponents of tort reform argue that reform will reduce medical malpractice insurance costs, damage awards, and costs associated with defensive medicine. If proponents are correct, these cost reductions should increase health insurance coverage. On the other hand, if the prior tort law was functioning well, reform may increase medical costs by reducing doctors’ care-taking or increasing of the use of aggressive treatments. In this case, tort reform could actually decrease insurance coverage by raising healthcare costs. We evaluate the effect of eight common tort reforms on private health insurance coverage between 1981 and 2007. We find that damage caps, collateral source reform, and joint and several liability reform increased health insurance coverage for the most price-sensitive groups (the single-young and the self-employed) between one-half and one percentage point each. Accordingly, we conclude that tort reform may increase insurance coverage rates for price-sensitive groups, but its overall effect on coverage will be small.

Keywords: tort law, health law, health economics, insurance