Skyrocketing healthcare expenses are contributing to an increase in your car insurance premiums
From Car Repairs to Medical Bills: The Real Cost of Auto Insurance Claims
Let's dive into the world of auto insurance claims, where you'd normally think about vehicle repairs after an accident. But there's more! Your liability insurance also covers medical bills for the unfortunate souls you might injure on the road - and those bills can quickly mount, often surpassing the cost of a totally wrecked vehicle. As healthcare costs climb, insurers have no choice but to adjust their rates accordingly.
Our website's True Cost of Auto Insurance report reveals a troubling trend: the average cost of full coverage car insurance has experienced a whopping 30% increase since 2023.
Healthcare Costs: On the Rise, and Rising Faster
Flare-ups from the pandemic and inflation have significantly driven up the cost of medical goods and services. According to the U.S. Bureau of Labor Statistics, the price of medical care services and commodities surged by 18% and 10% respectively from 2019 to 2025. Yet, these figures barely scrape the surface.
When we narrow the focus to hospital services, which include visits to emergency rooms and urgent care centers, costs have spiraled by a shocking 26%.
When Healthcare Staffing Shortages meet Auto Tech Shortages
Insurance expenses usually follow a delay in contributing factors, and the healthcare sector is still feeling the aftermath of the pandemic. As per insurance consultant Guy Fraker, specializing in financial predictive modeling, variables pushing up healthcare costs include ongoing technological advancements, shortages of foreign-sourced pharmaceuticals and healthcare personnel, particularly in specialized nursing.
The exodus of approximately 100,000 registered nurses from the healthcare sector within two years post-pandemic, due to burnout, stress, and retirement, is just one piece of a much larger puzzle. The Health Resources and Services Administration predicts a looming shortage of over 300,000 RNs and 146,000 licensed nurse practitioners by 2027. Add to that a predicted deficit of 124,000 physicians by 2027, and over 187,000 by 2037, and you've got a perfect storm brewing in the healthcare industry.
When hospitals can't maintain enough permanent staff, they resort to contract labor, leaving hospitals to bear the brunt of added costs. These increased costs are eventually reflected in hospital bills, which lead to higher car insurance claims, and eventually, your premiums.
How Healthcare Costs Impact Auto Insurance
Bodily Injury Liability covers the medical expenses of those you injure in a car accident. With medical costs on the rise, average bodily injury claim payouts have climbed by 35% from Q3 2023 to Q1 2025, averaging about $27.6K per injured party. Arizona, Virginia, California, Washington, and several other states have seen significant increases.
Personal Injury Protection (PIP) or Medical Expense Coverage (MedPay), which pay for your medical bills and those of your passengers, might also be part of your policy by law or by choice. Nationally, average PIP claim payouts increased by 4% between Q3 2023 and Q1 2025.
The Dark Side of the Headache: Legal System Abuse
While auto insurance and health insurance companies collaborate to settle claims, third-party litigation can complicate matters. "No-fault states experience significantly lower litigation rates involving claimants suing an insurer of other parties to a crash," says Fraker. Even in no-fault states, about half of all accident victims seek legal representation before filing a claim with their insurance provider. This legal system abuse can lead to increases in car insurance rates.
Is It All about Healthcare Costs?
Although healthcare costs have a major impact on auto insurance rates, other factors are also at play, including frequent collision and comprehensive claims. However, watch this space; President Trump's new tariff plans could potentially reshape car insurance costs.
The Bottom Line
As consumers, we're susceptible to the rising healthcare costs in America. "If healthcare were regulated like it should, costs would significantly decrease," says Weaver. However, there are steps you can take to work the system to your advantage. If you've opted for a high-deductible healthcare plan to save on health insurance, speak to your agent to understand how your car insurance might cover your injuries in the event of a car accident. Depending on your state, MedPay and PIP often have lower or zero deductibles, making them more manageable at the time of loss. Additionally, your PIP or MedPay claim payout could help you meet your health insurance deductible if your injuries exceed your car insurance coverage amount. But remember, any PIP or MedPay claims can potentially increase your auto rates.
In light of the increasing healthcare costs, insurance companies have been compelled to adjust their rates. For instance, bodily injury claim payouts have jumped by 35% in some states, reflecting the climbing medical expenses that auto insurance covers. furthermore, with technological advancements, pharmaceutical and healthcare personnel shortages, and a looming deficit of healthcare professionals, hospital costs are spiraling, ultimately affecting auto insurance claims and premiums.
