The cost of contraception

Yes, contraception costs insurers money. Not providing it costs them more.

I think Kevin Drum – about the smartest blogger, or journalist of any description, now working – makes a mistake from time to time just to keep the rest of us on our toes. He’s right that the latest Administration plan to deal with contraceptive coverage under employer-paid health insurance is a kludge, and he’s right that, since money is fungible, sayingthat insurance companies have to spend some money other than the employers’ money to cover it is gibberish. (That’s supposed to insulate the employers from the moral onus of allowing reproductive freedom rather than imposing their dogma on their employees. I forget who it was who Tweeted the question, “Should health insurance provided by a Jehovah’s Witness employer cover blood transfusion?”)

But what Kevin misses is that offering health insurance with contraceptive coverage is not in fact more expensive than offering health insurance without it, because if the woman gets pregnant the insurer will have to pay for prenatal care and delivery. You can cover a lot of $50 contraceptive-pill prescriptions with the avoided $10,000 cost of a single uncomplicated delivery.

As to the plan itself: looks to me like a perfect non-solution to a non-problem.

Update Kevin points out a complexity I’d missed. Yes, total health care costs go down with contraception. But if enough women without coverage pay out-of-pocket for the Pill, the insurance company could still come out ahead by stiffing them (while covering Viagra, of course). That leaves a factual question: if a big employer goes to a health insurer and asks for a quote for employee coverage, is the quote actually lower if contraception is excluded?

Second update Kevin produces a reasonable-sounding BOTEC suggesting some net cost to insurers. Which means he still owes the rest of us one mistake.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

18 thoughts on “The cost of contraception”

  1. What makes my blood boil in this “conversation” is this: The Catholic hierarchy and other right-wing religious ideologues naturally frame the issue as a matter of religious freedom, which is poppycock. But the so-called mainstream media goes right along with the joke. I’ve seen news story after news story in the god-damned New York Times accept that framing without any criticism at all. Not opinion pieces, news stories. From the lead story in this morning’s Times: “…President Obama has struggled to balance women’s rights, heath care and religious liberty.” The only “religious liberty” involved here is the liberty of the Catholic hierarchy and other right-wing religious ideologues to impose their crackpot views on people who don’t share them. Georgetown University isn’t being asked or required to provide contraception to its employees, it’s being required to provide health insurance. Are they next going to demand that none of the wages they pay to their employees can be used to purchase contraceptives? Does “religious liberty” demand that kind of interference by employers in their employees’ lives? What is the difference between insurance being used to obtain contraception and wages being used?

    I can’t wait till the Christian Science Monitor demands that the health insurance they provide their employees may not be used to obtain medical care.

  2. If covering contraception were cheaper than covering the deliveries, why wouldn’t insurance companies already be doing that?

    1. Oh, me, me, mister Carter!

      Because we don’t have a free market in health care insurance now, nor did we over the past decades?

      To mix it up, I’ll take “Why An Actual Free Market In Health Care Would Suck Less Than What Republicans Want” for $300, Alex.

    2. Actually, there’s a factual question here. If an employer asks for coverage without contraceptives, does the insurer offer a discount? I think the answer is “No,” but perhaps some reader has an actual answer.

      1. Basic economics will tell you that the answer is likely to be no simply because the question is susceptible of being asked. Insurance companies price policies in part according to what it costs them to provide services, but also in part according to what the customer (whether individual or large organization) is willing to pay for. If you ask about price with and without contraceptive coverage, you are overwhelmingly likely to be a person or organization for whom that coverage has positive value (assuming the price is less than the out of pocket cost). So the insurance company would be idiots to offer you a discount.

        On the other side, if you’re opposed to contraception for your employees, the insurance company might consider demanding an upcharge (for the paperwork and the special formulary), but in today’s political climate they know that such an action would cost them way more in boycotts and death threats than they might recoup as a straightlacing fee.

    3. Most insurance companies do already cover them in their group policies (around 85%, according to a KFF survey a while ago).

      This is also why they have unavoidably become part of the minimum essential coverage, because the PPACA defines how essential health benefits are to be determined in § 1302 (b)(2)(A) (in addition to § 1302 (b)(1)(I)):

      “The Secretary [of HHS} shall ensure that the scope of the essential health benefits under paragraph (1) is equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary. To inform this determination, the Secretary of Labor shall conduct a survey of employer-sponsored coverage to determine the benefits typically covered by employers, including multiemployer plans, and provide a report on such survey to the Secretary.”

      1. The answer to Mr. Bush’s question (and Mark’s nod to KD’s point contained in the Update) is that there are really two questions with respect to the cost issue.

        The first can be illustrated as follows: Insurer X has an option: Offer contraception services for free or not to do so. After a period of long study, Insurer X has determined that based upon its pool of insureds, it can save money by not offering contraception services for free. If that is the case, then the new rules are merely “kludge.”

        But that is not the case. One reaches this conclusion only by conflating the first question with the following question: Will total health care costs rise, fall, or stay the same if all insurance plans offer free contraception services?

        Insurance companies can create situations where their costs are controlled by not offering contraception services. For instance, assume that by not offering contraception services, there are X unwanted pregnancies. While these pregnancies will impose additional costs on the insurer due to costs of pregnancy, delivery, etc., other medical costs will often be avoided. E.g., child care medical costs due to women withdrawing from their jobs and, thus, the medical insurance pool of that particular insurer. On a net/net basis this insurer may very well be ahead financially by not offering contraception services.

        However, when the question is posed: Does the failure to offer free contraceptive services impose, net/net, additional costs on the medical care system taken as a whole, the answer seems to in the affirmative. See here: http://bit.ly/UPgARt

        One of the points of the ACA is to provide insurance by reducing the incentives to exclude certain types of care and individuals who are not “low risk” by broadening the insured base that all insurers must cover. The “free contraceptive services” portion of the ACA is merely a specific example of the general approach taken by the ACA.

  3. Just let me know when my “religious sensibilities” allow me to direct how the money the government makes me pay to them gets spent, because I’ve got all kinds of moral objections to much of it. It’s embarrassing how long this non-issue has been allowed to fester in our public consciousness. Haven’t the Catholics got some souls to save, or something?

  4. (While covering Viagra, of course.)

    Seriously, you’ve got a policy that covers Viagra? That would be fairly unusual, and certainly NOT a matter of “of course”.

    My otherwise excellent, (And alas now illegal) policy didn’t even cover Viagra when my urologist wanted me to take it after my prostate surgery to enhance blood flow so I’d heal faster. I’ve sure as hell never heard of anybody whose insurance covered it for nookie. Maybe if you’re wealthy enough to have platinum plated coverage.

    Contrasts with the way that same insurance covered contraceptives for the period of my wife’s recovery from a difficult delivery, and not otherwise. Hard to explain why they covered it for one purpose and not the other, if they thought it would save them money; It’s not like she works for the Catholic church.

    But, IIRC, they would have covered tubal ligation if done at the time of delivery. This kind of suggests that they ARE doing the sort of calculation you suggest they should, and it’s not actually coming up in favor of paying for birth control pills.

    1. I’m afraid you are mistaken about Viagra coverage. I have what I am certain is relatively ordinary employer-provided (and partially employee-paid-for) medical coverage, and the prescription plan does cover Viagra. My plan is certainly not platinum plated.

  5. “Should health insurance provided by a Jehovah’s Witness employer cover blood transfusion?”

    Yes: not because it is standard-of-care, not because it saves money by reducing mortality, but because the alternative is faith-based nullification.

    None of this is about cost and it is only opportunistically about the substance of the “beliefs”: it is about certain institutions being seen to be placed above the law. That is it and that is all, and it is fatal to the pretence of civilization. (One of your trolls was rattling on the other day about the rule of law, but he will not stretch it this far.)

    It is the “beliefs” themselves that are fungible, as could be shown by a very simple experiment. Render any faith-based objection moot and a different objection will instantly spring up to replace it.

  6. if enough women without coverage pay out-of-pocket for the Pill, the insurance company could still come out ahead by stiffing them (while covering Viagra, of course).

    I see what you did there.

  7. Good post, Mark, but I am sorry to see that you have fallen into the Newspeak trap of referring to rights of access to contraception (and access to abortion, FTM,) as “reproductive freedom”. When a rhetorical device can be characterized as Orwellian (think Mini-true), that is not praise. Does anyone* seriously oppose the freedom to reproduce? Even the Roman Catholic

    Church

    Man-Boy Lust Association favors that freedom.

    Is tax avoidance the same thing as payment of taxes? Is crime prevention the same thing as crime?

    _____________________________
    * Anyone, that is, since the Shakers died out of self-imposed attrition?

    1. So reproductive freedom is the freedom to reproduce as much as you want so long as it’s non-zero? Does freedom of religion require that I be a member of any religion I choose so long as I belong to some religion?

      Freedom generally implies freedom to as well as freedom from. Nothing Newspeak about it.

      1. Calling it “reproductive freedom” is euphemistic in that many folks may be squeamish about referring to abortion rights as such. The right to speak freely includes the right to refrain from speaking, but in common parlance the phrase, “You have the right to remain silent,” is more closely associated with Fifth/Fourteenth Amendment jurisprudence than First Amendment jurisprudence. The freedom to choose abortion should not be treated as the constitutional right that dare not speak its name.

        As a matter of fact, SCOTUS has addressed two actual reproductive freedom cases in its history. In Buck v. Bell, the Court in 1927 upheld the authority of the superintendent of a Virginia home for the feeble minded to order one of the patients to be sterilized. It was in that case that Justice Holmes infamously and callously opined, “Three generations of imbeciles is enough.” In Skinner v. State of Oklahoma ex rel. Williamson, the Court ruled in 1942 that a state habitual criminal statute which mandated the surgical sterilization of an inmate thrice convicted of larceny, but imposed no such penalty upon those thrice convicted of crimes of similar gravity such as embezzlement, violates constitutional Equal Protection guaranties.

        The high court’s rulings regarding governmental obstacles to access to contraception and abortion rights are of considerably more recent vintage.

        1. That’s one way of looking at it I suppose. I don’t think it’s meant to obscure the fact that it’s connected to contraception and abortion access. If anything, it’s meant to draw attention to the fact that these are two aspects of a broader right — that of a woman to control when, if and how she will reproduce.

          Not too long ago, contraception wasn’t really considered controversial. I wonder if “reproductive freedom” started gaining prominence because “abortion rights” couldn’t completely identify the issue anymore?

          [I was “anonymous”, btw. stupid lack-of-preview!]

  8. There’s another complication. Making contraception available does not reduce the rate of unwanted pregnancy equally across all populations, so while the availability of contraception does reduce health care costs nationwide, it does not necessarily reduce the cost to the insurance plan for any given insurer. Also, your cost figures are potentially low, as they exclude the cost of associated doctor’s visits. For many poorer women, especially the working poor, the need for a doctor’s visit to get a prescription is actually a bigger obstacle than the cost, which is yet another reason to make contraception available OTC.

    JHA

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