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Posted Feb 24, 2012, 3:43 pm
Is the Obama administration correct when it claims its contraception mandate will be "cost neutral" for insurance companies? Or are the critics right when they say Catholic institutions will pay a hidden cost in the form of higher premiums when their insurers are required to give "free" contraceptives to their female employees?
We've found plenty of evidence. But it's often conflicting — and ultimately inconclusive. Some leading examples:
There are other studies, some of which we describe in the Analysis section which follows. But altogether they produce a murky picture. Until better data are available, we're unable to conclude whether the Obama birth-control mandate is likely to result in a net cost increase or not.
The Obama administration announced in January that most employers will have to offer insurance that provides birth control to women with no copay or deductible. The mandate applies to religiously affiliated organizations, such as hospitals and universities, but exempts religious entities, such as churches. Groups including the United States Conference of Catholic Bishops denounced the mandate as an attack on religious freedom. Obama amended the mandate in February to allow religious organizations to opt out of providing coverage that includes birth control, forcing the insurance companies to cover the costs of providing the contraception.
Critics: Mandate will raise premiums
"The idea that insurance companies are going to provide free coverage for items contained in the administration's order reflects a misunderstanding of the business of insurance," Rep. Dan Lungren said in a press release.
"Under its 'accommodation,' the religious employer continues to pay premiums that contribute to the revenues of the insurers. The money paid by religious employers for what will inevitably be higher premiums thereby frees up insurer funds to pay for abortion-inducing drugs, sterilization, and contraception in violation of their strongly held beliefs," Lundgren said.
The United States Conference of Catholic Bishops made a related claim: "The argument that (religious organizations) will not really have to subsidize the coverage, because insurers will offer it 'free of charge,' runs up against the reality that this coverage will be integrated into their overall health plan, and subsidized with the premiums paid by employer and employee for that plan."
The trade group America's Health Insurance Plans wouldn't comment directly on the issue except to say insurers have long offered contraceptive coverage.
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"As we learn more about how this rule would be operationalized, we will provide comments through the regulatory process," AHIP said in a statement.
Kelly Miller, spokeswoman for the Blue Cross and Blue Shield Association, said: "We are waiting for more information to analyze how the administration's proposal would work. The Blue Cross and Blue Shield Association has not estimated the cost of the Administration's proposal about contraceptive coverage."
But some insurance companies have said anonymously that they expect the mandate to result in an increase in costs, according to a survey from Reimbursement Intelligence, an industry consulting firm. None of the 15 companies surveyed said it expected the mandate to result in savings, while 40 percent of the companies expected costs to increase through higher pharmacy expenditures. Another 20 percent said they thought it would be cost neutral. And Mickey Herbert, a former CEO of the insurance company Connecticare, recently said: "If we know contraceptives cost $600 a year, that $600 by all rights needs to be built into the premiums. I take offense at the president or anyone else who says [contraceptive services] are free."
Still left unresolved is the issue regarding self-insured religious organizations that apply for an exemption. Those organizations don't have insurance companies that can cover the costs of contraception coverage for employees who want it.
Studies: Conflicting conclusions
The U.S. Department of Health and Human Services in February listed several studies supporting the claim that contraception coverage adds little upfront cost to insurers while saving money over time by preventing unplanned pregnancies.
HHS included a 1995 study funded by a major maker of birth-control pills and published in the American Journal of Public Health. It found — not surprisingly — that using birth control measures costs considerably less than the pregnancies that would result otherwise. For example, it said that oral contraceptives cost $1,784 per person over a period of five years, but using no contraception would result in 4.1 pregnancies costing $12,879.
The study's authors said that insurance companies would save money — but then they conceded the opposite could be true, and said "additional studies will be necessary to address this issue."
Journal of Public Health, 1995: If, by expanding coverage, a payer simply finances the contraceptives that would otherwise have been purchased by individuals, then the payer's net costs are likely to increase. On the other hand, if broader coverage leads to improved access and substantially more effective contraceptive use, our models suggest that payers may save resources by avoiding the costs of unintended pregnancies. Clearly, additional studies will be necessary to address this issue.
A 2009 Guttmacher Institute survey that focused on the recession's impact on women's contraception said 23 percent of women reported having a harder time paying for birth control than in the past. The proportion rose to one out of every three among financially worse-off women. But the report also said that the recession appeared to have promoted a shift, for some women, toward more effective birth control methods and more effective use.
Overall, 29 percent agreed with the statement, "With the economy the way it is, I am more careful than I used to be about using contraception every time I have sex." Those who were financially worse off were more likely than others to agree with the statement — 39 percent versus 19 percent. Eight percent of respondents reported "that they sometimes did not use birth control to save money," while 18 percent of women who took the pill reported inconsistent use to save money.
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A 1998 study by the Guttmacher Institute found that an insurance company adding "the full range of reversible medical contraceptives" would increase costs by $21.40 per employee per year. Most of the money, $17.12, would be covered by employers, while employees would pay $4.28 a year. Proponents of the contraception mandate have argued those costs are minimal compared with long-term savings.
For instance, a 2004 study published in the journal Contraception found that oral contraceptives resulted in cost-savings of $8,827 per woman over two years — compared with using no contraception at all.
Global Health Outcomes Inc., a health care research firm, found that employers who provide contraception coverage annually save $97 per employee when the costs of contraceptives, unintended pregnancies, related absences and employee replacement are considered.
In 2001, Janice Lachance, then director of the U.S. Office of Personnel Management, explained in a letter to the National Women's Law Center that premiums were not affected after the federal government added contraception to the health coverage of 9 million employees, retirees and their family members. Some of those plans already covered at least some form of contraception before the requirement.
"We told health carriers we would adjust 1999 premiums, if needed, during the 2000 premium reconciliation process. However, there was no need to do so since there was no cost increase due to contraceptive coverage," she wrote.
But the costs and savings of contraception mandates aren't so clear cut in some state studies.
Hawaii's 2001 study, which the Obama administration cited, examined four of the state's health plans before and after the contraception mandate took effect in 2000. The study concluded that the requirement to cover contraceptives "did not appear to have a direct affect on an increase in the cost of health insurance."
Paradoxically, most of the plans reported that the number of pregnancies increased following the mandate. But some plans also recorded a decrease in maternity-related costs. The plan that was by far the largest, covering more than 480,000 members, saw a 25 percent rise in the cost of covering contraceptives during the first year of the mandate, but also a 26 percent increase in the number of women identified as pregnant along with — a further paradox — a 1.5 percent decline in "maternity related costs." The decrease in maternity costs that year, $291,000, failed to fully offset the increased expense of contraceptive coverage, which was more than $387,000.
Another plan, which covered 32,000 Hawaiians, appeared to show some savings during the mandate's first year. Contraception costs grew by 85 cents per member, while the rate of pregnancies fell by 3.5 percent and their costs dropped by slightly more than $3 per person. The savings outweighed costs by more than 3 to 1.
But the year before the mandate took effect, the pregnancy rate fell by 2.6 percent and maternity costs plummeted by a rate of $13.57 per person. Contraception costs rose 65 cents per person. The study said: "[T]he data shows a slight decrease in the number of paid pregnancies from 1998 to 2000 and a noticeable decrease in the maternity related costs for the same period.
This suggests that the mandate has had little effect on Health Plan C members or employer groups." Hawaii's study concluded: "Further review and assessment in two to three years would be appropriate, and provide more utilization data and cost-benefit trends." Brent Suyama, a spokesman for Hawaii's Department of Commerce and Consumer Affairs, told us that no other study has been done.
Connecticut's 2010 study said its birth-control mandate would lead to an increase in premiums that year by as much as $17.28 per person. But the study could not conclude whether private insurance plans saved enough money from reduced pregnancy costs to offset the added expenses of contraception coverage.
University of Connecticut: There is a significant body of evidence showing the efficacy and the cost effectiveness of use of contraceptives in women, although most of the studies we found have focused on the populations served by public funding. Almost all of these studies have found a high degree of effectiveness in reducing the number of unintended or unwanted pregnancies as well as significant cost savings associated with reducing the number of these pregnancies.
This mandate and similar services covered under public funded programs have reduced the overall cost of health care in the state. We were not able to find a good source of the savings caused directly by this mandate, but the available data from the public programs provides an indication of the mandate's effectiveness.
The Pennsylvania Health Care Cost Containment Council said it couldn't recommend a proposed contraception mandate in 2000 because the submitted evidence could not support either claim of savings or increased costs.
Proponents argued that the cost of contraception coverage, citing Guttmacher's $21.40 per employee per year number, was reasonable compared with the cost of an unintended pregnancy, which averaged $5,500 for delivery in Pennsylvania. But Highmark, a Pennsylvania-based insurance company, told the PHCCC that they would have to expend hundreds of hours, update computer systems and perform other administrative work to implement the mandate. The insurance company estimated it would spend $21.4 million annually, 10 percent of its projected overall financial impact, to comply.
Pennsylvania Health Care Cost Containment Council: There was general consensus in the submissions of both proponents and opponents that implementation of SB 1094 would increase the cost of purchasing health insurance in the Commonwealth, in particular the pharmacy benefit, the cost of which has been increasing at an unprecedented rate. There were, however, substantial differences in projections of the amount of the increase. Moreover, while savings are likely from this measure, the amount of possible savings relative to the cost of the legislation is unclear, as is the extent to which the savings would be passed on to the purchasers of health care.
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A 2000 Texas study of its proposed mandate regarding oral contraception estimated that the cost of coverage would outweigh the savings.
Milliman, the actuarial firm that conducted the Texas study, warned us that citing anything from a nearly 12-year-old study in the current context of the health care law and contraception mandate "would be irresponsible, out-of-context and simply wrong. Milliman would object to such a citation in the strongest possible language." However, we feel that the study provides context to the contraception issue.
The study assumed that women in most cases would acquire and pay for oral contraceptives even if coverage wasn't provided. The savings from a lower pregnancy rate come only from "those women who would make different decisions" if oral contraception was included in their health plan, the study said.
Milliman study: If oral contraceptives were not covered by insurance, we would expect a slightly lower use of oral contraceptives and therefore a slightly higher rate of unwanted pregnancies, abortions and births. However, in most cases, we would expect the insureds would still use oral contraceptives but bear the costs themselves.
That's a scenario considered in the 1995 study cited by HHS above, which adds to the gray area of the cost claims being made.
So where does all this leave us? We of course take no position on whether contraception should be covered or not, or if so, by whom. What we can say is this: The administration hasn't proven that requiring insurance companies to provide free contraception on request will save them enough in medical costs to make the net costs zero or less. But by the same token, the president's critics can't prove that he's wrong, either.