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The Obama Administration’s recently announced policy to require insurers to cover contraception as women’s preventive health care has prompted many over-heated op-eds, editorials on both sides and even a thoroughly one-sided Congressional hearing. The controversy is unlikely to end anytime soon: pending federal legislation and proposed amendments would massively enlarge the scope of insurers’ and business owners’ ability to restrict any type of insurance benefit on either “moral” or “religious” grounds, undermining the very purpose of insurance.
Below, we take a closer look at the arguments by opponents of the contraception requirement, unpack the legal issues and public health debate, and respond to many erroneous assertions.
Religiously objecting institutions that do not currently provide coverage for contraception in their health insurance plans were granted a significant accommodation by the Obama Administration when it announced on February 10, 2012, that such employers will not be required to subsidize coverage for contraception (as all other health insurance sponsors will have to do starting in August of 2012). Rather, insurers will include contraceptive coverage for employees at no charge to either the employer or the employee.
In response to this fair and balanced accommodation, some have questioned whether the proposal is an accounting ruse, suggesting employers will have to cover the costs of birth control coverage through higher premiums.
This argument, obviously, ignores HHS’s explicit promise in the published Final Rule that the new policy for objecting employers will require that “there be no charge for the contraceptive coverage,”[i] and assumes, without evidence, that insurance companies will violate the clear requirements of the law by increasing premiums. (As a side-note, an unsupported assertion that some “bad actors” may disobey a law is rarely viewed as a reason to doubt the public policy behind the law.)
Regardless, an editorial in the Wall Street Journal argued:
The reality, as with all mandated benefits, is that these costs will be borne eventually via higher premiums. The balloon may be squeezed differently over time, and insurers may amortize the cost differently over time, but eventually prices will find an equilibrium.
This analysis, by predicting cost effects over time, gets it precisely wrong. It is certainly the case that coverage will require insurance companies to provide up-front payments for services and prescriptions. But because all insurance is a bet against future costs, the fact that contraception coverage is revenue-neutral over the medium term (because contraception averts both unintended pregnancies and improves maternal and child health outcomes) means that over time, there will be no costs to equalize.
It is for this reason that the National Business Group on Health, in a steely-eyed business analysis for the insurance industry that included number-crunching by a PricewaterhouseCoopers actuary, already recommended in 2007 that insurers provide contraception coverage free of “cost sharing” (i.e., no co-pays or deductibles) for employees. Actuarial studies demonstrate that the upfront costs of adding contraception to a health insurance plan are very low, and that these costs must be measured over time against the savings from fewer unintended pregnancies. A 2009 study of the cost effectiveness of 15 forms of birth control found that all of them were cost-effective when compared to no method, and that long-term contraception methods that do not rely on user compliance are the most cost-effective. [ii]
Because cost is a significant barrier to effective and consistent contraceptive use, providing no-copay insurance coverage for contraceptives will both expand access and increase the number of women who use the most highly effective methods. As noted in Guttmacher’s 2011 IOM testimony:
…three recent studies have found that lack of insurance is significantly associated with reduced use of prescription contraceptives, even when controlling for a range of sociodemographic factors. One of these studies also indicated that prescription contraceptive use increased between 1995 and 2002 among privately insured women because of state contraceptive coverage mandates enacted during that period, although the evidence on this point is less strong.
History also demonstrates that premiums do not necessarily rise when insurers are required to include birth control in their plans. More than a decade ago, Congress required plans in the Federal Employees Health Benefits (FEHB) program to cover all FDA-approved contraceptive methods. Around the same time, Hawaii prohibited employers from excluding contraceptive services or supplies from health insurance coverage. Again according to Guttmacher, neither of these cases resulted in higher premiums.
Further evidence of a lack of cost concern may be found in the utter silence from employers regarding anticipated costs from the new policy, and telegraphed acquiescence of insurers, which (somewhat understandably) quietly grumbled about the “precedent” while supporting the notion of contraception coverage. Given the new requirement, if the Journal’s theory were right, employers in general should be vocally raising concerns regarding the potential for increases in premium costs for plans. Yet there has not been a peep from employers raising purely economic objections to the coverage requirement. In sum, the premium cost-shifting argument is itself a ruse.
Some opponents of the policy, as well as the USCCB, also suggest that they retain “ moral concerns ” regarding the accommodation, because, “that coverage is still provided as a part of the objecting employer's plan, financed in the same way as the rest of the coverage offered by the objecting employer.” In other words, because contraceptive coverage will be offered by the insurer, an employer would still be somehow linked to that aspect of the coverage – even though they will not, in fact, be charged for it or be required to communicate about it.
The Bishops’ continuing opposition to this arrangement reveals how they have shifted the goalposts over the course of this debate – now it is not only paying for contraceptive coverage that is objectionable, but the very knowledge that an employee might obtain a service despite the disapproval of her employer.
When considered fully, this conclusion is extraordinary. In effect, the Bishops’ argument is that because an objecting employer purchases a product from an insurer, it somehow gives that employer the right to direct the insurer’s other activities, including offering an additional covered benefit free of charge. It also relies on an erroneous view of how health insurance actually works.
When an employer purchases a health insurance policy for its employees, the insurance company does not create a special, separate account for the premiums it collects from that employer and its employees and hold those funds to pay only for the claims of those employees. Rather, those premium dollars are commingled with those of dozens, hundreds, or perhaps thousands of other employer groups; these pooled funds are then used to pay claims for the enrollees in all of those groups. Some of the funds are used for administrative expenses, and some are invested. No individual customer of the insurance company has a right, merely by virtue of being a customer and purchasing a plan, to direct what the insurer does with that customer’s specific funds. Once paid to the insurer, the funds of an objecting religious employer lose their identity and become those of the insurer. The employer may not direct how the insurer invests, spends or otherwise uses those dollars.
Yet under the Bishops’ logic, a religious employer would have the right to object to an insurance company’s investments of its funds in, say, a media company that produces “profane” material, or a defense contractor, as some of those funds may have come from a premium payment made by that employer. By extension, a religious employer could object to an insurer covering contraception or other objectionable services for enrollees in another employer’s health plan, as the insurer’s pool of funds contain some dollars that came from the objecting religious employer.
Furthermore, in most employer-sponsored health insurance plans, employees pay some share of the premium. In such situations, it makes even less sense that an objecting religious employer could prohibit the insurer and the enrollee from arranging for contraceptive coverage. An employer would ordinarily have no right to prevent employees from spending their income as they like, or from contracting for services. The Bishops fail to explain why an employer that pays some of the premium, but has expressly disavowed paying for contraception, should be able to prevent an enrollee who also pays for the policy, from accepting an additional benefit offered by an insurer.
To take this point one step further, health insurance coverage and other benefits are part of what is often referred to as “total compensation.” They are part of how employers compensate employees, which include wages or salary, stock options, and benefits (such as health insurance, disability insurance, contributions to a retirement plan, and paid vacation).
An employer that morally opposes the consumption of alcohol may not prohibit an employee from spending her wages on wine, or prescribe acceptable locations for an employee to go on vacation. And an employer that has a religious objection to contraception could not prevent an employee from spending her own funds to buy birth control pills. Religious employers should not be able to stand in the way of women’s health care by conditioning one form of compensation – health benefits – on conformity with the employer’s religious and moral views.
Leaving the employment context, but extending this logic, religious objectors’ position is tantamount to a claim that they should be able to restrict the unrelated commercial activities of medical suppliers or drug companies to their hospital, merely because those activities involved supplies or drugs to which they have a religious objection. This concept of religious liberty stretches the principle beyond recognition to encompass unfettered economic coercion.
Opponents of the Administration’s accommodation also complain that Catholic health insurers will violate religious principles by providing coverage for contraception. But the reality is that Catholic health insurance companies have been providing or arranging for contraceptive coverage for years.
A survey conducted by Catholics for Choice found that half of Catholic managed care plans were providing contraceptive coverage for enrollees; almost half covered tubal ligations. Plans have devised various ways of providing these needed services despite the religious teachings of the church, including contracting with non-Catholic providers to provide the services; arranging for the funds received from the employer or government program that pay for contraception to go to a third-party administrator; or arranging with another insurer to handle payment and provision of contraception.
In addition, many Catholic health plans participate in the Medicaid program, in which coverage for contraception/family planning is not only a mandatory service, but one that must be provided to enrollees without cost sharing (sound familiar?). Catholic Medicaid plans, like their commercial counterparts, have figured out ways to participate in this insurance program. For example, they form a partnership with a non-Catholic insurer that provides coverage for contraception, or set up a billing arrangement in which funds for family planning go to a third party that, in turn, pays claims for contraceptive services and supplies.
These arrangements demonstrate that Catholic insurers have little difficulty administering health care coverage that includes contraception. Moreover, they belie the loud complaints by opponents of the rule and new accommodation that even being associated with a plan that includes contraceptive coverage is an assault on religious freedom. Catholic health plans have voluntarily entered the Medicaid managed care market in droves, with full knowledge that family planning is a covered service. These plans have not deemed the program so tainted by the legal requirement for this coverage that they refuse to participate in the overall Medicaid program. They have simply devised administrative workarounds to avoid directly paying for contraception while still affording their enrollees access to it, as required by law. There is no reason that religious insurers should have any more difficulty with this new coverage policy for contraception than they have had previously with similar requirements.
Finally, opponents argue that the new policy modification will be unworkable in the case of religiously-objecting employers that self-insure. The Administration has indicated that it will develop a workable policy for self-insured plans that is consistent with the goals of the new rulemaking: ensuring access to no-copay coverage for women, without placing a cost on objecting employers. With regard to the specific case of self-insured employers, the information published in the Federal Register explicitly states:
The Departments intend to develop policies to achieve the same goals for self- insured group health plans sponsored by non-exempted, non-profit religious organizations with religious objections to contraceptive coverage.
Over the course of a year and a half, an appropriate solution will be developed and finalized. Given the flexible arrangements undertaken by Catholic insurance companies, as explained above, it should be clear that a number of possibilities exist for a policy result that will meet all of the stated goals. Development of a reasonable and workable solution seems all the more likely when we consider the strong expressions of support for the accommodation from groups like the Catholic Health Association and the Association of Jesuit Colleges and Universities, both of which include self-insured employers in their membership.
[i] “Under this approach, the Departments will also require that, in this circumstance, there be no charge for the contraceptive coverage. Actuaries and experts have found that coverage of contraceptives is at least cost neutral when taking into account all costs and benefits in the health plan.” Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act, 77 Fed. Reg. 8725, 8728 (Feb. 15, 2012).
[ii] James Trussell et al., Cost effectiveness of contraceptives in the United States, 79 Contraception 5, 12 (2009).