Wednesday, February 6, 2013

Insurers Covering Contraception

Last week's Wall Street Journal had a piece on new contraception opt out regulations--as a follow-up to what was originally required coverage under the Affordable Care Act. (I am not sure if the link I have provided is for an article free to the public but there are many sources of information on this new regulation.)

Contraceptives have multiple medical uses.  But clearly one use is to prevent unwanted pregnancies.  When it comes to whether this should be a required part of an insurance plan we can set all the religious arguments aside and look at some basic economics.

Insurance is meant to provide reimbursement when the unexpected happens.  Contraceptives are intended to prevent something from happening.  And, while we may have a discussion about just how much control each person in a relationship feels he or she has, pregnancy will only happen if two people choose to have intercourse.  Thus, the thing that is to be prevented is under the control of the individual.  This is different form exposure to the influenza virus where the person can take steps to reduce exposure and to reduce transmission even if he has been exposed, but he cannot completely avoid exposure.  A woman could completely avoid the risk of pregnancy and she has control over how much of that risk she is taking--even without contraceptives.

So, we are asking for insurance to cover something over which we have control.  Let's make an assumption that all women want the contraceptives.  (Debatable, but let's run with it for a moment.)  Then, what are we doing.  We are asking an insurer to cover the cost of something that all women will use.  This involves a layer of administration that would be unnecessary if the women paid for it themselves.

So, as a society we would spend less if women paid for it themselves.  We are setting up a policy that could lead to more spending as a result.  One might ask--aren't there better things to use societal resources on than administering a program to pay for contraception?  Or perhaps more economically speaking--if the government has decided that it is important to subsidize the purchase of a preventive good or service, is there a more efficient way to do that than to wrap it into health insurance.  And, when I think about efficiency, I am thinking about also including the costs of getting it passed in the first place and then regulating it--neither of which has been negligible.

If we want to spread the costs of paying for contraception to those who have more resources available there are other ways to do it.

If I understand what the new regulations say, if an employer opts out, individuals will be able to get an additional insurance policy at no out of pocket costs.  I am not sure of the logic on this one, but it seems like whether people in the employer are paying for it directly (if the employer chooses not to opt out) or indirectly (as I would have to think that a product with no premium would be wrapped into the administrative costs for everyone else), the employees of employers who opt out would still end up with at least some share of the cost for this--it would just be even more diffused.

In this, I am not taking a stand on whether we should be subsidizing contraception for low income mothers.  That is for policy makers, religious, and ethicists who think about the meaning of contraception to decide. What I am trying to emphasize is that this may be more costly than just having women pay for it themselves and we are wrapping what appears to be a public health issues (or at least a population health issue as we look at the health of the population including mothers and newborns) into a private health insurance mechanism that may or may not be the most efficient way or helping to facilitate access if that is the goal.   

9 comments:

  1. This comment has been removed by the author.

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  2. Interesting post. I think the general thought process carries much greater consequences beyond contraception coverage. The notion that health “insurance” covers only unpredictable health costs seems violated by many covered services beyond contraceptives. Everything from annual wellness visits, prenatal care, and diabetes prevention, by your logic, are things that should not be covered by insurance, as they are all predictable costs that might be more efficiently borne by the consumers themselves.

    However, this logic seems to neglect a couple realities of healthcare and insurance. One--Many of these services actually help the insurer’s bottom line. Providing preventative care is generally cheaper than treating an acute illness. Thus, an insurer seeking to maximize profit or minimize costs should offer these services at low cost anyway.

    Two—by rolling these services into insurance, lower prices can be negotiated on behalf groups of beneficiaries than they would be able to achieve, if they each bought the service individually. So, perhaps health insurance, in this light, is better seen as a way to increase consumer bargaining power than a way to mitigate risk, as insurance typically does.

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    1. Unfortunately, most evidence that I've seen does not support the notion that covering prevention truly saves money. We like to think that. There is not much evidence to support it. For the people who would have a bad event, yes, they save money, but it is not as clear at a population level. And, why have the administrative cost anyway.

      As for what is done better in a group--if the group really wants it, why should it have to be mandated? And if not everyone in the group wants it, why should those who don't want it have to share in bearing the costs? Mandates imply one size fits all. Is that true for much of anything?

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  3. I completely disagree with many of your presumptions. One, that contraceptives don't fit into the insurance model. That only holds if you think insurance should only be for disasters after something has happened. Like it or not, health insurance in the US pays for many, many things that are meant to preserve health or prevent things from happening. If we were to follow your logic, what else would insurance not pay for? Drugs for hypertension (as high blood pressure rarely causes physical manifestations prior to resulting in stroke or heart attack) or high cholesterol. Screening tests like colonoscopies and mammograms, or for HIV (which are undertaken before symptoms occur). The list goes on and on.

    Second, your comparison to avoiding the flu is inaccurate. A person could very well completely avoid the flu if he/she lived self-sufficiently in the middle of nowhere with no human contact. It is a personal choice to live in society, to leave the house, and to have contact with other people and their germs. Most people would no more like to live this hermetic existence than they would like to abstain permanently from sex. Just as most humans have an innate need to live near and interact with others, we also have an innate need to be sexually intimate with others.

    Finally, you are right that it's theoretically possible that all people would pay for contraception on their own if insurance did not cover it. However, we know that is not the case. Many, many women experience lapses in their contraception due to inability to pay for it (this includes women who do not qualify as low-income). It has been shown that publicly-funded contraceptive services pay off in low-income populations (in fact, nearly $4 are saved for every $1 spent, and that doesn't even include the money saved on not needing to educated and provide social services for averted births-it only accounts for costs of pregnancy and childbirth averted). For women who don't qualify as low-income but still struggle, it is highly likely that covering their contraceptives will save money for several reasons. One, women experience contraceptive gaps due to trouble paying for their prescriptions, leading to unintended pregnancies, leading to miscarriages, childbirth, abortions (expensive). Two, women choose less effective methods (such as oral contraceptives) rather than highly effective methods (such as implants or IUDs) due to the high up-front cost of the more highly effective methods (often over $1000). When women rely on less effective methods, they have more unintended pregnancies, leading, again, to miscarriages, abortions, and births (expensive).

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    1. Your points are valid. First point. Yes, insurance pays for lots of things that are predictable. Hypertension is not predictable over a lifetime but expenses are once you have it. It is actually a reasonable question to ask what should be insured. And we can differentiate between insurance and subsidization. What you are asking for in asking for help for people to pay for things is subsidization. My only question is whether subsidization is best done through a mechanism that is mixed with insurance or whether it should be separate. Just because it is that way now does not make it right.

      Your second point is also correct, although I maintain that a need to be sexually intimate with others is a distinctly different choice than a need to live in society in general. Perhaps we can agree to disagree on that point. And if we focus on the pregnancy prevention aspect of contraception versus the spread of disease with influenza then there is a difference in the degree and type of externalities.

      Finally, the fact that not all people who may want to use contraceptives can afford them argues for subsidization if we think that is an appropriate role for government. We return to the first point on this--should we mix subsidization with insurance or should it be separate.

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    2. Thanks for the response. I agree that just because health insurance today is the way it is doesn't mean it should be. I personally think we should get rid of insurance and have a single payer system with defined benefits - things that are of value from an economic standpoint (such as contraception) and/or that we think are worth investing in (such as anti-hypertensives- which may or may not be economically a good idea, but certainly help with quality of life) would be covered, and a separate scheme for catastrophic coverage of unexpected expenses could be something separate. Things in the middle people would have to pay for, or purchase a separate program to cover (and it wouldn't be insurance from the economic point of view, as you point out). Of course the devil is always in the details!

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  4. Health was really serious issue to everybody, keeping healthy was not an easy task to be done daily,but we all know that illness was unpredictable, I have also read various article and said that Herbal Incense can be used to cure some disorders in some cases.

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  5. You will get lots of other benefits as well from a Health Insurance policy if you select them wisely. You can also meet associated expenses as well by using a medical insurance.

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  6. The hospitals could refuse Medicare or Medicaid patients, but I doubt anyone finds that a preferable solution. Government shouldn't dictate how the private sector practices religion.

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