Written by Editor-in-Chief Jodi Jacobson for RH Reality Check. This diary is cross-posted; commenters wishing to engage directly with the author should do so at the original post.
In 2011, the Department of Health and Human Services examined the issue of just how much it costs insurance companies to cover contraception. Based on data from a wide range of peer-reviewed medical and public health data, evidence-based research and actuarial studies as well as prior experience with insurance policies in which contraception is covered without a co-pay, the HHS analysis found that it costs more not to provide contraception than it does to provide it. HHS concluded:
While the costs of contraceptives for individual women can be substantial and can influence choice of contraceptive methods, available data indicate that providing contraceptive coverage as part of a health insurance benefit does not add to the cost of providing insurance coverage.
HHS guidelines for including contraceptive care and supplies as part of the essential package of primary health care for women were based on this analysis as well as on recommendations to HHS from the Institute of Medicine, which conducted an extensive study, relying on independent physicians, nurses, scientists, and other experts as well as evidence-based research to draw conclusions and formulate its recommendations.
Here, in brief, is what the cost analysis said.
“Evidence from well-documented prior expansions of contraceptive coverage,” states the HHS issue brief, “indicates that the cost to issuers of including coverage for all FDA-approved contraceptive methods in insurance offered to an employed population is zero.”
In 1999, when Congress required the health plans in the Federal Employees Health Benefits (FEHB) program to cover the full range of FDA-approved contraceptive methods, premiums for 1999 had already been set when the legislation passed. The Office of Personnel Management (OPM), which administers the FEHB program, provided for a reconciliation process for insurers who found this requirement burdensome. But, HHS notes:
[T]here was no need to adjust premium levels because there was no cost increase as a result of providing coverage of contraceptive services.
In other words, no insurance company complained because they found it was to their advantage to provide the service.
This is critical because it is perhaps the best model for the nation in terms of what to expect. The FEHB program is the largest employer-sponsored health benefits program in the United States, and at the time, notes HHS, “it covered approximately 9 million Federal Employees, retirees and their family members and included approximately 300 health plans.”
Likewise a review of a similar mandate in Hawaii found no increase in insurance costs. In 1999, Hawaii prohibited employer group health plans from excluding contraceptive services or supplies from coverage, requiring them to include FDA-approved contraceptive drugs or devices to prevent unintended pregnancy.
A report on this experience by the Insurance Commissioner of Hawaii concludes that the mandate did not appear to increase insurance costs in any of the four surveyed health plans in Hawaii servicing employer groups.
What do reviews of actuarial data show?
The direct costs of providing contraception as part of a health insurance plan are very low and do not add more than approximately 0.5 percent to the premium costs per adult enrollee, as per studies from three actuarial firms–Buck Consultants, PriceWaterhouseCoopers (PwC), and the Actuarial Research Corporation (ARC)–which estimated the direct costs of providing contraception coverage.
More recent analysis of actuarial data conducted in July 2011 by the Actuarial Research Corporation and using data from 2010 estimated that contraceptive coverage without a co-pay costs roughly $26 per year per enrolled female.
However, notes HHS, “as indicated by the empirical evidence described above, these direct estimated costs overstate the total premium cost of providing contraceptive coverage.”
When medical costs associated with unintended pregnancies are taken into account, including costs of prenatal care, pregnancy complications, and deliveries, the net effect on premiums is close to zero. One study author concluded, “The message is simple: regardless of payment mechanism or contraceptive method, contraception saves money.
Counting indirect costs–such as time away from work and productivity losses–further reduces the total cost to an employer.
A model developed by Global Health Outcomes that incorporates costs of contraception, costs of unintended pregnancy, and indirect costs found that covering contraception saves employers $97 per year per employee. Similarly, the PwC actuaries state that after all effects are taken into account, providing contraceptive services is “cost-saving.”
Does providing contraception through public programs also save costs?
As HHS notes:
Each year, public funding for family planning prevents about 1.94 million unintended pregnancies, including almost 400,000 teen pregnancies. Preventing these pregnancies results in 860,000 fewer unintended births, 810,000 fewer abortions and 270,000 fewer miscarriages. More than nine in 10 women receiving publicly-funded family planning services would be eligible for Medicaid-funded prenatal, delivery, and postpartum care services upon pregnancy. Avoiding the significant costs associated with these unintended births saves taxpayers $4 for every $1 spent on family planning.
Evidence that expanding access to contraception through Medicaid is unequivocal: Increased access saves taxpayer money.
During the 1990s, HHS states:
…many states implemented Medicaid Section 1115 Family Planning Demonstrations. An independent evaluation of the experience of six of these states found that all six Demonstrations yielded savings, with annual state savings ranging between $1.3 million in New Mexico and nearly $30 million in Arkansas.
As of August 1, 2010, 27 states, including States like Pennsylvania, Texas, Florida, and Virginia had expanded Medicaid eligibility for family planning services under waivers that stipulated that these expansions be budget neutral. Based on this experience, the Congressional Budget Office has estimated that expanding family planning to all States would save $400 million over 10 years.
Why would insurance companies provide contraception without a co-pay to their female employees? The answers are clear.