How Will Insurers Respond To The Obama Administration’s Conscience Rule Modification?

“If a woman’s employer is a charity or a hospital that has a religious objection to providing contraceptive services as part of their health plan, the insurance company -– not the hospital, not the charity -– will be required to reach out and offer the woman contraceptive care free of charge, without co-pays and without hassles.” — President Obama, 2/10/12

The big question from today’s unveiling of the updated contraception coverage rule — which would require insurers to directly and seamlessly provide birth control to employees of nonprofit religious organizations that opt out of the requirement — is, why would the insurance companies provide the benefit at no additional cost? After all, if the employer isn’t paying for the birth control and the employee will receive the benefit at no additional cost sharing, aren’t insurers on the hook for the upfront costs of the contraception?

The economics of insurance suggest that they’re not — at least not over the long term. That’s because when insurers or employers provide contraception, they’re avoiding the much higher costs of unintended pregnancies. The Guttmacher Institute points to the literature:

— “A 2000 study by the National Business Group on Health, a membership group for large private- and public-sector employers to address their health policy concerns, estimated that it costs employers 15–17% more to not provide contraceptive coverage in employee health plans than to provide such coverage, after accounting for both the direct medical costs of pregnancy and indirect costs such as employee absence and reduced productivity.”

— “[E]very dollar invested by the government for contraception saves $3.74 in Medicaid expenditures for pregnancy-related care related to births from unintended pregnancies. In total, the services provided at publicly funded family planning clinics resulted in a net savings of $5.1 billion in 2008.”

— “A study from the early 1980s looked at a policy change in California under which the state began charging copayments for state-funded family planning services. The study, commissioned by the state department of health, found that nearly one in four clinics that charged copayments saw a decrease in their client population, and a similar proportion reported a decrease in necessary follow-up visits.”

As a White House administration official explained on a call with reporters this morning, “contraception services save a lot of money in the overall health care system” and don’t come at an additional premium. Still, insurers have yet to weigh in on the new rule and it’s not immediately clear how they will offset the initial upfront cost of swallowing some share of the cost of providing birth control to employees of religious institutions that opt out of the birth control requirement.