The following post originally appeared on the TIME Moneyland blog.
Initially, the controversy over President Obama’s proposal that all insurers cover contraception focused on religious liberty. After polls revealed that 98% of sexually active Catholic women have used birth control, though, some who oppose Obamacare tried to shift the argument from religion to money: “If insurers are forced to offer contraception without co-pays,” they warn, “they’ll hike our insurance premiums.” But will that actually happen?
Based on the data, it’s difficult to make the case that most, or even many, Catholics are anti-contraception. They want to be free to practice their religion, but they also want to be free to decide when to have children. As one pundit put it on Twitter: “Catholics are not against birth control; old Catholic men” — the Bishops — “are against birth control.”
Plenty of Americans, though, are against changes that would increase health insurance premiums. Robert Laszewski, editor of the Health Care Policy and MarketPlace Review, sounded the alarm in a six-word headline that has spread throughout the media: “No Free Lunch. No Free Contraception.”
“Of course there is a cost,” writes Laszewski, who has been quoted on NPR and throughout the blogosphere. “Today, contraception is almost universally covered in health insurance policies. The argument that forcing insurers to pay for it, without deductibles and co-pays, saves money because it avoids pregnancy costs is just plain silly … If insurers saved money handing out contraception for free in the first place they would have started to hand it out for free years ago … Insurers will likely just shut up and go along with it … but they will quietly pass the costs along.”
Like many quick and dirty “bumper sticker” arguments, Laszewski’s assertion sounds logical — as long as you don’t think about it for more than the minute it takes to read it. After all, someone is going to have to pay for all of those pills and devices, won’t they?
Actually, not really. The truth is that both insurers and employers who self-insure save money in the long run by covering contraception. So much money is saved that it makes financial sense to waive co-pays and deductibles. A 2000 study by the National Business Group on Health estimates that not providing contraceptive coverage in employee health plans winds up costing employers 15% to 17% more than providing such coverage.
Contraception is expensive only if you think of birth control in terms of the individual woman’s upfront costs, rather than looking long-term at the “net cost” to the insurer and factor in all the dollars saved when customers don’t become pregnant. Think of it this way: If my married daughter lays out a $15 co-pay for birth control pills, she doesn’t save a dime. True, she protects herself against the emotional cost of an unwanted pregnancy, along with the hefty costs of raising a child. But in terms of the costs to give birth to the child, she is not much better off, because if she does become pregnant, her insurer, like many, would pay the bills above and beyond the co-pay.
By contrast, if an insurer makes birth control totally free for all of its customers, it avoids having to reimburse them for countless unplanned pregnancies and births. Overall, then, it’s cheaper for the insurer to pay a little upfront to save a ton down the line.
There’s some indication that co-pays serve as a barrier to using birth control. A 2011 report for the Institute of Medicine prepared by the Guttmacher Institute reveals that “average copayments in employer-sponsored insurance plans have increased considerably over the past decade to $49 in 2010 for ‘non-preferred’ brand-name drugs and $28 for brand-name drugs.” Meanwhile, “one 2009 study of low and middle-income sexually active women” showed that roughly 13% of them “said they saved money through inconsistent use of birth control.” This is why a 2007 National Business Group guide for employers calling for “coverage of the full range of contraceptive methods and sterilization services, recommends zero cost-sharing … to avoid real or perceived financial barriers, and to increase utilization.”
The Guttmacher report observes that “couples using no method of contraception” run a whopping “85% chance of an unintended pregnancy within 12 months.” Insurers that waive co-pays also avoid shelling out for complications that often accompany unplanned pregnancies, including high-risk situations such as births of successive children that are not properly spaced out, a woman who does not know she is pregnant and drinks during those crucial first months, and pre-teen girls having children.
Finally, free contraception does not cost insurers nearly as much as many assume because only 28% of women use the most expensive form of birth control — the Pill. Fully 37% of couples choose tubal sterilization or a vasectomy. A higher percentage take this route if their insurer covers 100% of the bill. The upfront cost is higher, but the insurer waives just a single co-pay.
This helps explain a PricewaterhouseCoopers estimate that if a plan that currently offers no contraception covered the full range of services and products — “without cost-sharing” — the plan would wind up spending just “$37 to $41 more per member per year.” As the 2011 Guttmacher report notes, ‘$40 per member per year is miniscule when compared with average insurance premiums: $5,049 for an individual employee and $13,770 for family coverage.” Most importantly: “These actuarial estimates do not take into account the potential cost-savings from contraceptive care.”
This is why the notion that President Obama’s proposal will lead to higher insurance premiums is, to quote Laszewski, “just plain silly.”