Insurance industry could take hit from birth control mandate

The insurance industry is concerned it will take a hit from the Obama administration’s mandate that they provide birth control in health plans for employees of religious organizations that object to the coverage.

Publicly, the health insurance industry has avoided getting involved in the fight.

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But in private, the industry is dubious of the administration’s argument that the insurance industry wouldn't take a hit because birth control is cheaper than unwanted pregnancies.

The trade group America's Health Insurance Plans has limited its comments to saying it worries about the "precedent" the mandate would set. The concern is that the government could eventually require health plans to cover any number of preventive services – even prescription drugs - without copays or deductibles, under the theory that they save money in the long-term.

Privately, however, insurers say there's nothing "free" about preventing unwarranted pregnancies. They say the mandate also covers costly surgical sterilization procedures, and that in any case even the pill has up-front costs.

"Saying it's revenue-neutral doesn't mean it's free and that you're not paying for it," an industry source told The Hill.

Doctors still have to be paid to prescribe the pill, drugmakers and pharmacists have to be paid to provide it - and all that money has to come from insurance premiums, not future hypothetical savings, the source said.

The White House argues the new plan will save money for the health system.

"Covering contraception is cost neutral since it saves money by keeping women healthy and preventing spending on other health services," the White House said in a fact sheet.

"For example, there was no increase in premiums when contraception was added to the Federal Employees Health Benefit System and required of non-religious employers in Hawaii. One study found that covering contraception saved employees $97 per year, per employee."

Tim Jost, a champion of the health reform law and law professor at Washington and Lee University, reiterates that point in a new analysis of the birth control mandate.

"Health plans will be able to offer contraceptive coverage for free because, according to studies cited by the government, contraceptives cost substantially less than pregnancies," Jost writes. "The free coverage is not, therefore, an 'accounting gimmick' under which employers in fact pay for coverage against their beliefs, but coverage will in fact be paid for by the insurers out of savings that they realize by offering contraceptive coverage."

Yet in a survey of 15 large health plans this week, Reuters found that "40 percent of the participants said they expect the requirement will increase costs through higher pharmacy expenses" within a year or two.

Another "20 percent said costs would even out because they already budget for contraception in the premium, 6.7 percent said it would drive up pharmacy costs but decrease medical costs, while 33.3 percent weren't sure," Reuters found. "None said it would lead to net savings."

It's not clear how those costs would be passed on. The regulation bars the health insurance plans from raising the religiously-affiliated employers' premiums, so it's possible workers at companies that directly offer contraceptive coverage would get stuck with higher premiums to make up the lost revenue.

Another unresolved issue is the case of self-insured institutions, where the employer and the insurer are in effect one and the same. The administration says it's still working that out, but Republicans doubt they'll be able to.

"It forces the insurance company that they have to pay to do the coverage," Rep. Paul Ryan (R-Wis.) said last Sunday in reaction to the new rule. "So instead of making the institution itself, it reinforces the insurer. And a lot of these Catholic institutions are self-insured, and all insurers under this rule must provide these mandated benefits."

To complicate things further, some critics of the special treatment for religiously-affiliated institutions have argued that employers aren't really spending their own money on healthcare benefits in the first place. Because employees must accept lower wages than they otherwise would, the idea that employers are spending their own money on employee coverage is "rubbish" according to Gary Puckrein, Founder and President of the National Minority Quality Forum, a nonprofit group dedicated to eliminating health disparities among racial groups.

"Employers do negotiate benefit design with insurers on behalf of workers, but the benefit does not exist until the employee's wages are transferred to the insurer's account," Puckrein writes in the Huffington Post. "Religious employers are no exception; they are not using their own money to buy medical products and services for their employees. It is their employees who are purchasing the benefit with their own money."