HHS/ASPE. U. S. Department of Health and Human Services.Background

ASPE ISSUE BRIEF

The Cost of Covering Contraceptives through Health Insurance

February 2012

About This Issue Brief
This brief reviews the literature on the cost of contraceptive coverage in private and public health insurance programs.  This brief was written by John Bertko, F.S.A., M.A.A.A., Director of Special Initiatives and Pricing in the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services; Sherry Glied, Ph.D., Assistant Secretary for Planning and Evaluation, U.S. Department of Health & Human Services (ASPE/HHS); Erin Miller, (ASPE/HHS); Adelle Simmons (ASPE/HHS); and Lee Wilson (ASPE/HHS).

This Issue Brief is available on the Internet at:
http://aspe.hhs.gov/health/reports/2012/contraceptives/ib.shtml

How to Obtain a Printed Copy

Contents

Summary

In August 2011, the Department of Health and Human Services (HHS) published Guidelines on Women’s Preventive Services that will require non-grandfathered health insurance plans to cover certain recommended preventive services for women, including contraceptive services, without charging a co-pay, co-insurance or a deductible beginning in August of 2012.  The Guidelines are based on recommendations to the Department from the Institute of Medicine, which relied on independent physicians, nurses, scientists, and other experts as well as evidence-based research to draw conclusions and formulate its recommendations.  The Guidelines provide for an exemption for certain religious employers, which is modeled on an option available in some of the 28 states that already require coverage of contraception.[1]  Additionally, the Administration announced that non-profit, religious employers who do not currently offer contraceptive coverage would not have to comply with the requirement for a year and new regulations would be developed and finalized by the end of the year to accommodate religious concerns while ensuring access to this benefit.

While the costs of contraceptives for individual women can be substantial and can influence choice of contraceptive methods,[2]  available data indicate that providing contraceptive coverage as part of a health insurance benefit does not add to the cost of providing insurance coverage.

Empirical Evidence on the Cost of Contraception

Evidence from well-documented prior expansions of contraceptive coverage 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, Congress required the health plans in the Federal Employees Health Benefits (FEHB) program to cover the full range of FDA-approved contraceptive methods. The FEHB program is the largest employer-sponsored health benefits program in the United States, and at the time, it covered approximately 9 million Federal Employees, retirees and their family members and included approximately 300 health plans.  The premiums for 1999 had already been set when the legislation passed, so the Office of Personnel Management (OPM), which administers the FEHB program, provided for a reconciliation process.  However, there was no need to adjust premium levels because there was no cost increase as a result of providing coverage of contraceptive services.[3]

Also 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.[4]  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.[5]

Review of Actuarial Studies

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% to the premium costs per adult enrollee.[6]  Studies from three actuarial firms, Buck Consultants, PriceWaterhouseCoopers (PwC), and the Actuarial Research Corporation (ARC) have estimated the direct costs of providing contraception coverage.  In 1998, Buck Consultants estimated that the direct cost of providing contraceptive benefits averaged $21 per enrollee per year.[7]  PwC actuaries completed an analysis using more recent, 2003 data from MedStat for the National Business Group on Health, and determined that a broader range of services (contraceptive services, plus lab and counseling services) would cost approximately $41 per year.[8]  The most recent actuarial analysis, completed by the Actuarial Research Corporation in July 2011, using data from 2010, estimated a cost of about $26 per year per enrolled female.[9]

However, 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.[10],[11] One study author concluded, "The message is simple: regardless of payment mechanism or contraceptive method, contraception saves money."[12]

When indirect costs such as time away from work and productivity loss are considered, they further reduce the total cost to an employer.  Global Health Outcomes developed a model that incorporates costs of contraception, costs of unintended pregnancy, and indirect costs.  They find that it saves employers $97 per year per employee to offer a comprehensive contraceptive benefit.[13]  Similarly, the PwC actuaries state that after all effects are taken into account, providing contraceptive services is “cost-saving.”[14]

Public Programs

Providing contraception through public programs is also cost-saving.  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.[15]

During the 1990s, 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.[16]  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.[17]

[ Go to Contents ]


Endnotes

[1] The Guidelines were published alongside an amendment to the July 2010 Preventive Services Rules that required non-grandfathered health plans to cover certain recommended preventive services without cost-sharing.  The amendment to the July 2010 preventive services regulation exempts health plans sponsored or offered by certain religious employers from the requirement to cover contraceptive services.

[2] Mosher, W. D., and J. Jones. 2010. Use of contraception in the United States: 1982–2008. Vital Health Statistics 23(29):1–44, available at: http://www.cdc.gov/nchs/pressroom/data/Contraception_Series_Report.pdf (accessed: February 9, 2012.), and Frost JJ and Darroch JE, Factors associated with contraceptive choice and inconsistent method use, United States, 2004, Perspectives on Sexual and Reproductive Health, 2008, 40(2):94–104 and Debbie Postlethwaite, James Trussell, Anthony Zoolakis, Ruth Shabear, Diana Petitti, A comparison of contraceptive procurement pre- and post-benefit change, Contraception, Volume 76, Issue 5, November 2007, Pages 360-365, and Trussell J et al., Cost effectiveness of contraceptives in the United States, Contraception, 2009, 79(1):5–14

[3] National Women’s Law Center, “Covering Prescription Contraceptives in Employee Health Plans: How this Coverage Saves Money,” May 2006, available at: http://www.cluw.org/PDF/ContraceptiveCoverageSavesMoney.pdf; (accessed: February 8, 2012) and Letter from Janice R. Lachance, Director, U.S. Office of Personnel Management to Marcia D Greenberger, National Women’s Law Center.

[4] 1999 Hawaii Sess. Laws. Act 267; SB 822, available at: http://www.capitol.hawaii.gov/session1999/acts/Act267_sb822.htm (accessed: February 9, 2012).

[5] Wayne Metcalf, Insurance Commissioner of the State of Hawaii, “Contraceptive Coverage Report,” December 2001, available at: http://hawaii.gov/dcca/ins/reports/2001_contraceptive_report.pdf (accessed: February 8, 2012).

[6] Jacqueline E. Darroch, “Cost to Employer Health Plans of Covering Contraceptives: Summary, Methodology and Background” (Washington DC: The Guttmacher Institute 1998), available: http://www.guttmacher.org/pubs/kaiser_0698.html and Campbell KP, editor. Investing in Maternal and Child Health: An Employer’s Toolkit. Washington, DC: Center for Prevention and Health Services, National Business Group on Health; 2007, p. 83, available at: http://www.businessgrouphealth.org/healthtopics/maternalchild/investing/docs/mch_toolkit.pdf, (accessed: February 8, 2012).

[7] Jacqueline E. Darroch, “Cost to Employer Health Plans of Covering Contraceptives: Summary, Methodology and Background” (Washington DC: The Guttmacher Institute 1998), available: http://www.guttmacher.org/pubs/kaiser_0698.html (accessed: February 8, 2012).

[8] Campbell KP, editor. Investing in Maternal and Child Health: An Employer’s Toolkit. Washington, DC: Center for Prevention and Health Services, National Business Group on Health; 2007, p. 83, available at: http://www.businessgrouphealth.org/healthtopics/maternalchild/investing/docs/mch_toolkit.pdf, (accessed: February 8, 2012).

[9] Memorandum from Cathi Callahan, Actuarial Research Corporation, “Adding free preventive care for women: ARC estimates from July 1, 2011,” July 19, 2011.

[10] Washington Business Group on Health, “Promoting Healthy Pregnancies: Counseling and Contraception as the First Step, Report of a Consultation with Business and Health Leaders,” September 20, 2000, p. 9, available at: http://www.businessgrouphealth.org/pdfs/healthypregnancy.pdf, (accessed: February 8, 2012).

[11] Campbell KP, editor. Investing in Maternal and Child Health: An Employer’s Toolkit. Washington, DC: Center for Prevention and Health Services, National Business Group on Health; 2007, p. 83, available at: http://www.businessgrouphealth.org/healthtopics/maternalchild/investing/docs/mch_toolkit.pdf, (accessed: February 8, 2012).

[12] Trussell J, Leveque JA, Koenig JD, et al. The economic value of contraception: a comparison of 15 methods. Am J Public Health. 1995; 85(4):494-503, available at: http://ajph.aphapublications.org/doi/pdf/10.2105/AJPH.85.4.494 (accessed: February 8, 2012).

[13] Washington Business Group on Health, “Promoting Healthy Pregnancies: Counseling and Contraception as the First Step, Report of a Consultation with Business and Health Leaders,” September 20, 2000, p. 9, available at: http://www.businessgrouphealth.org/pdfs/healthypregnancy.pdf, (accessed: February 8, 2012)

[14] Campbell KP, editor. Investing in Maternal and Child Health: An Employer’s Toolkit. Washington, DC: Center for Prevention and Health Services, National Business Group on Health; 2007, pgs. 19, 25, available at: http://www.businessgrouphealth.org/healthtopics/maternalchild/investing/docs/mch_toolkit.pdf, (accessed: February 8, 2012).

[15] Gold, Rachel Benson, Sonfield, Adam, Richards, Cory L., and Frost, Jennifer J., “Next Steps for America’s Family Planning Program: Leveraging the Potential of Medicaid and Title X in an Evolving Health Care System,” The Guttmacher Institute, February 2009, available at: http://www.guttmacher.org/media/nr/2009/02/23/index.html (accessed: February 9, 2012).

[16] Edwards, J., Bronstein, J., and Adams, K., “Evaluation of Medicaid Family Planning Demonstrations.” The CNA Corporation, CMS Contract No. 752-2-415921, November 2003.

[17] Congressional Budget Office, “Estimated Effect on Direct Spending and Revenues of H.R. 3162, the Children's Health and Medicare Protection Act, for the Rules Committee,” (August 1, 2007) available at: http://www.cbo.gov/ftpdocs/85xx/doc8519/HR3162.pdf (accessed: February 10, 2012).


How to Obtain a Printed Copy

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Last updated: 02/10/12