Free Contraceptives – Paid for by Thee and Me

The ‘compromise’ announced by the administration last week on the contraceptives issue is another example of the politicization of healthcare and health insurance driven by the ACA. The semantic dodge of making all health insurers provide coverage for contraceptives instead of employers needing to provide coverage does nothing to change the effect and actually broadens the expense that all policy holders will have to pay. Regardless of your personal needs or situation, you will now be paying for contraceptives through the premiums in your insurance policy.

The key here is the movement of contraceptives into the category of preventive care.

What will be the effect of this policy on the contraceptives market? As John Cochrane points out in his WSJ editorial,  the secondary effect of this move is that incentives for pharmaceutical companies to develop cheaper versions of birth control has vanished, as well the incentive for male centered non-prescription birth control. In short, the cost of contraceptives will never go down, they will probably go up. So much, for cost savings.

Other questions have been raised about whether or how this policy would be applied to self-funded employer plans, that technically don’t use insurance to cover their health benefit expenses. Since the majority of US employees covered through their employer are in these sort plans, that would put the onus of the expense on individual and small employers that cannot self-insure.

However, the real issue here is the use of the preventive care approach to legislate any number of favored benefits or tests into insurance plans. Every disease interest group will want their special pleading included as a preventive care measure (e.g. testing for autism, dementia, etc.). The cost of the preventive care portion of any insurance policy will necessarily go up.

Just another reason for any small to medium sized employer to get out of providing health insurance benefits to their employees.