Wednesday, November 27, 2013

Love, actuarially

Victorian postcard, via Wikipedia.
Now that the Supreme Court has agreed to hear the Hobby Lobby case about how the religious freedom of the company owners requires that they be permitted to impose their religious beliefs on their employees, it may be time to note once again a wrinkle I've noted before, but with some new backup.

Namely: we sort of assume that if an insurance company "pays for contraception", that will cost them more than not doing so; we have this picture of shelling out so much per pill packet and so much per IUD and of the whole thing being on the minus side of the ledger. But actuarially speaking this is not at all the case. The costs of dealing with accidental pregnancy are so much higher than those of effective contraception that providing everybody in your risk pool with family planning costs the insurer approximately zero and saves the employer on the order of an annual $97 per employee.
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]
In this way the amount a company "pays" to cover family planning for employees is actually negative, and in order for Hobby Lobby to avoid paying for its workers' contraception it would, in fact, have to pay a significantly higher premium. It is going to be arguing before the Supreme Court that it is an unbearable burden for the Affordable Care Act to require them to pay less.

I mean, I don't suppose it makes a difference to the legal issues in question, but it does to my mind make them awfully abstract. (Note: it might make a difference to the determination of whether the law imposes a "substantial burden" on Hobby Lobby. By the way, be sure to see Scott Lemieux's analysis of the issues themselves.)

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