Saturday, March 17, 2012

Religious exemption for contraceptive coverage: who pays when the employer is self-insured? (cont.)

When the administration announced its compromise regarding the requirement that all health plans offer free contraception -- i.e., that if an employer objected on grounds of conscience, the insurer, not the employer, would pay -- I wondered immediately how that would work in the case of the large number of employers whose health plans are self-insured. Who would pay in cases where the employer is the insurer?

My guesses included the third party administrator (TPA) usually hired to run such plans. But that did not seem entirely to make sense, because a) not all self-funded plans use TPAs, and b) the TPA, by definition, does not fund the services provided.  Requiring them to pay for contraception would be a little like requiring outsourced payroll-handling services to pay for, say, ergonomic chairs.

Yesterday, HHS Secretary Kathleen Sebelius rendered an answer of sorts. The Times' Robert Pear reports:

The coverage will be provided by the companies that review and pay claims — “third-party administrators” — or by “some other independent entity".
It's actually a non-answer, though, as Pear highlights:
The new Obama policy leaves two big questions unanswered:

Who will provide the money to pay the claims for contraceptive drugs and devices? Who will pay the fees normally paid by the employer? 

Secretary Sebelius said the money could come from pharmaceutical companies, which sometimes provide discounts to favored customers by paying rebates on drugs. These drug rebates could be used to help pay for contraceptive coverage if a religious organization objects to providing such coverage to employees, she said in a notice to be published next week in the Federal Register. 

Alternatively, Ms. Sebelius said, the federal Office of Personnel Management could encourage or require one or more private insurers to provide contraceptive coverage for people in a religious organization’s health plan. Under the 2010 health care law, the personnel office will sign contracts with at least two insurers to offer comprehensive coverage to individuals, families and small businesses in every state.
So it seems that the TPA will not pay. Or maybe not. To suggest that the TPA will "provide" the coverage, if that does not mean paying for it, is a tautology. The TPA "provides" all the services in a self-insured plan that it administers, in the sense of processing whatever paperwork a service generates.

In fact, as Pear indicates, the government has simply given itself until April 1, 2013, the end of the "safe harbor" for plans objecting to providing for contraception, to figure this out. So indicates the guidance provided in the Federal Register on February 15:
During the temporary enforcement safe harbor, the Departments plan to develop and propose changes to these final regulations that would meet two goals— providing contraceptive coverage without cost-sharing to individuals who want it and accommodating nonexempted, non-profit organizations’ religious objections to covering contraceptive services as also discussed below....
In fact, the administration is essentially starting from scratch, albeit with existing state rules as models,  in figuring out a workable rule:
Before the end of the temporary enforcement safe harbor, the Departments will work with stakeholders to develop alternative ways of providing contraceptive coverage without cost sharing with respect to non-exempted, non-profit religious organizations with religious objections to such coverage. Specifically, the  Departments plan to initiate a rulemaking to require issuers to offer insurance without contraception coverage to such an employer (or plan sponsor) and simultaneously to offer contraceptive coverage directly to the employer’s plan participants (and their beneficiaries) who desire it, with no cost-sharing...The Departments intend to develop policies to achieve the same goals for selfinsured group health plans sponsored
by non-exempted, non-profit religious organizations with religious objections to contraceptive coverage.

A future rulemaking would be informed by the existing practices of some issuers and religious organizations in the 28 States where contraception coverage requirements already exist, including Hawaii. There, State health insurance law requires issuers to offer plan participants in group health plans sponsored by religious employers that are exempt from the State contraception coverage requirement the option to purchase this coverage in a way that religious employers are not obligated to fund it. It is our understanding that, in
practice, rather than charging employees a separate fee, some issuers in Hawaii offer this coverage to plan participants at no charge. The Departments will work with stakeholders to propose and finalize this policy before the end of the temporary enforcement safe harbor.
The Feb. 15 guidance reiterates administration claims that providing free contraceptive service is cost-neutral at worst and in fact actually saves plans money:
In addition, there are significant cost savings to employers from the coverage of contraceptives. A 2000 study estimated that it would cost employers 15 to17 percent more not to provide contraceptive coverage in employee health plans than to provide such coverage, after accounting for both the direct medical costs of pregnancy and the indirect costs such as employee absence and reduced productivity. In fact, when contraceptive coverage was added to the Federal Employees Health Benefits Program, premiums did not increase because there was no resulting health care cost increase.
If TPAs are in fact induced to foot the cost, however, this argument is irrelevant as far as they are concerned. Since they do not fund other healthcare services, they will not reap the benefits of any subsequent costs that contraception prevents. That's also true for any other entity induce to foot the bill other than the insurer -- or self-insurer.

Pear's article ends with a disturbing codicil:
The administration on Friday also issued a final rule requiring coverage of contraceptives under student health plans offered by many colleges and universities. The requirement applies to health plans underwritten by private insurers like UnitedHealth and Blue Cross and Blue Shield. It does not apply to student health plans at colleges that serve as their own insurers. 

“A self-funded student health plan cannot be included in this regulation without a change in law,” the administration said.
College health plans are a scandal unto themselves, often offering ridiculously inadequate coverage. Businessweek did an expose in I think about 2006. Many plans cap coverage at $30,000, which means that if you suffer catastrophic illness or injury, you're screwed. I imagine that, like the college loan regime ended by the ACA, and like the College 529 savings plans that steer users to mutual fund companies selected by their state of residence, they are governed by laws written by lobbyists.


  1. The TPA may not directly reap the benefits of better health outcomes from birth control coverage, but they will be able to recoup their costs from the employer (which will reap the better-outcome benefits): TPAs bill employers, and since every TPA will be under the same obligation, none will be able to gain a price advantage on this one; ergo, all of them will probably raise prices sufficiently to cover their costs. Or so the economists would have us believe.

  2. Right, but isn't that the point, Theo? The employer will ultimately pay for it.