Insurers see costs in Obama birth control rule

The Obama administration maintains that its plan to have health insurers pay for birth control offered to employees of religious groups won't end up costing the industry. But insurers aren't so confident.

Last Friday, President Barack Obama sought to placate outraged leaders of the Catholic church, which opposes contraception, by making insurers responsible for providing the free birth control.

Obama's 2010 healthcare law mandates free contraception. The administration exempted houses of worship from the rule, but requires coverage be made available to employees of religiously affiliated organizations such as hospitals and universities.

The administration has said insurers should ultimately make up any initial costs by avoiding expenses associated with unintended pregnancies. But a new survey of 15 large health plans shows they are dubious of such savings.

Asked what impact the requirement will have on their costs in the year to two years after it goes into effect, 40 per cent of the participants said they expect the requirement will increase costs through higher pharmacy expenses.

The survey of pharmacy directors at the health plans was conducted on Wednesday by Reimbursement Intelligence, which advises pharmaceutical, medical device and other companies on reimbursement issues. The firm did not name the insurance plans it surveyed.

Of the health plans, 20 per cent said costs would even out because they already budget for contraception in the premium, 6.7 per cent said it would drive up pharmacy costs but decrease medical costs, while 33.3 per cent weren't sure. None said it would lead to net savings.

"They think it will raise pharmacy costs and won't lower medical costs," said Rhonda Greenapple, chief executive officer of Reimbursement Intelligence. "The idea that preventative care is going to reduce overall healthcare costs, they don't buy it."

Last week, insurers including Aetna Inc questioned the precedent set by Obama's plan that would force them to pay for coverage with no clear way of recouping the expense.

But insurers may still seek ways to pass through such costs, either by increasing premiums to the same employers or to other corporate clients.

The U.S. Conference of Catholic Bishops said its concerns were not addressed by Obama's compromise, and noted that insurance plans would likely cover the birth control costs out of the larger pool of revenue they make from their contract with a religious employer.