The contraceptive/insurance controversy

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August 2, 2011 by Tony Novak

This is a short brief in bullet format on the story behind the “contraceptive controversy” that sparked so many comments yesterday.

  • The federal law known as the “Affordable Care Act” passed in 2010 requires insurance plans to cover preventative care at 100% without co-pays or deductibles.
  • The effective date of this provision of the law will most likely be the insurance plan’s first anniversary following December 31, 2011.
  • The Obama Administration instructed the Department of Health and Human Services (HHS) to draft he specific regulations of this provision. The public was largely unaware that their instructions were to include preventative services in the regulation without regard to the cost effectiveness of the required coverage. Apparently even some of the medical professionals charged with preparing supporting data for the regulations disagreed with the final results.
  • Health insurance is regulated by state law as well as federal law. Some states have stated they will not allow the provisions of the federal law and more than half of the states have filed suit against the federal government to prevent the implementation of these changes. The case is not expected to be heard by the Supreme Court until late 2012 or 2013. It is not clear what impact this ongoing controversy will have on health insurance plans next year.
  • Public outrage was triggered by the specific requirement that health insurance plans cover contraceptives including the controversial “morning after pill“.
  • Employers generally oppose the measure because the cost of this regulation is expected to be about $1.40 for each $1.00 of actual care provided under the provision. This is because of the added costs of the administrative process as opposed to simple cash payment for these relatively inexpensive medical items. It simply does not make economic sense to cover preventative care under insurance plans, even after adjusting for the savings achieved by early detection of medical conditions.
  • Grandfathered insurance plans” are exempt from the regulation but we expect few of these to survive. In fact, none of our thousands of small business group insurance clients, to our knowledge, will have qualifying exempt insurance plans. It is possible that a few large corporations might be able to preserve their insured health plans from modifications required under the current law. In short, we believe that the “grandfathered health plan” is simply a myth for the large majority of Americans.
  • Many other types of insured and uninsured health plans are exempt from the regulation including short term medical, mini-med, limited benefit, catastrophic illness, self-insured, discount PPO plans, etc. Industry research indicated that more employers planned to utilize these exemptions even before yesterday’s announcement so we expect away from major medical insurance will be further fueled now.
  • Insurance companies are expected to take the easiest route through this maze. Since their operations are most directly controlled by state insurance regulators, we anticipate that insurance companies will abide by the wishes of local regulators in the event of a conflict with federal law.

Freedom Benefits will continue to work with businesses and individuals to customize their health plans with or without the provisions of the Affordable Care Act. We continue to believe that in most cases there is enough flexibility in the market and existing laws to exercise significant control over coverage and costs.

In summary, we don’t expect that the new regulation on contraceptives will have significant impact on you or your business unless you allow it. However, if you want to avoid any impact, it might be necessary to take affirmative steps to modify your health insurance before December 31, 2011.

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