0
$\begingroup$

Today the Trump administration in the USA announced they are removing the mandate that company provided health insurance include free contraception coverage. My understanding is that providing contraception for free actually reduces the overall healthcare cost in the US, since the price of pregnancy and births is extremely high compared to inexpensive pills. Therefore, from a strictly economics standpoint, I would expect that companies that elect to not cover contraception might pay higher premiums than if they were to choose policies that included coverage. Is this the case? Prior to today did religious organizations and private companies that chose not to cover contraception actually pay higher premiums, or did insurance companies just raise everyone's premiums to compensate? (Or is my original premise flawed that premiums should be higher when contraception is not covered?)

$\endgroup$
2
$\begingroup$

There are different arguments here, depending on the points of view of the government and the insurance providers. I'm trying to answer to the general question on the title.

Insurance providers aim at minimizing their costs with healthcare and the probability of health issues. Free birth control not only prevents unwanted pregnancy, but might also have other health benefits. This prevention would save insurance providers from the costs of unwanted pregnancy, which are not only the birth but also psychological costs. I am not aware of any studies that would compare both situations. Insurance providers could benefit from this measure if they know that women will buy the birth control anyways, so the insurer free rides on the benefits of the pill.

The government should try to maximize the "society's profit" or well being, coming from healthcare, but also from other aspects like the fulfillment of values. The logic is to balance the "harm" inflicted by this policy to some groups (say, some religious citizens could say they feel bad for living with these policies) and the losses in profit inflicted to insurance providers or employers, with the potential benefits to society. The book Freakonomics makes an interesting correlation with approving abortion and reducing crime in New York, which could be an argument to give it for free (social benefit of less crime). Note that the argument was later refuted in The Economist, but might still be used by some people who only read the book.

Who could benefit from this change in policy, besides what is mentioned above (my own opinion, discussable)

  • Pharma industry, with people choosing more expensive pills when they are not covered by the insurer
  • Religious groups and anyone who disagrees with the concept of free birth control
  • President Trump, by gaining more approval from these groups
  • (Far fetched) Hospitals and doctors who could increase their services
$\endgroup$
  • 2
    $\begingroup$ Here's why I strongly dislike the type of books like freaknomics: economist.com/node/5246700 $\endgroup$ – An old man in the sea. Oct 7 '17 at 13:00
  • $\begingroup$ bos.frb.org/economic/wp/wp2005/wp0515.pdf $\endgroup$ – An old man in the sea. Oct 7 '17 at 13:01
  • $\begingroup$ Great point, didn't know about it! I've added a note on the answer above. $\endgroup$ – JoaoBotelho Oct 11 '17 at 9:36
  • $\begingroup$ João, I don't think that just because it's still a best seller, one can take it at face value... $\endgroup$ – An old man in the sea. Oct 11 '17 at 10:38
  • $\begingroup$ I wanted to say that people might still use the argument if they dont know that it was refuted, and only read the best seller. $\endgroup$ – JoaoBotelho Oct 11 '17 at 10:43

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.