Insurance Coverage of Contraceptives

The last several weeks have been a roller coaster ride for those interested in insurance coverage of contraceptives. In this post, we answer some of the key questions about the new contraceptive coverage policy generally, and more specifically, how it will be applied to religious organizations.

Why is contraceptive coverage part of health reform?

When the Affordable Care Act was passed, it included considerable attention to preventive care, for the first time stipulating that new private plans cover a wide range of recommended clinical preventive services to plan holders without cost-sharing. Specifically, this section of the law (2713) requires that private plans cover services that receive a strong recommendation from the U.S. Preventive Services Task Force (USPSTF); vaccines recommended by the Advisory Committee on Immunization Practices (ACIP); preventive services for children recommended by Bright Futures guidelines for pediatric preventive care; and “with respect to women,” new services that will be identified by the Health Resources and Services Administration (HRSA). In 2010, the Department of Health and Human Services (HHS) requested that the Institute of Medicine (IOM) convene a committee of experts in women’s health and prevention to identify gaps for women in the current preventive recommendations.

The IOM committee identified eight new preventive services for women, including screening for intimate partner violence, well woman visits, breastfeeding supports as well as the inclusion of contraceptive services and supplies, including all methods approved by the Food and Drug Administration. These recommendations were adopted by HHS in August 2011. Contraception is also recommended as a part of health care for women by the nation’s leading health care professional associations, including the American Medical Association, the American Congress of Obstetricians and Gynecologists, the American Academy of Pediatrics, and the American Public Health Association.

This new provision has significant implications for access to contraception and affordability for millions of women. It is estimated that half of pregnancies in the U.S. are unintended, among the highest rate among developed nations. The vast majority of women in the U.S. have used a contraceptive at some point in their lives to prevent unintended pregnancy, plan future pregnancies, or space childbearing. Cost-sharing requirements, such as co-payments and co-insurance, have been shown to curtail utilization of preventive services.

How much do contraceptives cost and aren’t they already covered by insurance?

The costs of contraceptives can vary widely, depending on the type of contraceptive a woman uses. Condoms are generally inexpensive, but other forms that are more effective (such as implants and IUDs) can be quite costly and also require a visit to a health care provider for insertion or prescriptions.

Coverage for prescription contraceptives is generally widespread, but not universal, in the private and public sectors. Most women in the U.S. receive coverage through private plans, and the 2010 Kaiser/HRET survey of employers reports that 85% of large firms cover prescription contraceptives in their largest health plans, although they may charge cost-sharing which can vary greatly by employer and type of plan. Currently, 28 states require insurance plans sold in the state to cover contraceptives, with a wide range of specific requirements and exemptions among these mandates. These laws, however, do not affect self-insured employer plans, which are regulated by the federal Employee Retirement Income Security Act (ERISA) and are exempt from state rules. These are plans that are funded directly by the employers and 60% of covered workers are in these plans. In 2000, a ruling by the Employment Equal Opportunity Commission found that employers that cover preventive prescription drugs and services, but do not cover prescription contraceptives are in violation of the Civil Rights Act. Contraceptive coverage is also typically included in most major government programs, including the Federal Employees Health Benefits Plan (FEHBP), Medicaid, the Indian Health Service, and TRICARE (which covers military families).

How will the final federal rule on contraceptive coverage affect insurance coverage of contraceptives?

The new federal rule will be effective August 1, 2012 and states that the full cost of all prescribed FDA-approved contraceptives and related services must be covered in new private plans, including individual, small group, large group, and self-insured employer plans. This new rule applies to all new plans, except for plans sponsored by certain non-profit religious employers who object to the use of birth control. Existing plans that have “grandfathered” status are not required to provide this coverage regardless of the employers’ religious affiliation. Originally, the exemption was limited to religious employers that included only houses of worship. Some religious leaders called for a broader definition of religious employers to include religiously-affiliated institutions, such as faith-based hospitals and universities, even if they employ and serve people with a wide range of religious tenets. Others disagreed, saying that the type of insurance coverage that women have should not be defined by their employers’ religious beliefs. This exemption has been the focus of much of the current debate.

Who will be required to cover contraceptives and who is exempt?

The Administration issued a Final Rule on February 10, 2012 addressing the religious exemption. In essence, the exemption has two levels: One that exempts churches, synagogues, and other houses of worship from the coverage requirement completely. It also grants other nonprofit employers who hold religious objections to contraceptives a one-year grace period (until August 2013), during which they do not have to comply with the regulation. By the end of this one-year period, HHS will issue rules requiring the insurance companies that sell plans to these religiously-affiliated employers to offer contraceptive coverage without cost-sharing directly to any employees and their dependents who desire it. Therefore, religiously-affiliated employers that oppose birth control will not have to spend their funds on contraceptive coverage, but their employees and their dependents will still be able to obtain full coverage for contraceptives directly from the insurer. During the transition year, the Administration plans to put forth more details on this portion of the regulation and to specify requirements for self-insured plans, where the employer and the insurer are the same entity. It is currently unknown how many religiously-affiliated insurers are self-insured.

The Administration put forth this rule with the intention of relieving employers with religiously-based objections with the obligations of using their funds toward contraceptive coverage, which may violate their religious tenets, while still assuring that women have access to contraceptive coverage without cost-sharing.

This final policy is based on the contraceptive coverage mandate and exemption in Hawaii. In Hawaii, an employer that invokes a religious exemption to the mandate is required to provide enrollees, in writing, a list of the contraceptive services that the employer refuses to cover as well as information on how to access the services. It is the insurer who must then to provide this coverage to the workers. The Hawaii statute also recognizes that women may use contraceptives for many health conditions, and states that coverage must include “prescription contraception that is necessary to preserve the life or health of the enrollee.” Under the federal rules it is not yet clear how employees will be notified of the policy, whether there will be a similar protection for the other medical uses of contraceptives, and how the new rule will affect self-funded employer plans that have been exempted from state laws. This could be clarified over the next year.

What is the cost impact of this provision?

The specific short- and long-term costs and savings for plans of this new policy are not known. The National Business Group on Health recommends that employers include coverage of contraceptives in their plans, finding that the short-term costs may be modest and will likely be offset rapidly by long-term saving in preventing costs associated with pregnancy. An HHS brief on cost implications of prior expansions of contraceptive coverage concluded: “Evidence from well-documented prior expansions of contraceptive coverage indicates that the cost to issuers of including coverage for all FDA-approved contraceptive methods in insurance offered to an employed population is zero.” When coverage of contraceptives was added to FEHBP in 1999, it did not increase premium costs. Finally, a key difference between prior research and the current policy is that the ACA provision eliminates cost-sharing, and it is not clear how much this would affect plan costs as this expense is currently borne by workers and their families.

What’s next?

While the rule issued by HHS is final, this issue is likely to remain in play. Over the coming year, HHS has indicated that it will further clarify how this exemption will be structured. In the meanwhile, some legislators in Congress who are not satisfied with the present religious exemption have introduced legislation to change this rule and other organizations have filed legal challenges. These bills and lawsuits aim to either broaden the exemptions from the mandate to a wider group of employers with objections to contraceptives and other elements of the health reform law, or repeal the contraceptive coverage provision from the law.

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