Insurance coverage of birth control still makes no sense

Jim Huffman Dean Emeritus, Lewis & Clark Law School
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Justice Sotomayor’s order temporarily enjoining enforcement of the Affordable Care Act’s contraception coverage mandate was, no doubt, a disappointment to the man who appointed her to the high court, and to most Obamacare supporters. If the Supreme Court ultimately finds the mandate unconstitutional it will be a victory for religious freedom, but will leave barely a dent in the massive wealth redistribution scheme that is Obamacare.

That Obamacare is about wealth redistribution rather than health care insurance is underscored by the facts underlying Sotomayor’s order. The plaintiffs, mind you, are nuns. If true to their vows, they will never have any need for birth control. The only reason for the law to require them to purchase health insurance that covers contraception is to force them to pay for contraceptives used by others. That is wealth distribution pure and simple. It is not, by any logical understanding, insurance.

Insurance is about guarding against uncertain future costs. We insure our homes against fire damage knowing that there is little likelihood we will ever have occasion to demand payment from the insurance company. Indeed we fervently hope we will never be entitled to payment. By lots of people paying a tiny fraction of their expected future costs in the event of a fire, everyone in the insurance pool can be assured that their full losses will be covered in the unlikely event their home is burned.

Catastrophic health insurance works the same way. Catastrophes do not befall everyone, but everyone is at risk of being buried under medical costs in the rare event catastrophe strikes. Insurers are willing to guarantee full payment of catastrophic injury costs (less deductibles that will lower the insured’s premium payments) because they know that most of those who purchase catastrophic health insurance will never have the misfortune of having to demand payment.

The costs of birth control are different. Everyone who engages in unprotected sexual intercourse knows that pregnancy is a highly likely result. As the name of the leading birth control advocacy group Planned Parenthood attests, pregnancy is something one can plan on. If one wishes to have sex but does not want to have a baby, birth control must be part of the life plan. It is a predictable cost of engaging in sexual intercourse.

There is no more reason to insure for the payment of birth control than there is to insure for the costs of maintaining a supply of spare light bulbs. We know that our light bulbs will require replacement every now and then. But we would never think of asking our home insurer to provide coverage for the costs of light bulb replacement. The costs of collecting light bulb replacement premiums and processing replacement claims would make our light bulbs much more expensive than they are at the local hardware store.

The same is true of birth control. It is far less costly and no less convenient for each individual to purchase whatever birth control they require at the local drugstore than to have our health insurers collect premiums and make payments to birth control users. It makes no sense to insure against the unavoidable and predictable costs of daily life, which is why we don’t do so, except in the case of health care.

The point of mandated health insurance coverage of birth control costs has nothing to do with the risk sharing function of insurance and everything to do with shifting the costs of birth control from some people to others, including those whose life plans do not require birth control.

There is nothing inherently wrong with this sort of cost shifting. For at least a few people, expenditures on birth control actually displace expenditures on basic necessities like food and shelter. There are both humanitarian and social reasons to help these folks out. But requiring that every insurance policy purchased by every American provide birth control coverage has to be the least efficient means conceivable for subsidizing the birth control costs of the truly needy.

The same can be said of much that is mandated under Obamacare. It makes no sense to insure against routine and predictable health care costs, yet that is what the Affordable Care Act purports to do. For insurers or the government to pay those routine and predictable costs for everyone including those who cannot afford to do so themselves, the only solution is to charge some people more than they would otherwise spend. That is why premiums have gone up for millions of people while other millions, some in need and others not, are looking forward to free or subsidized health care.

When Obamacare collapses, which seems inevitable sooner or later, our legislators should start anew with an understanding that insurance is one thing, wealth redistribution is another. Since the New Deal when employer supplied health coverage was substituted for direct compensation in the face of government salary controls, our policymakers have confused health insurance with health care. The result is Obamacare. Even a Supreme Court declaration that mandated birth control coverage violates religious liberties will not cure that problem.

Health insurance, like home and auto insurance, should be left to the private market. Subsidized health care should be left to private charity and the government. By distinguishing the two, there is a better chance that health insurance costs and health care costs will decline and subsidized health care will go only to those truly in need.