Cost to Employer Health Plans of Covering Contraceptives: Summary, Methodology and Background

June 1998

By Jacqueline E. Darroch

Summary of Results

Legislation has been introduced in the U.S. House and the Senate and a number of states (and actually has already been enacted in the State of Maryland) to mandate that insurance plans cover reversible medical contraceptives to the same extent that other prescription drugs and supplies are covered. This would not only improve access, but would also allow for more even-handed provision of contraceptive methods, giving women more balanced selection of the method most appropriate to their particular preferences and needs, independent of its cost.

One question in the discussion over possible mandates is how much they would add to insurance premiums. Available data on method use do not indicate how the contraceptive supplies are paid for,¹ making it difficult to estimate reliably the cost of additional coverage from existing national data. However, such projections can be made based on information from plans that currently do cover these reversible medical contraceptives.

In order to inform the current discussion about the potential cost of requiring that contraceptives be covered the same way plans cover other prescription drugs and supplies, The Alan Guttmacher Institute (AGI) commissioned Buck Consultants, an employee benefit, actuarial and compensation consulting firm, to make more detailed and comprehensive estimates.²

Buck Consultants estimated that the average total cost (including administrative costs) of adding coverage for the full range of reversible medical contraceptives to health plans that do not currently cover them will increase total health coverage costs for employees and their dependents by $21.40 per employee per year - $17.12 of employers' costs and $4.28 of employees' costs.

The added cost for employers of providing this coverage corresponds to $1.43 per month, which represents a mean increase of less than 1% in employers' costs of providing employees with medical coverage. This figure is broken down by method as follows:

METHOD	COST TO EMPLOYER PER EMPLOYEE PER YEAR
Oral Contraceptives	$16.13
Diaphragms/Cervical Caps	0.03
Injectables	0.77
Implants	0.15
IUDs	0.04
Total	$17.12

The above estimation of costs takes into account:

•The number of prescriptions for oral contraceptives filled per employee per year in plans that currently cover oral contraceptive supplies - from third-party organizations that administer drug plans covering over half the U.S. population;

•The number of prescriptions for other methods filled per employee per year - estimated from the oral contraceptive information, national data on contraceptive method use by women in private insurance plans and the length of time supplies for each method can be used;

•The net unit cost to a health plan for each method, deducting an average employee copayment for those methods typically obtained at a pharmacy (oral contraceptives, the diaphragm and cervical cap) - from the drug plan administrators for oral contraceptives and a pharmacy pricing reference for the other methods, with the average copayment taken from an industry benefits report;

•Administrative expenses, including risk charges and profit, of health plans for the claims filed with them - based on a health maintenance organization (HMO) and preferred provider organization (PPO) industry profile; and

•Employee payments toward the cost of employment-based health benefits - from a national survey of employer-sponsored health plans. This estimate represents the average cost of adding coverage to a plan that now does not cover any of these nonpermanent contraceptive methods. The cost would be less for those plans that cover at least some of these methods - half of indemnity plans and as many as 90% of HMOs. In fact, the added expenses would be minimal for 6 in 10 POS (point of service) and HMO plans that already cover oral contraceptives but do not necessarily cover the other reversible medical methods. There would be no added costs for the one-third of POS and HMO plans that already cover all of these methods.

Methodology

Only the added costs of covering contraceptive supplies were estimated by Buck Consultants. The major part of the cost of the physician's services is generally covered as part of the office visit, and is not always separately identified as a contraceptive service.³ The costs of covering oral contraceptives were estimated directly from the actual experience of plans that currently cover the cost of oral contraceptives. Costs for other methods were estimated in a different way, because other reversible medical contraceptive devices are not always uniquely identified on physician bills or captured by health plan claims systems.

For oral contraceptives, information was obtained from six major pharmacy benefit managers covering nearly 150 million members (insured employees and their dependents) - over half the entire U.S. population. Pharmacy benefit managers are third-party organizations that administer drug benefits for insurers. They negotiate terms of reimbursement with the retailers and handle the administration of claims and reimbursements for the insurance plans. Data from these pharmacy benefit managers were used to estimate for 1998 the average number of prescriptions filled or refilled and the average cost for oral contraceptives per employee per year in plans that covered the method. The "per employee" figures included supplies and costs for the employee as well as for any spouse or other dependents.

The number of prescriptions filled or refilled (scripts) and the number of devices purchased (for the other reversible medical methods - diaphragms, cervical caps, injectables, implants and IUDs) were estimated based on the number of privately insured women using each of these methods relative to the number using oral contraceptives, adjusted for the number of units of each method needed to equal one year of use. The results were expressed as the average number of scripts or devices per 1,000 employees per year, i.e., the total number of prescriptions filled or refilled and devices dispensed in one year to everyone covered by a plan divided by the number of total employees.

The average number of scripts/devices per insured employee per year was estimated as
METHOD	SCRIPTS/DEVICES PER EMPLOYEE PER YEAR
Oral Contraceptives	0.78416
Diaphragms/cervical caps	0.00246
Injectables	0.01878
Implants	0.00035
IUDs	0.00016
Total	0.80591

This average number of scripts/devices per employee per year takes into account:

•that some employees and their dependents do not purchase any nonpermanent medical contraceptive methods during a year,

•that some employees have more than one covered person in their family purchasing contraception, and

•that some users need more than one refill of their method and that others use methods that prevent pregnancy for more than one year.

From the pharmacy benefit managers' information, Buck Consultants estimated that the average cost to an insurance plan for one oral contraceptive script was $22.27. This figure includes an adjustment for an average employee copayment of $5.50 toward the total script price of $27.77. The unit costs for the other methods were estimated as the published average wholesale price minus copayments of $5.50 for diaphragms and cervical caps, the other methods that typically are obtained through a pharmacy rather than directly inserted or administered by a clinician.

The average net cost for these nonpermanent (reversible) medical contraceptives per employee per year was calculated as the average number of scripts/devices per employee per year multiplied by the average cost of each script or device after copayment.

These average costs per employee per year represent the amount the covering plan pays for these contraceptive supplies per employee per year. Their levels reflect the distribution of methods used by women covered by private insurance and the costs of each of these methods. To arrive at the total cost per employee per year, Buck added an estimated 15.5% to these claim costs to cover plan administration and other plan costs. This resulted in a total cost per employee per year of adding coverage for these methods of $21.40, of which an estimated 20% ($4.28 per employee per year) would be transferred by employers to their employees and 80% ($17.12) would be paid by employers. This added cost to employers of $17.12 per employee per year represents an average increase of less than 1% in the projected 1998 cost to employers for medical coverage for their employees.

METHOD	COST PER EMPLOYEE PER YEAR
	TOTAL	EMPLOYEE SHARE	NET COST TO EMPLOYER
Oral Contraceptives	$20.16	$4.03	$16.13
Diaphragms/Cervical caps	0.04	0.01	0.03
Injectables	0.97	0.19	0.77
Implants	0.19	0.04	0.15
IUDs	0.04	0.01	0.04
Total	21.40	4.28	17.12

Background

In 1996, the Health Insurance Association of America (HIAA) presented estimates to the California Assembly Insurance Committee of the cost of oral contraceptive coverage. HIAA estimated that the cost of adding contraceptive coverage (for oral contraceptiv

The issue of coverage for nonpermanent medical contraceptive methods in private insurance is one that affects most women, and their families, at some time during their lives. Three-quarters of U.S. women of reproductive age depend on private insurance for their medical care expenses. Recent figures show that in 1995, 74% of women aged 15-44 were covered by private insurance, 16% were enrolled in Medicaid and 2% were enrolled in CHAMPUS or other government insurance.⁵ Virtually all indemnity plans and many HMOs cover pregnancy and its outcomes. A 1993 survey of private insurance plans found that 97-98% of indemnity plans covering 100 or more employees and of HMOs routinely cover childbirth; 66% and 70%, respectively, routinely cover abortion, and 9 in 10 will pay for it under some circumstances.⁶ This coverage affects many women: 82% of women aged 40-44 have had at least one child,⁷ and 43% have had at least one induced abortion.⁸

Contraception is also an important medical issue in women's lives. If a woman is sexually active between ages 20 and 45 and wants 2 children (the typical number in the United States⁹), she will spend, on average, 20.5 years needing to use contraception and 4.5 years either trying to become pregnant or being pregnant or postpartum.¹⁰

Contraception is a need that cuts across sociodemographic groups. Among those aged 20-44 who have ever had sex, for instance, 85% have ever used oral contraceptives (see Table 1), the most commonly used nonpermanent method in the United States. This proportion varies only slightly by age, marital status, area and region of residence, parity, education and poverty level. Ever-use of the pill is reported by 88% and 84% of non-Hispanic white and black women aged 20-44 who have ever had sex, respectively, as well as by 75% of Hispanic women and 61% of other women. Some 88% of Protestant and 81% of Roman Catholic women have ever used the pill, along with 86% of those reporting no religious affiliation and 73% of those reporting other religions. However, a 1993 survey found that half of indemnity plans for large groups and 7% of HMOs do not cover any nonpermanent contraception. Only 33% of these large indemnity plans, and 84% of HMOs, routinely cover the most commonly used nonpermanent method, the oral contraceptive pill. Some 42% of indemnity plans and 86% of HMOs provided coverage for the pill in some circumstances.¹¹ In 1996, the Washington Business Group on Health (WBGH) found that 53% of its members' HMO plans covered oral contraceptive pills, compared with 28-33% of their PPO/POS and fee-for-service plans.¹² (WBGH members include Fortune 500 and large public-sector employers.)

The AGI survey found that plans that do cover contraceptive services and/or supplies are often inconsistent in which methods they will cover, and have a pronounced bias toward covering permanent surgical methods. In 1993, 58% of large indemnity plans would not cover pills, 76% would not cover the implant and 82-85% would not cover injectable contraception or the diaphragm. About half of HMOs would not cover the diaphragm, implant or injectable, compared with 14% that did not cover pills. In contrast, about 9 in 10 large indemnity plans and HMOs cover permanent sterilization through tubal ligation and vasectomy.¹³

The cost of contraceptive services and supplies affects what providers women use and even the methods they choose. Women with family incomes under 200% of poverty who were using nonpermanent contraceptives in 1988 were about twice as likely as higher income users to go to a clinic when they made a family planning visit (55% vs. 26%).¹⁴ Among low-income women aged 18-35 who were surveyed in 1986, 89% said that cost was an important factor influencing their decision about what family planning provider to use; 41% of those who preferred a clinic said it was because of cost.¹⁵

Among clients using family planning clinics in 1991-1992, those who did not have Medicaid coverage (which pays for all methods of contraception) were one-12th as likely to get the contraceptive implant as were other women at the same clinics who were on Medicaid. And among the 60% of family planning agencies that did not even offer the method, 43% said this was due to the cost of the method and the inability of the agency or clients to pay for it.¹⁶ Among 129 patients enrolled in a study in Texas in which they obtained a free IUD, 47% said that they would not have been able and willing to pay the more than $200 that the IUD actually cost if it had not been provided free of charge through the study.¹⁷ Women aged 18-44 in commercial and Medicaid managed care plans in 5 states were surveyed in 1996-1997; all were at risk for unintended pregnancy and not using contraceptive sterilization. Some 29% of them said that if cost and the need for referral were not a problem, they would like to learn more about other contraceptive methods; 44% of condom users and 23% of those using no method said they would be interested in learning about a medical contraceptive method.¹⁸

Method use and method choice have direct effects on whether or not a woman will have an unintended pregnancy, the costs of which are usually covered by private insurance. For instance, women using oral contraceptives are less than half as likely to become pregnant in a year's time as are those using condoms, and one-fourth as likely as couples using withdrawal, but they are more than 12 times as likely to become pregnant as women using implants or injectables or couples relying on tubal sterilization or vasectomy.¹⁹

Each year, 3.28 million women either give birth to a baby they had wanted to have at the time they conceived or have a planned pregnancy that ends in miscarriage. However, women who succeed in planning their pregnancies are only about half of all women who conceive. Some 3.04 million women experience an unintended pregnancy each year. These pregnancies result in 1.22 million unplanned births, 1.43 million induced abortions and 0.39 million miscarriages - unintended events with significant economic, personal and social costs. Some 53% of these unintended pregnancies are among women who experienced contraceptive failure - largely because they or their partner were not using their method consistently or correctly - and 47% are among those who were not using any method during the month they conceived.²⁰

Comparisons of use of highly effective methods with those that are more difficult to use successfully or with nonuse - in terms of unintended births, abortions and miscarriages, as well as STDs and other health side effects - clearly show that effective contraceptive use when couples are sexually active and do not want to have a child leads to better health and to lower health care costs.²¹ This makes contraceptive use a relevant issue for health care providers interested in reducing medical care costs.

The discrepancy between the spotty insurance coverage for contraceptive methods and the near-universal coverage for the most costly outcomes of poor contraceptive use raises numerous questions: about discrimination against (or at least unfairness to) women, who are most typically the contraceptive users; about effects of differential payment on users' choice of methods; and about the impact on whether they use any method at all. Indeed, this is why legislation has been introduced in the House and the Senate to mandate that private insurance plans cover nonpermanent medical contraceptive supplies to the extent that they cover other prescription drugs and devices.

Such a requirement would affect a large number of women and their partners, since almost everyone in the United States uses medical methods of contraception during their lives. The most recent figures, for 1995, indicate that 44.7 million women aged 15-44 were covered by private insurance sometime during the prior year (Table 2). Of these, 31.0 million were sexually active, would have been fertile if they were not using a contraceptive, were not pregnant, postpartum or trying to become pregnant, and did not want to have a child at the time. Some 9.7 million of these women were using nonpermanent medical methods of contraception - oral contraceptives (8.0 million), the diaphragm or cervical cap (0.7 million), injectable contraception (0.6 million), the implant (0.2 million) or the IUD (0.2 million). And, as shown above, the overwhelming majority of the 11.1 million privately insured women relying on contraceptive sterilization used such methods in the past, and many of those using nonmedical methods or no method will use them in the future.

Contraceptive use is a standard part of Americans' lives. Almost everyone of reproductive age has been sexually active, and almost all of those who have been have used contraception during periods when they wanted to avoid having a child.²² Studies have shown the personal benefits of contraceptive use, in both health and economic terms, as opposed to the costs of unintended pregnancy - whether ending in abortion or in a mistimed or unwanted birth.²³

In light of this, excluding coverage for all or some medical methods of contraception from private insurance plans seems particularly incongruous. The analyses presented here illustrate that if all plans included contraceptive services and supplies in the same manner as other medical care and prescription drugs and devices, the total cost to employers who do not now cover reversible medical methods would be $17 per employee per year, or less than 1% of current health care premiums.

Table 1. Percentage of sexually experienced women aged 20-44 who have ever used oral contraceptives, 1995
GROUP	PERCENTAGE
All women	85.1
AGE
20-24	81.3
25-29	86.9
30-34	86.8
35-39	84.8
40-44	85.1
EDUCATION
Less than HS graduate	81.3
HS graduate	87.4
College	84.8
MARITAL STATUS
Married	86.9
Separated/Divorced/Widowed	87.8
Never married	79.1
RACE/ETHNICITY
Hispanic	75.1
Non-Hispanic white	88.2
Non-Hispanic black	84.4
Other	61.0
RESIDENCE
Central city	82.5
Other metropolitan	85.1
Nonmetropolitan	89.0
REGION
Northeast	80.2
Midwest	86.6
South	87.0
West	85.0
PARITY
No children	81.3
1 child	86.3
2 children	88.1
3+ children	85.5
POVERTY LEVEL
<150% of federal poverty line	80.7
150-299%	85.8
300%+	86.8
RELIGION
None	86.4
Protestant	88.4
Roman Catholic	81.2
Other	73.2
CURRENT REPRODUCTIVE STATUS
Method users
Tubal ligation	87.6
Vasectomy	89.5
Medical reversible methods	84.4
Nonmedical reversible methods	74.5
Pregnant, postpartum, trying to get pregnant	82.8
Infertile	82.5
Not sexually active	68.5
Sexually active, using no contraceptive	84.8
Source: Tabulations from the 1995 National Survey of Family Growth.

Table 2. Contraceptive use by women aged 15-44 covered by private insurance in 1995
METHOD	NUMBER (000s)	PERCENTAGE DISTRIBUTION
		OF ALL INSURED WOMEN 15-44	OF WOMEN AT RISK FOR UNINTENDED PREGNANCY
All women	44,742	100.0	na
At risk for unintended pregnancy	31,038	69.4	100.0
Contraceptive sterilization	11,098	24.8	35.8
Reversible medical method	9,694	21.7	31.2
Oral contraceptives	7,978	17.8	25.7
Diaphragm	645	1.4	2.1
Injectable	621	1.4	2.0
Implant	234	0.5	0.8
IUD	211	0.5	0.7
Cervical cap	6	0.0	0.0
Reversible nonmedical method	8,113	18.1	26.1
Male condom	6,074	13.6	19.6
Withdrawal	866	1.9	2.8
Periodic abstinence	696	1.6	2.2
Suppository	133	0.3	0.4
Foam	118	0.3	0.4
Sponge	76	0.2	0.2
Jelly/cream	73	0.2	0.2
Female condom	12	0.0	0.0
Other method	66	0.1	0.2
None, at risk for unintended pregnancy	2,133	4.8	6.9
Not at risk	13,703	30.6	na
Source: Tabulations from the 1995 National Survey of Family Growth. na=not applicable.

References

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