All Commentary
Friday, February 10, 2012

Contraception: Insuring the Uninsurable

Conscience versus coercion.

Update below.

Controversy rages over the Obama administration’s mandate that all employers – including Catholic hospitals and universities — include free contraception in their employee health insurance policies. Catholic officials object that since their church forbids contraception, the decree violates the First Amendment’ s protection of religious freedom. Others have joined in the protest, prudently anticipating that this violation of freedom of conscience could spread to other matters and other faiths.

Those raising the objection have an unimpeachable case. The precedent apparently set in the more than two dozen states that already have similar mandates is irrelevant. What’s immoral does not become moral simply by precedent. The principle that no one should be forced to finance that which he or she finds abhorrent is sound. In fact, it should be generally applied.

Changing the Subject

Defenders of the decree are quite good at changing the subject. Of course they are — what else have they got? To hear them, you’d think someone has proposed that contraception be outlawed. (Well, Rick Santorum does seem to favor that; but he’s pretty much alone.) Obamacare champions would have us believe the controversy is about “access” to certain products and services. All the decree does, they say, is provide insurance coverage for, and therefore access, to free contraception (along with other preventive services) for women who want it. But that just raises another question:

What has this got to do with insurance?

Access does not depend on coverage. We have access to many important things not covered by insurance. Weirdly, some say the decree actually affirms religious freedom. How so? Sens. Barbara Boxer, Jeanne Shaheen, and Patty Murray explained in the Wall Street Journal: “[T]he millions of American women who choose to use contraception should not be forced to follow religious doctrine, whether Catholic or non-Catholic.”

In other words, lack of insurance coverage for contraception is equivalent to being forced not to use contraception. That is some strange argument, but it’s what we’ve come to expect from members of the “world’s greatest deliberative body.”


So the question remains: What has this got to do with insurance?

“Access to birth control is directly linked to declines in maternal and infant mortality, can reduce the risk of ovarian cancer, and is linked to overall good health outcomes,” Sens. Boxer, Shaheen, and Murray write.

Fine, but what’s it got to do with insurance?

“[B]roadening access to birth control will help reduce the number of unintended pregnancies and abortions, a goal we all should share.”

Fine, but what’s it got to do with insurance?

“Proper family planning through birth control results in healthier mothers and children, which benefits all of us.”

Fine, but what’s it got to do with insurance?

“It saves us money too….”

Fine, but what’s it got to do with insurance?

“It can cost $600 a year for prescription contraceptives.” (That’s a high-end estimate; there are lower cost options, including Planned Parenthood for low-income women.)

Fine, but what’s it got to do with insurance?

“Some 99% of women in the U.S. who are or have been sexually active at some point in their lives have used birth control, including 98% of Catholic women, according to the Guttmacher Institute.”

Fine, but what’s it got to do with — oh never mind. I’ll answer myself: It’s got nothing to do with insurance.

Pooling Risk

Insurance arose as a way for individuals to pool their risk of some low-probability/high-cost misfortune befalling them. It shouldn’t be necessary to point this out, but coming of child-bearing age and choosing to use contraception is not an insurable event. It’s a volitional act. It may have good consequences for the person taking the action and society at large, but it is still a volitional act. It makes no sense to talk about insuring against the eventuality that a particular person will use contraception. Strictly speaking, contraception has nothing to do with insurance.

Unfortunately, we don’t speak strictly about health insurance. One reason we don’t is the tax code. Since World War II compensation for labor in the form of employment-based health insurance does not count as taxable income. (Money spent independently on health insurance does count.) The tax code thus creates perverse incentives to 1) depend on one’s employer for medical insurance, 2) shift income from liquid cash to restricted insurance benefits, and 3) define uninsurable events as insurable. Would someone care to explain how well-baby care can be insurable?

So we have taxation to thank for yet another feature of the modern world: the corruption of language. In the medical realm insurance no long means insurance.

Instead it’s a game by which we get other people to pay for stuff. Well, that’s not quite accurate. It’s actually a game in which we pretend that other people pay for stuff. Look, contraception, mammograms, colonoscopies, and well-baby care are not free. (See my “There’s No Such Thing as a Free Mammogram.”) They require labor and resources for which the owners wish – not unreasonably — to be compensated. Someone has to pay. If employers are compelled nominally to pay for the coverage, does anyone seriously doubt that employees will actually pay through lower cash wages? Employers are not charities. So even without a copayment, we all know deep down that we as workers pay for the coverage. (Which by the way is likely to be more expensive than the services would be in a freed market, since insurance companies will charge overhead and more for their trouble. Also subsidized demand raises prices.) Nevertheless, the truth is so obscured that people can pretend they’re getting something for free.

So the government-generated system treats us like children, and alas most of us seem happy to be treated that way.


Under pressure, the Obama administration was expected to announce a “compromise” under which exempt Catholic employers would not have to pay for contraception coverage. Instead, insurance companies would provide the coverage directly to employees. Since under Health and Human Services rules, this coverage must be free, the Obama administration is in effect directing insurers to eat the cost. But insurers are profit-making companies, not charities, so we may expect them to pass the cost to someone else. But to whom? There’s only one possibility: nonexempt employers, which means in fact employees of nonexempt companies. So the grand compromise shifts the cost from a small minority of employees to the vast majority — all in the name of religious freedom. All workers in nonexempt companies and institutions will take a pay cut.

Update II

Perhaps I stopped the movie too soon. The Wall Street Journal writes, yes, there will be cost-shifting at first. But that’s not the last of it. “The balloon may be squeezed differently over time, and insurers may amortize the cost differently over time, but eventually prices will find an equilibrium. Notre Dame will still pay for birth control, even if it is nominally carried by a third-party corporation.”

I assume what the WSJ anticipates, perhaps among other things, is that more efficient insurers will be able to raise their premiums by a lesser amount than less efficient competitors. The new cost-shifting environment will present entrepreneurial opportunities. As a result, marginal firms will exit the market, leaving fewer firms serving the same demand — meaning higher prices for all as the result of the policy. It’s the principle of water finding its own level.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.