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Welcome To My Soapbox, Birth Control Edition…

April 4th, 2012 · 8 Comments
Discrimination · Markets · Policy

From my soapbox:

Dear ladies: I really couldn’t care less whether you use birth control or not. In addition, I couldn’t care less whether either I or my employer subsidizes your birth control via insurance premiums. (For those of you who aren’t aware, that’s one part of the debate that people almost have right, as cross-subsidy is how insurance works. Also, for the record, I am, in fact, a woman.) What I do care about is women acting as victims rather than combatants in the supposed “war on women.”

You can read the full article here. An astute colleague asked if one market outcome would consist of employers trying to specifically attract non-breeders. I am not sure of the answer to this, except to say that I think we have anti-discrimination laws in part because there are incentives for firms to hire non-breeders anyway. (For example, subsidizing my health insurance is cheaper for an employer than subsidizing the health insurance of a woman with three kids.) I recall that Stephen Colbert had a brilliant bit on this a while back where he talked about how firms should hire ugly people because then the firms wouldn’t have to worry about insurance coverage for spouses or kids. Unfortunately, I can’t seem to locate the clip, so if any of you know what I’m talking about, I would be very grateful for a source.

Another astute lawyer friend of mine asserted that the decision to not cover contraceptives must be a moral one since it costs an employer money to not provide such coverage:

Moreover, a 2000 study by the National Business Group on Health, a membership group for large employers to address their health policy concerns, estimated that it costs employers 15–17% more to not provide contraceptive coverage in their health plans than to provide such coverage, after accounting for both the direct medical costs of pregnancy and indirect costs such as employee absence and reduced productivity. Mercer, the employee benefits consulting firm, reached a similar conclusion. And a more recent National Business Group on Health report, drawing on actuarial estimates by PricewaterhouseCoopers, concluded that even if contraception were exempted from cost-sharing, the savings from its coverage would exceed the costs.

Well then…I think friend has a point, but I don’t entirely overlook the possibility that employers could just be ignorant of costs in some cases. Either way, it doesn’t affect the overall argument that, if women vote with their feet, employers have an incentive to provide contraceptive coverage in the form of a larger employee pool. If employers are willing to hurt their bottom lines in order to exert some ethical control over their employees, then…I really don’t know, since I’m really not in the business of deciding whether it’s the government’s job to regulate ethics.

Tags: Discrimination · Markets · Policy

8 responses so far ↓

  • 1 Philip Weiss // Apr 4, 2012 at 10:06 pm

    The benefits of a larger employee pool are going to be small and really hard to quantify, particularly compared to the cost of insurance, for most many many employers. McDonald’s, for instance, will get just about the same quality of employees regardless of whether they exclude women who want contraceptive coverage or not. At the low end of the wage and skill scale, which is where the cost of contraceptives most affects people, why would an employer bother to offer it? And how can women vote with their feet, if most of the other employers offer the same lack of coverage. People who are harder to replace can vote with their feet.

  • 2 Punditus Maximus // Apr 5, 2012 at 9:43 am

    Conservatives love them some Jim Crow, don’t they?

  • 3 econgirl // Apr 5, 2012 at 11:05 am

    @ Philip: I was told by a friend who is in the process of offering health insurance for his employees that, in some states at least, it’s literally more expensive to purchase a policy without contraceptive coverage than it is to purchase a policy with it. What I take from this is that the health insurers are starting to put contraceptive coverage in the same category as gym membership subsidies and such, since they know that it will lower their claims in the long run.

    Also, it’s important to remember that McDonalds hires not only people to run the registers but also Harvard MBAs to run marketing and operations and such, and any health insurance decisions enacted to exert ethical control are going to impact both groups. McDonalds may not think too much about the quality of applicant pool for cashiers, but they definitely do for the corporate managers.

  • 4 David Welker // Apr 9, 2012 at 9:22 pm

    Shouldn’t a behavioral economist ask a different question than whether it is theoretically possible for women to “shop around” for the best employer who provides the coverage she wants and ask an entirely different question. Will real people in the real world actually behave that way?

    I am currently in the job market. Generally, when I talk to recruiters or employers, I negotiate salary first and foremost. I don’t really pay attention to exactly what is or is not covered in the health insurance plan. Instead, I know that they offer health insurance and I assume it is a reasonable policy. In any case, I do not really feel I have time examine the details of what is or is not covered that closely.

    I would bet most people are like me when it comes to looking for jobs. They focus on big picture items (like salary) and assume that the health insurance is high quality. So, most people are probably going to find out about a “small” detail like whether their employer offers coverage for contraception after they accept the job offer.

    Well, let us assume you accept a job offer. Let us say you have moved halfway around the country for the job. Are you going to consider leaving it because the health insurance wasn’t exactly what you expected? Probably not most people.

    Now, one could make an argument about how “ideal rational maximizing agents” should behave. Or one could ask how people in the real world do behave. When it comes to policy, I think the latter is more informative than the former.

    I am in complete agreement that, theoretically, women could exercise enough market power to ensure contraceptive coverage at nearly every employer. I think practically, coordination costs would put the power in the hands of employers in most instances.

    Another point. Let us assume that women could and would get the outcome they want without any assistance from government. Is this efficient?

    Well, you tell me. When you are looking for a job, do you want to also worry about comparing differences in health insurance or would you rather pay less attention to this because you know that insurance is a relatively homogeneous product and focus instead on things like salary?

    By requiring certain things to be covered, government has a role in making things health insurance coverage more homogeneous, which will actually improve market outcomes because it will make it less costly to compare offers from different employers. To put it another way, most people probably would greatly prefer not having to become experts at the ins and outs of health insurance if they could avoid it. And if they have to do so, it is costly in terms of time.

  • 5 Tim Cullen // Apr 14, 2012 at 2:14 pm

    Insurance need not operate via cross subsidy although many “insurance” policies operate in such a fashion in practice.

    The ideal group of policy holders would all have identical risks, and the law of large numbers could be used to easily predict outcomes at the group level allowing individuals to trade their financial risk of getting sick for a fixed cost roughly equal to their expected cost in a mutually beneficial transaction.

    Contraceptive coverage really doesn’t belong under any real insurance policy, but to the extent it saves money for insurers in practice such rational people with offer it with no need for a mandate.

    In summary real insurance is priced based on risk and deals with high cost, unpredictable events (such as a high deductible catastrophic plan) and as such there is little reason to cover contraception although if such coverage saves money in practice for various “pre-paid health are plans” there’s little reason to pass some ridiculous mandate to screw over religious people and those with catastrophic coverage plans.

  • 6 Kent // Apr 28, 2012 at 12:40 am

    Something that may also be worth considering. Could this debate not be solved if the purchase of health insurance was shifted to the individual?

    I am an Australian. We have been buying our own private health insurance for decades. If you earn enough taxable income, you are charged 1% of that income if you don’t have private health insurance. Does this sound familiar to any American constitutional lawyers?

    As far as incentive schemes go it is pretty effective. As soon as I was too old to be on my parent’s PHI policy and earning enough money to be caught in the system, I purchased a scheme, I am insured and it hasn’t been a consideration when moving between jobs.

    Employers are actively discouraged from providing their employees with health insurance. If they pay for the health insurance on the employee’s behalf, the employer is taxed at the highest marginal rate for an individual on that payment and effectively receive no tax deduction for the expense.

    It seems to me that you could avoid an entire country and its political class being distracted by such a politically divisive issue that is essentially a private matter; how extensively do I believe I should be covered by my health insurance policy, if I choose to be covered at all? I guess that’s the point of not wanting the government to incentivise the purchase of health insurance in the first place.

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