Costs and Benefits


Since a federal judge stunned the business community earlier this month by ordering a Seattle drugstore chain to add contraceptives to its health plan, employers have been calling experts like Mary Beth Mulligan.

The most common question: How much is it going to cost?

Cost is part of a list of reasons that have kept many employers from offering contraceptive coverage.

"For many employers, large and small, it wasn't considered a medical issue so it just wasn't covered," said Mulligan, an associate with William M. Mercer Inc., a New York-based worldwide consulting firm, and an author of a report on the financial implications of providing contraceptive coverage.

"For other employers, it's sort of a moral or social type thing. They don't want to offend people, so they won't cover it," Mulligan said. Others assume "it's going to cost a lot more money than they can afford to spend."

When employers hear that adding contraceptives will cost them about $17 per employee per year, their calculations often end there. But the economics of contraception are not so simple.

As employers face increasing pressure to provide the coverage, some are looking beyond the costs and deciding that promoting use of the most effective forms of contraceptives--the pill and other prescription methods--is good for business.

"We think it makes sense for them to look more comprehensively at what they are providing rather than just the cost of contraceptives," said Julie Gonen, director of family health for the Washington Business Group on Health, a think tank whose members include about 160 Fortune 500 employers.

"We try to tell them, 'You already cover pregnancy.' And some cover termination of pregnancy. 'So why wouldn't you want to help employees have healthy and planned pregnancies?' " Gonen said.

Some employers have decided to add contraceptive coverage because of other considerations, such as the need to appeal to a labor market that is increasingly female and was, until late last year, very tight.

"During the time period when unemployment was so low, employers were looking for ways to attract and retain employees, particularly their female and minority work force," Mulligan said. "You would be surprised at the number of employers who say, 'I want to be on Working Woman's list of top employers for females.' "

Although organizations such as Planned Parenthood have advocated increased access to prescription contraceptives for many years, the recent inclusion in job prescription plans of the male potency drug Viagra gave new energy to efforts targeting employers. Since 1998, 14 states including California have mandated some form of prescription parity, and New York state lawmakers are debating such a bill now.

The likelihood that an employee has job-related contraceptive coverage varies, depending on company size and the types of insurance plans, if any, that are offered. In 1997, a Mercer survey found coverage availability ranging from a low of 35% among small-company indemnity plans to a high of 68% among large-company HMO plans.

A survey last year by the Kaiser Family Foundation, a Palo Alto-based health research organization, appeared to show improvement, finding a range of availability from 60% to 87%.

Still, many employers do not offer coverage. An estimated 10.4 million American women use oral contraceptives. And for many of those women whose employers cover just about every other prescription drug, the trip to the pharmacy for contraceptive refills fuels a recurring gripe.

"They get angry every month. A lot of them just fume over this," said Martina Alexander, a Riverside flight attendant who has filed a complaint against American Airlines in an effort to force the company to cover contraceptives, pap smears and infertility treatments for all employees.

Alexander pays out of pocket for infertility treatments, which have included stints on oral contraceptives and other medications.

A spokesman for the airline declined to discuss the complaint pending with the Los Angeles office of the Equal Employment Opportunity Commission. But previously, the company has said it covers contraceptives prescribed for medical conditions but not for birth control. American has said its coverage of infertility treatments and pap smears varies by region and type of plan.

The biggest fight is over birth control pills, the most popular form of reversible prescription contraception. Without insurance, the pills cost women about $333 a year--enough to prompt many women, especially those with low-wage jobs, to resort to cheaper and less effective alternatives, according to women's health advocates.

Contraceptive costs are one of the chief reasons women spend 68% more out of pocket than men on health care, according to the Washington-based Women's Research and Education Institute.

The cost is significant enough to prompt some flight attendants who travel abroad to buy birth control pills in Canada, Mexico and elsewhere, said Emily Carter, health coordinator for the Assn. of Professional Flight Attendants, a Texas-based union that represents 23,000 American Airlines flight attendants.

"There are cheaper ways to get birth control," Carter said.

Seattle pharmacy manager Jennifer Erickson got so fed up with having to pay the full cost of contraception that she filed the lawsuit against Bartell Drug that led to the unprecedented court order. Because Bartell offers its employees a comprehensive prescription plan, U.S. District Judge Robert S. Lasnik reasoned, it was unfair to women to leave out contraceptives.

Many employers object to such mandates as an unwarranted intrusion into their businesses. As a more practical matter, they say, prescriptions are leading to sharp increases in health insurance costs, prompting many employers to slam the door on any add-ons, even relatively cheap ones.

"Employers carefully figure out, when they are drawing up health-care plans, what they can afford," said Randy Johnson, vice president for labor and employment benefits for the U.S. Chamber of Commerce.

"These employers are providing health-care benefits voluntarily for their employees, and they do it because it makes good business," he said. "But at some point, they are going to throw up their hands."

But contraception is more than a relatively inexpensive addition to health-care coverage, according to several recent analyses of its benefits to employees and employers.

"Usually it comes out cheaper to cover contraceptives because if you prevent unintended pregnancies, then not only will you probably have fewer pregnancies overall, but the pregnancies you do have will be healthier," said Gonen, of the Washington Business Group on Health. Planned pregnancies usually get earlier and better prenatal care.

When employers add birth control pills and other forms of prescription contraceptives to health plans, their costs rise less than 1%, or about $17.12 per employee, according to a 1998 report from the Alan Guttmacher Institute, a New York-based health research organization. So, a company with 100 employees would pay an additional $1,700 a year. Assuming standard cost-sharing, the cost to employees would be $4.28 a year, or about 36 cents a month.

The Washington Business Group and William M. Mercer have published white papers, with assistance from Pharmacia Inc., surveying the scientific literature on the costs and benefits of providing contraceptive coverage to employees and dependents. Pharmacia makes Depo-Provera, an injectable contraceptive available by prescription.

The Mercer report, quoting a Guttmacher estimate, tells employers they can save as much as $4.40 for each dollar they spend on contraception coverage. The Washington group analyzes a hypothetical business employing 80,000 people, including 40,000 women of reproductive age, and concludes that the cost of not providing contraceptive coverage is 17% higher than offering it.

Savings come from, among other things, reducing the incidence of expensive premature births among employees and dependents, employee absences, maternity leaves, pregnancy-related sick leaves and employee replacement costs.

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