On an administrative fix to the Hobby Lobby decision

Since I spent a bit of time talking to colleagues this morning about what the administration might do in the wake of the Hobby Lobby ruling, I figured I’d share what I’ve learned. But, fair warning, the following is not based on extensive reading. There’s a lot I don’t know, as acknowledged below.

Premise: You know what the Hobby Lobby ruling is. If not, go read this.

Next: You know that the administration previously provided a way for non-profit, religious organizations to not cover contraception but for the employees of such organizations to still be covered for them. How? Via Tim Jost:

The Departments of HHS, Labor, and Treasury attempted from the beginning to accommodate the objections of religious organizations. In 2011, the agencies published interim final rules exempting from the requirement religious employers, such as churches and other houses of worship. These rules were made final in 2012.

The 2012 rules, however, did not exclude religious organizations other than houses of worship — such as hospitals, universities, and charities — from the contraceptive coverage requirement. On June 28, 2013, the Departments issued final regulations exempting certain religious organizations and employers from having to provide themselves contraceptive services to their employees. This final rule provided an accommodation under which contraceptives would instead be made available independently through insurers or third-party administrators to the employees of these organizations.

As expressed in Justice Alito’s opinion, the administration could extend the same accommodation to the types of organizations (closely held for-profit corporations) germane to the Hobby Lobby case. How does this accommodation work, exactly? As I understand it, it’s weird.

For fully-insured organizations, the government makes the insurer just pay for contraception even though its premium is (presumably) based on no contraceptive coverage. The assumption seems to be that contraception coverage pays for itself in avoided pregnancy cost. So the collected premium is actually higher than it need be. So, no direct government cost here. But, since premiums are potentially higher than they should otherwise be, there would be a loss of government tax revenue (because employer-sponsored premiums are tax exempt). Plus, what is the insurer doing with the extra premium revenue it (maybe) doesn’t need?

Self-insured organizations have to find a third-party insurer to cover contraception. That insurer would pay the third-party administrator for contraceptive costs out of a government-imposed fee they would otherwise pay exchanges. So, there’s a direct government cost. Maybe. If you go back to the prior paragraph, however, there really shouldn’t be any (net positive) cost of contraception. So is the government (via forgone fee to exchanges) paying something here or not? I don’t know.

How this will actually work out depends on how exactly the costs of contraception are calculated. Are they net the cost of avoided pregnancies or not? Is this in the regs? Where? And what is that net cost anyway? One round-up of the evidence says that it’s a bit cloudy. Maybe contraceptive coverage (as opposed to contraception) doesn’t pay for itself in avoided pregnancies.

It’s possible I don’t have things exactly right, so point me to a correction if you see official language that contradicts something I wrote. (I’ll include updates below.) Is there more to this story? New evidence on whether contraceptive coverage pays for itself? Any researcher have data that would shed light on this? Let me know via email or Twitter.


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