There is a broad consensus (and a strong economic argument) that Americans should be protected against the potential financial catastrophe that can result from unexpected costly illnesses. This is the essence of health insurance. We count ourselves among those that broadly agree with this consensus opinion. Put plainly, unexpected medical bills should not be a source of financial insecurity. The Affordable Care Act represents President Obama’s best effort to provide this protection. But the ACA does far more than simply provide financial security in the form of health insurance to a large number of previously uninsured Americans. When the ACA reaches beyond this goal, it tends to get into the most trouble.
Americans like having health insurance, so to serve its broad political goals, the Obama administration has tried to label all aspects of the ACA as elements of health insurance. But the labels do not always fit. Recall that the administration was placed into the awkward position of defending the individual mandate as a tax in court, despite clear statements by various supporters of the ACA that it did not involve new taxes on those earning under $250,000 a year. In some people’s minds this continues to bring into question the legitimacy of the entire legislation.
This week, the debate has been about the mandate that employers include contraception in the basic insurance benefit that they are mandated to provide as part of employee compensation. Plans that do not offer this coverage do not meet the minimum requirements of the ACA and therefore employers would be required to pay steep fines per employee. In the “Hobby Lobby” decision, the Supreme Court ruled that owners of closely held corporations could not be compelled to provide certain types of birth control as part of their employee health insurance plans if they objected. The court then followed this up by granting a temporary injunction that allows Wheaton College to avoid filing a form facilitating the provision of contraceptives to its employees by a third party insurer. A final ruling from the Supreme Court on that issue will come in the future.
This is a fight that the Administration frankly didn’t need to and shouldn’t have picked. Recall that we got in this situation when the HHS (now perhaps our nation’s most powerful agency) decided to include contraception as part of the “essential health benefit that must be offered as part of all qualifying insurance plans.” And with that relatively simple decision, we’re off! Since that point the administration has been attempting to tailor its contraceptive mandate to avoid infringing on the religious beliefs of different groups. First, explicitly religious organizations were exempted. Then religious non-profit organizations were given the accommodation that serves as the center of the recent Wheaton College decision. Finally, as a part of the Hobby Lobby decision, closely held for-profit corporations have access to this potentially problematic non-profit workaround.
Had the administration thought more clearly about the underlying economics, and demonstrated a bit more political boldness (after all, wasn’t boldness one of the reasons America supported the President in 2008), it could have avoided this Rube Goldbergeseque solution. For the sake of argument, we will accept that affordable contraception is an underprovided public good requiring a government subsidy (a point that has a good deal of validity). But contraception is predictable and does not involve substantial expense – compared to say a new child. As such, it is by definition not an insurable product, and tying its provision to insurance is asking for trouble…the type of trouble that the Supreme Court has provided. Besides, tying contraception to insurance all but guarantees that millions of women will not receive the subsidy; witness the millions of Americans who still lack health insurance.
There are better ways to subsidize public goods than tying them to health insurance, especially when the goods in question are not insurable. If the administration believes that contraception is an underprovided public good, then why not carve this troublesome feature out of the ACA and offer contraception stamps? Like food stamps, they could be exchanged at the pharmacy for the purchase of qualified contraception products. This would eliminate the employer middleman and better target the subsidies to the low income individuals who need it the most.
We will tell you why the administration didn’t pursue this path. While we have no qualms about it, we suspect that most Americans would not accept this notion of directly subsidized contraception. By labeling contraception a healthcare service that requires insurance coverage, and rolling the subsidy into the ACA, political acceptance is all but assured. Unfortunately, the rules of the ACA effectively lock most Americans into their employer-sponsored insurance (another problematic provision of the law), so this approach ties contraception to employment, ties the hands of employers, and guarantees legal challenges along the lines of Hobby Lobby. This only serves to further politicize the ACA and assure that far more important reforms to the ACA will be delayed even further into the future.
Contraception is not the only uninsurable good or service that CMS has added to the minimum benefits package, which includes far less controversial preventive health measures that are routine and expected. But, as we previously discussed, it is only a matter of time before lobbyists and weigh in on other benefits that are not cloaked in the legitimacy of prevention. Judging by the experiences of the states, which collectively impose over 2000 “insurance” mandates, most of these mandates will actually be subsidies for uninsurable services. Lobbyists have long known that by labeling these subsidies “health insurance,” political hurdles melt away. In the case of contraception, the Obama administration has learned this lesson well.
Given that this Supreme Court felt confident enough in their economic logic to call the mandate a tax, we are surprised that they did not take this opportunity to question the entire notion of “insuring” contraception. So we are glad to have had this opportunity to do it for them.