In my last post I talked about the $1 premium for abortion coverage under Obamacare. The rule can be found here. The document is 644 pages, so, for those interested, the action is all on pages 627-630. This Section §156.280 Segregation of funds for abortion services. In the language of the document, QHP is “qualified health plan,” i.e. a health plan issued through the exchanges.
Paragraph (d)(1) describes “abortions for which public funding is prohibited.” The segregated premium for insurance coverage for these abortion is described in (B) [of(e)(2)(i)] on p. 629. This premium is equal to “the actuarial value of the coverage of services described in paragraph (d)(1) of this section.” Paragraph (4) [of (e)] on p. 630 specifies that the premium “(ii) Must estimate such costs as if such coverage were included for the entire population covered; and (iii) May not estimate such a cost at less than one dollar per enrollee, per month.”
What does it mean that costs must be calculated “as if such coverage were included for the entire population?” Note that abortion insurance is bundled with a QHP, so an enrollee is a person covered by a qualified health plan. The reference population for the insurance premium is evidently all enrollees with abortion insurance, or all enrollees in QHPs bundled with abortion insurance. For example, an employee with a five member family must pay $5 per month, since each one of the five members is enrolled in the plan. Bundling abortion insurance with QHPs and eliminating “opt-out” provisions effectively lowers the cost of abortion insurance by distributing the costs among all enrollees, a much larger group than all women who would voluntarily purchase abortion insurance. This larger group includes many people who cannot obtain abortions and who therefore cannot directly “benefit” from an abortion, such as men, children, and women beyond child-bearing age.
How much should abortion insurance cost for women? The rule specifies a $1 minimum or the expected costs of the population, assuming all women are covered. In 2008, women between 20-24 obtained about 350,000 abortions in the U.S. Here, for simplicity, I ignore Medicaid funding assume all abortions are privately funded . Using an average prices for an abortion of $500, the average cost for all 10.1 million women in that age range would be about $17.41 per year, or $1.45 per month. Women at these ages have the highest abortion rates. Average costs for women 25-29 are $1.08 per month, and less than one dollar per month for women in all other categories. The average cost of abortion for all women of child-bearing age is $8.05 per year, or $0.67 per month. Fair insurance premiums would be equal to these costs if all women in these categories elected to purchase abortion insurance, but higher if some women elect not to purchase the insurance because they would never obtain an abortion. The smaller the insured population, the higher the premiums.
When these costs are effectively distributed, not among women who may obtain an abortion, but among all enrollees, the average cost is much, much lower. This program channels the monthly premiums from enrollees to abortion providers and insurers. The monthly minimum premium of $1 is a binding constraint, well above the fair insurance price, so the program channels an amount money to abortion providers and insurers that far exceeds the actual cost of abortions. This rule effectively creates a pot of money that can only be used for abortions in the United States, to be divided up among the abortion providers and the insurers.
How big is the pot of money? The current population of the United States is 313 million, and about 50 million people are not covered by health insurance, leaving 263 million current enrollees. If 80% of these enrollees have QHPs with abortion insurance under Obamacare, monthly premiums would be $210.4 million. Fair insurance for this number of enrollees is only $0.26 per month, well below the $1 minimum. Premiums of $210.4 million per month add up to $2.52 billion per year, far more than the projected costs of $660 million (1.32 million projected abortions at $500 each). This leaves a pot of $1.86 billion in excess of costs. When these funds are made available, the price of abortions will tend to rise.
How much will the price of abortions rise? It will depend on the bargaining power of insurance companies vis-a-vis abortion providers. With an increase in abortions to 1.32 million that I predicted in an earlier post, the average price of an abortion could rise from $500 to as high as $1,900, i.e. $2.52 billion divided by 1.32 million abortions. This would be the case if the abortion providers had all of the bargaining power. Conversely, if insurers had all of the bargaining power, then they could keep the cost of abortions at $500 and reap profits of $1.86 billion. The truth is somewhere in the middle, though I hazard a guess that the abortion industry is more concentrated and in a better bargaining position, e.g. Planned Parenthood.
In light of this, my earlier assumption that 80% of QHPs would offer abortion insurance is likely a conservative estimate. Abortions and abortion insurance will become extremely profitable under this plan, and it may be very difficult to find a QHP that is not bundled with abortion insurance.