California is one of two states with an infertility insurance law that mandates insurers to offer coverage. This type of mandate is distinctly different from state mandates that require employers to provide coverage. The distinction seems minor at first glance. California couples dealing with infertility should understand the unintended consequences of this language, and weigh their options carefully.
Having an infertility insurance mandate should help lower costs for couples considering infertility treatments - right? Unfortunately this is not always the case. To understand why, you have to follow the money.
Insurance companies compete to offer group health insurance plans based upon several factors including: quality of service, network of doctors and hospitals, and price. The first two factors, while important are often very hard to quantify. On the other hand, price is extremely easy to quantify.
Employers are forever looking for ways to cut costs. Group health insurance costs have been skyrocketing over time. Employers attempt to control these costs in one of two ways:
Employers have been migrating towards Consumer Directed Health Plans in an attempt to better control costs. These plans cover less, and therefore cost less.
Employers pit one insurer against the next on similar plan designs in order to wring the greatest level of cost savings. The insurer with the lowest cost structure often wins.
California Health Insurance plans that offer infertility coverage will cost more than plans that do not. In a given year, only a very small percentage of employees will have a need for infertility insurance coverage. Therefore, most employers looking to cut costs will opt to offer plans without the infertility option.
An Upward Cost Spiral
So which employers will offer infertility coverage? Probably only a handful of uniquely positioned employers will make this choice. Employers with an employee demographic profile heavily weighted with married people age thirty to forty may consider offering the option. And many employers may offer two or more plan designs: one with, and one or more without infertility insurance coverage.
And which employees will elect the more expensive option? Only those considering infertility treatments will opt in. The remainder will opt for the less expensive option that does not include coverage they will never use.
So what does this all boil down to? Infertility insurance may become unaffordable, even for those likely to use the coverage. Insurance plans offering infertility treatment coverage will see a very high level of adverse selection. That means virtually every person in the plan is expecting to use the benefit. Insurers typically are held to a loss ratio of around 80%. This means that infertile couples in aggregate may expect to receive $.80 back on every $1.00 of premium paid for these plans. Where there is little risk sharing, costs for those likely to use the benefit will be very high.
What are the Options?
Your employer may not offer infertility coverage, or if they do you may find that the incremental cost of coverage outweighs your likely benefit. Consider using your flexible spending account to use pre-tax dollars to pay for your treatments. Supplemental insurance can be offered by your employer in a way that keeps the overall cost of health insurance low for all employees. Supplemental insurance can help you recoup you're out of pocket costs when you deliver your baby.