The Impact of the Affordable Care Act on Out-of-Pocket Costs and Use of Prescription Contraceptives

The Affordable Care Act (ACA) mandated that preventive services, including FDA-approved prescription contraceptives, be covered by private health insurance plans with no consumer cost-sharing starting August 2012. A decrease in out-of-pocket (OOP) price of a medical service would be expected to increase utilization of that service, but the actual impact of the ACA mandate on OOP costs and use of prescription contraceptives has not yet been studied.

Using an administrative claims dataset from a large national insurer, I estimate individual OOP costs and utilization of eight types of prescription contraceptive methods for 790,895 women between the ages of 13 and 45 who were enrolled in private health insurance for any period of time between January 2008 and June 2013. I find evidence that OOP costs of contraceptive have decreased sharply since the implementation of the ACA mandate in August 2012. Median costs for most methods dropped to zero between August 2012 and June 2013, and mean costs decreased 30-80% during this same period.

Using a difference-in-difference regression analysis, I estimate the price responsiveness of consumers to these price changes using the change in mean OOP price immediately pre- and post-mandate, with the change in mean OOP price calculated at the employer level. I perform this analysis for the two most commonly used methods of prescription contraceptives, the oral contraceptive pill and the intrauterine device (IUD). For both contraceptive methods, I find a statistically significant relationship between the drop in OOP price and the probability that a woman will use that method following the mandate. In other words, women working for firms in which the OOP price dropped by larger amounts post-mandate demonstrated increased use of both the pill and the IUD, compared with women in firms where the change in mean OOP price was smaller or zero. Back-of-the-envelope estimates suggest relatively inelastic demand for both the pill (arc elasticity ranging from  -0.04 to -0.12) and the IUD (-0.03 to -0.09).

Overall, my results suggest that the ACA mandate has produced large drops in OOP expenditures on prescription contraceptives, but inelastic demand among consumers has limited the impact of these price changes on overall utilitization of prescription contraceptives among privately insured women in the U.S.