# Wait a sec... Doesn't birth control pay for itself? **URL:** \ **Category:** Great Debates\ **Created:** [February 15, 2012, 6:50am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909 "2012-02-15T06:50:04Z")\ **Posts on this page:** 20\ **Page:** 8
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 19, 2012, 7:12pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/141 "2012-02-19T19:12:37Z")
> [@Terr](#): > > That doesn’t make any sense. Where do the “investments” come from if they take in less than their expected payout? The time between payment of premiums and payouts. ---
**Author:** ![BigT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigt/32/12044_2.png) [@BigT](https://boards.straightdope.com/u/BigT)\ **Post date:** [February 19, 2012, 11:33pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/142 "2012-02-19T23:33:51Z")
Here’s the thing you’re missing, John. If we don’t give the rich people free birth control, too, then they have less impotence to pay in themselves. If birth control really is the only thing most people use under 30, why would they pay for both insurance and the pill? Why wouldn’t they specifically opt for insurance that does not include the pill, thus shifting the burden of needing the pill to the people who can’t afford it? It’s why social security was not set up to just give money to the people who need it. Even many libertarians don’t have a problem with Social Security because they get most of their money back out. And that’s not even getting into the fact that insurance companies don’t do everything just for monetary reasons, as was just made very clear here recently. Many people apparently have a moral objection to providing birth control, and thus are willing to take the cost. Mandating it via law gets around this problem. Heck, the insurance company can just say they support birth control because they have to, and thus not worry about losing customers over it. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 12:11am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/143 "2012-02-20T00:11:06Z")
> [@TATG](#): > > The time between payment of premiums and payouts. With a million of beneficiaries, that time is effectively zero. Again, it doesn’t make sense to run an insurance company if the money you’re earning is from investments only and the “insurance” part of it you’re running at a loss. Remove the “insurance” part and run an investment company - you will make more money. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [February 20, 2012, 3:20am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/144 "2012-02-20T03:20:25Z")
> [@Terr](#): > > With a million of beneficiaries, that time is effectively zero. Again, it doesn’t make sense to run an insurance company if the money you’re earning is from investments only and the “insurance” part of it you’re running at a loss. Remove the “insurance” part and run an investment company - you will make more money. You may say that “it doesn’t make sense”, but I prefer to take [Warren Buffet’s word for it.](http://www.npr.org/blogs/money/2010/03/warren_buffett_explains_the_ge.html) > [@](#): > > Insurers receive premiums upfront and pay claims later. … This collect-now, pay-later model leaves us holding large sums — money we call “float” — that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. … > > If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money — and, better yet, get paid for holding it. Alas, the hope of this happy result attracts intense competition, so vigorous in most years as to cause the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. ---
**Author:** ![MichaelEmouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/michaelemouse/32/101_2.png) [@MichaelEmouse](https://boards.straightdope.com/u/MichaelEmouse)\ **Post date:** [February 20, 2012, 3:51am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/145 "2012-02-20T03:51:27Z")
> [@rat\_avatar](#): > > Thank you for clarifying your position. > > Condoms are prescription medication? > > I am still confused why if a prescription medication plan covers an item that accomplishes a particular goal it would also be required to cover non prescription medication solutions. > > If I have elevated lipids should they pay for my running shoes because they would pay for my Statins? No, condoms are not prescription medication. The fact that insurance usually/always pays for Rx and not OTC doesn’t mean that that’s the way it should be or that we should accept that it should when debating the issue of what should be covered. Reread the OP. What is the rationale behind his argument? He says that BC pills pay for themselves, that “Birth control doesn’t cost money, it saves money. If company makes it easier for women to get contraceptives then the result will be lower costs for prenatal and maternity care, if anything resulting in lower costs to employers.” That’s why he wants the law to require insurance companies to cover it. That rationale is equally applicable to condoms. The fact that one is Rx and the other OTC doesn’t affect that rationale. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 5:30am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/146 "2012-02-20T05:30:22Z")
> [@amarone](#): > > You may say that “it doesn’t make sense”, but I prefer to take [Warren Buffet’s word for it.](http://www.npr.org/blogs/money/2010/03/warren_buffett_explains_the_ge.html) No matter who explains it, it makes very little sense. Let’s say I start an insurance company and am such a genius actuary that I manage to set the premiums so exactly that after the initial period I get same money coming in premiums as I pay out in benefits. During that initial period I accumulated a sum of money - what Warren Buffett called “float” in the explanation you cited. Once that sum is accumulated and the premiums/benefits equilibrium is reached, that “float” can only increase by investing it, hopefully wisely, or acquiring new customers. No money from premiums from existing clients is being added to the “float” since the payout eats up all incoming premiums. Thus the insurance company’s profit in this scenario comes only from investing. The “insurance” side of the company is not profitable, and, in fact, is potentially (as Buffett explains as well) detrimental to the company. Do explain, then, why bother with the “insurance” part of it, since it is a huge hassle and doesn’t add anything to the bottom line? Just be an investment house. The only advantage to being an “insurance company” in this case is that the cost of initial capital is low, although I am sure once the customer acquisition costs (advertising, agent fees etc) is figured in, it’s not that low. But long term the cost of initial capital is not that important, if your investments are doing well. ---
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 20, 2012, 5:44am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/147 "2012-02-20T05:44:00Z")
> [@Terr](#): > > Do explain, then, why bother with the “insurance” part of it, since it is a huge hassle and doesn’t add anything to the bottom line? It gives you the money to invest. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 5:50am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/148 "2012-02-20T05:50:43Z")
> [@TATG](#): > > It gives you the money to invest. As I said, yes, it somewhat lowers the cost of initial capital, which in the long run doesn’t add much to the bottom line. And if the enormous amount of advertising and organizational effort it takes to start an insurance company was applied to acquiring capital to run an investment firm, I am sure the results would be just as good if not better. ---
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 20, 2012, 6:12am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/149 "2012-02-20T06:12:00Z")
> [@Terr](#): > > As I said, yes, it somewhat lowers the cost of initial capital, which in the long run doesn’t add much to the bottom line. Not much is more than not anything, which is what you said, and what I was responding to. > [@Terr](#): > > And if the enormous amount of advertising and organizational effort it takes to start an insurance company was applied to acquiring capital to run an investment firm, I am sure the results would be just as good if not better. Both have costs to aquiring money to invest, and both aim to make a return higher than their costs. That makes (economic) sense. If you want to now go on to argue that some ways of aquiring investment capital are less costly than others, and it is obvious that the insurance method cost is too high, I’d say you’d have to run some numbers. I’d also note that this argument seems to be a different one where we started from, where this sort of strategy w.r.t. insurance companies just didn’t make any (econmic) sense at all. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 7:28am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/150 "2012-02-20T07:28:43Z")
> [@TATG](#): > > Not much is more than not anything, which is what you said, and what I was responding to. > Both have costs to aquiring money to invest, and both aim to make a return higher than their costs. That makes (economic) sense. > > If you want to now go on to argue that some ways of aquiring investment capital are less costly than others, and it is obvious that the insurance method cost is too high, I’d say you’d have to run some numbers. I’d also note that this argument seems to be a different one where we started from, where this sort of strategy w.r.t. insurance companies just didn’t make any (econmic) sense at all. One company would concentrate on it investments. The other would have an enormous deadweight of the insurance business hanging on it with all the risks associated with it. It’s pretty clear which makes more sense. ---
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 20, 2012, 7:40am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/151 "2012-02-20T07:40:16Z")
> [@Terr](#): > > One company would concentrate on it investments. The other would have an enormous **deadweight of the insurance business** hanging on it with all the risks associated with it. It’s pretty clear which makes more sense. (Emphasis mine.) It is not deadweight, it is money to invest. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 8:16am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/152 "2012-02-20T08:16:21Z")
> [@TATG](#): > > (Emphasis mine.) It is not deadweight, it is money to invest. The insurance business (if Buffett is to be believed), adding nothing to the bottom line, is definitely deadweight. ---
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 20, 2012, 8:23am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/153 "2012-02-20T08:23:55Z")
> [@Terr](#): > > The insurance business (if Buffett is to be believed), adding nothing to the bottom line, is definitely deadweight. An odd interpretation. If you cut the purported deadweight, you would be left without the money (held from premiums) to invest. That would affect the bottom line. How is this different from saying that a loan is deadweight? ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 9:30am UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/154 "2012-02-20T09:30:14Z")
> [@TATG](#): > > An odd interpretation. If you cut the purported deadweight, you would be left without the money (held from premiums) to invest. That would affect the bottom line. > > How is this different from saying that a loan is deadweight? The premiums give you initial capital. Once the premium/benefit equilibrium is achieved, the insurance side is deadweight, not contributing anything anymore to the capital. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 20, 2012, 1:13pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/155 "2012-02-20T13:13:56Z")
> [@Quartz](#): > > I have an acquaintance who was high up in a major UK insurer. According to what he told me some years ago, neither of these statements is correct, at least for the UK. Apparently, UK insurance companies make their money from the income earned on investing the premiums. They take in less than their expected payout and hope to gain the rest from their investments. That still doesn’t mean insurance doesn’t cost the customer more than the benefits. In the US, the new insurance laws require a payout rate of 80-85%, not without a fair amount of squawking from the industry. While the underwriting business may operate at a net loss (before investment profits) that doesn’t mean the company pays out more than 100% of its premiums in benefits, it just means their total cost (benefits+admin) is more than the premium. Considering how much of their administration is rooted in reducing their payouts, I’m not going to automatically count that as a beneficial aspect of the service. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [February 20, 2012, 3:21pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/156 "2012-02-20T15:21:18Z")
> [@Terr](#): > > The premiums give you initial capital. Once the premium/benefit equilibrium is achieved, the insurance side is deadweight, not contributing anything anymore to the capital. Do you stop paying your premiums, but retain the benefits? Because that’s the only way I can make sense of your post. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 4:51pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/157 "2012-02-20T16:51:18Z")
> [@erislover](#): > > Do you stop paying your premiums, but retain the benefits? Because that’s the only way I can make sense of your post. No. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 5:00pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/158 "2012-02-20T17:00:32Z")
> [@erislover](#): > > Do you stop paying your premiums, but retain the benefits? Because that’s the only way I can make sense of your post. To expand - once the insurance company is past the set up stage, every month X in premiums comes in and Y in benefits+administration is spent out. According to the claims of the UK poster above, X\<=Y. Thus, for the insurance company the ongoing insurance business is either unprofitable or non-profitable - a deadweight on the supposedly profitable investment business. ---
**Author:** ![TATG](https://avatars.discourse-cdn.com/v4/letter/t/50afbb/32.png) [@TATG](https://boards.straightdope.com/u/TATG)\ **Post date:** [February 20, 2012, 5:17pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/159 "2012-02-20T17:17:32Z")
> [@Terr](#): > > To expand - once the insurance company is past the set up stage, every month X in premiums comes in and Y in benefits+administration is spent out. According to the claims of the UK poster above, X\<=Y. Thus, for the insurance company the ongoing insurance business is either unprofitable or non-profitable - a deadweight on the supposedly profitable investment business. The company continues to recieve premiums, and there continues to be a lag between reciept of premiums and payouts, and this maintains the float. Where X\ **Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [February 20, 2012, 5:37pm UTC](https://boards.straightdope.com/t/wait-a-sec-doesnt-birth-control-pay-for-itself/612909/160 "2012-02-20T17:37:43Z") > [@TATG](#): > > The company continues to recieve premiums, and there continues to be a lag between reciept of premiums and payouts, and this maintains the float. Where X\