I'm a little bit confused. Kathleen Sebelius says free contraceptives is a cost-reducer.

[MH1]

88. Short term vs. long term costs

The short term costs would be higher, and that's all the insurance companies care about.

Pro birth control politicians are speaking, accurately, of overall, long-term costs vs. benefits. Long term cost vs benefit to the PATIENT is not at all of interest to insurance company actuaries, and probably not very relevant to them, considering that businesses are managed on short-term profit measures.

As pointed out above, over time the insurance company can adjust their prices to maintain their profits, even if their overall costs are higher. So the relation of cost to bottom line is not as direct as you suggest.

The other factor is that "markets" (and their players) aren't as smart as you and certain right-wing snake oil salesman seem to think. Politics and ideology may also play a factor. Although overall it is less than the role of ignorance and inertia - why did it take so long for corporations to (mostly) eliminate (ok, significantly reduce) racial bias in hiring - and then only with a federal mandate to do so? It only makes sense to hire the person who can do the best job. But for a long time, skin color and gender were enough for companies to eliminate highly qualified candidates. That hurt the bottom line but they did it anyway. A similar blindness could be in play here, on top of the short-term focus of any profit-oriented company.