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(Not sure if this is the right Stack Exchange site. I'm asking it here because the event in question, as well as the repercussions, are political in nature.)

Wikipedia's article on Sandra Fluke includes a section about her testifying before Congress on whether "religiously affiliated institutions such as universities and hospitals should provide insurance plans that cover all costs for medicinal contraceptives."

I don't understand how insurance works with birth control. My picture of how insurance works is, I pay the insurance provider a certain amount of money. In return, the insurance provider promises that if something untoward happens to me (e.g. I'm knocked down by a car), they'll pay for my treatment. The cost of the insurance depends on what I want coverage for (e.g. do I want coverage for developing skin cancer?) and any associated risk factors (e.g. do I have any family history of skin cancer?).

How does this model work for birth control? Birth control works best if taken before the event, not after. It doesn't sound like something insurance works for because there's nothing to cover. Instead of paying the insurance company to cover all costs for contraceptives, I should logically simply buy the contraceptives from a pharmacist.

Edit: to clarify the question. The way I understand how insurance works is, in the event of _____, the insurance company pays me for ____. Fill in the blanks. For example, in the event my house burns down, the insurance company pays me to repair it. In the event I am knocked down by a car, the insurance company pays for my medical procedures.

In this case, we have "in the event of ____, the insurance company pays me for birth control". I don't see anything logical that can go into the first blank space. The only scenario I can see in which this would work would be, in the event I conceive, the insurance company pays me to terminate the pregnancy. However, this doesn't seem like what Sandra Fluke was talking about.

  • Comments deleted. Comments should be used to provide constructive criticism or other meta-information to the question. They should not be used to discuss the subject matter of the question. For more information on what comments should and should not be used for, please check the help article about the commenting privilege. – Philipp Mar 7 at 12:30
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    The sentence you are looking for is “in the event of a pharmacy bill for a drug to treat or prevent certain conditions from arising, the insurance company pays the pharmacy bill” – jmoreno Mar 7 at 12:48
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    I don't see how this is a question about politics. It's not about policy, about the mechanics of government or anything like that. – David Richerby Mar 7 at 16:40
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    @divibisan The question asks nothing about whether the government should mandate anything. The fact that health insurance covering birth control is a hot-button issue is irrelevant: the question isn't about that. It's just asking how the concept of insurance is compatible with birth control. – David Richerby Mar 7 at 17:30
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    @divibisan But, as I said, it has nothing to do with mandating anything. Not whether, not why, or anything else. I don't actually think it's borderline at all -- it seems quite plainly off-topic, to me. – David Richerby Mar 7 at 18:02
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It seems like the core of your question comes down to a misunderstanding about how health insurance works in the US. I'm going to make the assumption that you come from a country where basic medical care is covered by the government and insurance is used primarily as backup for extra costs incurred beyond that.

In the US, on the other hand, private insurance (for those who have it) is at the center of all health care. The expectation is that every healthcare expense (except for those that are excluded by the insurance companies) is run through insurance: from routine doctors visits, to prescription drugs, to ER visits or surgery. When you go to a pharmacy to buy contraceptives, the pharmacy bills the insurance company and charges you the specified copay (if applicable), just like with any other drug.

Therefore, you shouldn't be thinking of US health insurance as being similar to car insurance but as being similar to a privately run version of the NHS.

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    Yes. You can replace birth control in the question with any other drug that a person would be taking on a long-term basis, for instance blood pressure medicine. It's just that there isn't a large, organized political pressure group that opposes treating high blood pressure :-( – jamesqf Mar 6 at 18:52
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    No, the OP understands how insurance works. It's just that medical "insurance" no longer operates as insurance, due to government requirements about covering routine care. – jpmc26 Mar 6 at 20:24
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    I'd argue it's wrong to call it insurance at all. – jpmc26 Mar 6 at 20:48
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    @jpmc26 You can add that to the list of things with names that don't properly describe them. I think you're going too far with that statement: as this answer points out, they do provide health insurance in the normal way that insurance works, it just comes bundled with a bunch of other health related benefits and services. – divibisan Mar 6 at 22:01
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    @PyRulez And, indeed, the ACA only requires that insurers cover contraceptives without out of pocket costs if they are prescribed them by a doctor: webmd.com/health-insurance/aca-birth-control-coverage-faq#1 – divibisan Mar 7 at 3:03
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TL;DR The customer pays the insurance provider money. Then the insurance provider allows the customer to spend this money on birth control, be it pills or more invasive medical procedures.

Health insurance benefits

My picture of how insurance works is, I pay the insurance provider a certain amount of money. In return, the insurance provider promises that if something untoward happens to me (e.g. I'm knocked down by a car), they'll pay for my treatment.

That's one possible way for insurance to work. Typically, when it comes to health insurance customers expect it to cover other types of medical expenditures: screening, counseling, vaccination, pregnancy and newborn care, etc. Emergency coverage is only a part of the insurance policy.

Insurance providers usually follow the market and provide a wide array of health care benefits. Some plans might cover massage therapy, gym membership, and nutrition counseling.

Essential health benefits

HealthCare.gov has a page on essential health benefits that must be provided under ACA (What Marketplace health insurance plans cover):

Every health plan must cover the following services:

  • Ambulatory patient services (outpatient care you get without being admitted to a hospital)
  • Emergency services
  • Hospitalization (like surgery and overnight stays)
  • Pregnancy, maternity, and newborn care (both before and after birth)
  • Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
  • Prescription drugs
  • Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits)

As you can see, most of the mandated coverage is not directly related to emergency services. Preventive care alone includes an extensive set of procedures

Birth control mandate

Birth control is listed under "Additional benefits":

Additional benefits
Plans must also include the following benefits:

  • Birth control coverage
  • Breastfeeding coverage

Under the ACA, at least one form of 18 FDA-approved methods of birth control for women must be covered. Contraceptive methods include birth control pills, preventive barriers, emergency contraception, and sterilization procedures.

Sandra Fluke 2012 testimony

In her testimony, Sandra Fluke raised multiple arguments in favor of forcing insurance providers (in particular religious institutions) to cover the cost of medicinal contraceptives for women. Here're some of them:

  • Without insurance, women with low income can't afford the cost of contraception.

Without insurance coverage, contraception can cost a woman over $3,000 during law school. For a lot of students who, like me, are on public interest scholarships, that’s practically an entire summer’s salary. ... Women ... have no choice but to go without contraception.

  • Women need contraceptive medication for other medical purposes and the blanket refusal to cover contraceptives is dangerous.

A friend of mine, for example, has polycystic ovarian syndrome and has to take prescription birth control to stop cysts from growing on her ovaries. Her prescription is technically covered by Georgetown insurance because it’s not intended to prevent pregnancy. Under many religious institutions’ insurance plans, it wouldn’t be, ...
In sixty-five percent of cases, our female students were interrogated by insurance representatives and university medical staff about why they needed these prescriptions and whether they were lying about their symptoms. For my friend, and 20% of women in her situation, she never got the insurance company to cover her prescription, despite verification of her illness from her doctor. Her claim was denied repeatedly on the assumption that she really wanted the birth control to prevent pregnancy. ...
... Now, in addition to potentially facing the health complications that come with having menopause at an early age-- increased risk of cancer, heart disease, and osteoporosis, she may never be able to conceive a child.

  • Allowing insurance providers not to cover contraception sends a wrong message about the importance of female health.

This is the message that not requiring coverage of contraception sends. A woman’s reproductive healthcare isn’t a necessity, isn’t a priority. One student told us that she knew birth control wasn’t covered, and she assumed that’s how Georgetown’s insurance handled all of women’s sexual healthcare, so when she was raped, she didn’t go to the doctor even to be examined or tested for sexually transmitted infections because she thought insurance wasn’t going to cover something like that, something that was related to a woman’s reproductive health.

Her full statement is published on ABC news website.

Answers to specific questions

So, to answer your questions about birth control.

Birth control works best if taken before the event, not after.

In ACA's case, birth control is a set of medical services that includes emergency contraception.

It doesn't sound like something insurance works for because there's nothing to cover.

Health insurance usually includes preventive measures.

Instead of paying the insurance company to cover all costs for contraceptives, I should logically simply buy the contraceptives from a pharmacist.

In many cases, people are already paying for insurance anyway. The choice is then between spending additional money on the contraceptives and using insurance coverage. Some people won't be able to afford contraceptives. Some other people will choose to save money on them. Both cases will lead to an increased number of unwanted pregnancies with all the attendant consequences.

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    The customer pays the insurance provider money. Then the insurance provider allows the customer to spend this money on birth control, be it pills or more invasive medical procedures. I don't understand - why should the customer pay the insurance provider money at all then? Why can't they just directly spend the money on birth control? What does the insurance provider actually do? – Allure Mar 6 at 6:58
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    I don't understand. If your employer pays the insurance some amount of money, you can't use the money anymore because it now belongs to the insurance provider? Or do you mean, effectively, a component of your salary can only be spent on these medical issues, and the insurance provider is the person that makes sure you spend the money on medical issues? – Allure Mar 6 at 7:36
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    That's why it sounds like my idea of how insurance works differs from what you're thinking of. I pay the insurance provider money, and in the event something happens, they cover my costs. But in what you're describing, even though nothing has happened, they're paying me something. How is that possible? What kind of business model does the insurance provider work with? – Allure Mar 6 at 7:54
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    @Allure They're still paying you less than you paid them (at least that's true for an average customer). That's how insurers make a profit. The economic model of health insurance is a much broader topic with many moving parts. – default locale Mar 6 at 9:05
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    @Allure Again, they won't pay you more than you paid them, so you won't be able to buy "all the pills in the world". Usually, plans put a spending cap on the total spending or on spending for particular services. Also, you still need a prescription for birth control pills. I guess, there's nothing to stop you from selling your pills on a black market, but this applies to other kinds of prescription drugs as well. – default locale Mar 6 at 9:48
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You can think of the health insurance product as two pieces that are purchased together. One is coverage for health risks, that is illnesses. This is what you're thinking of as "insurance". The second part is that you're purchasing a bundle of preventative care, like annual checkups, vaccinations and birth control.

Preventative care reduces the cost of illness, therefore the insurance company, and the law, reasonably requires that you buy both together. In the specific example, birth control is cheaper than an abortion.

It is not uncommon for insurance products to bundle a risk and a non-risk component together. One example is whole-life insurance. You get paid either if you die, or you don't die before the policy's maturity date. Logically, you will always get paid. You can see the policy as a combination of an investment, which pays at the maturity date, and a risk portion, which pays extra if you die before maturity.

Other examples of bundled preventative services occur in commercial insurance. For example, factory insurance often includes on-site audits and safety support by the insurer. Auto insurance companies will also sponsor safe driving classes for their policyholders.

  • "Whole Life Assurance" has no maturity date - as the name suggests, it only ends when you die. Standard "Life Assurance" will pay the higher of a Guaranteed Minimum, or the Investment portion. If you survive to the maturity date, you also get an additional "Termination Bonus". "Life Insurance" does not pay out unless you die during the cover period. "Whole-Life Insurance" does not exist, since everyone will die eventually - it is assured. – Chronocidal Mar 6 at 21:03
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    That said, the "two pieces purchased together" point is excellent. You are buying Genuine Health Insurance, and a Healthcare Subscription Package, which have been bundled into one unit. Expected, optional or non-emergency items (such as birth control, checkups or gym membership) are part of the "Healthcare Subscription" part, not the "Insurance" part – Chronocidal Mar 6 at 21:14
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    "birth control is cheaper than an abortion" should say "contraception is cheaper than an abortion". Contraception and abortion are forms of birth control. – Monty Harder Mar 7 at 18:40
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It's in the insurance company's best interest to encourage any behavior which reduces further payouts. That's why they cover preventative measures, like screenings, wellness visits, etc. Birth control may cost the insurance company some money, but consider all the costs if birth control is not used and the person covered becomes pregnant - potentially all the costs of pregnancy, all the costs of birth, and then all the costs of the child growing up (who is family, and would be covered by that insurance) and kids are very expensive, medically. At best the insurance company could hope they'd only have to pay for an abortion, which is still expensive. In a way, you can consider covering birth control to be insurance for the insurance company (as well as for the person covered, who would also see significant cost increases with a pregnancy).

  • This is a big part of what the OP is missing. Most insurance companies are happy to pay for birth control for both men and women as it lowers future payouts. – JimmyJames Mar 6 at 19:12
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    This is often wrong for preventative care. Preventative care can easily cost much more than treating the illnesses in aggregate. It's actually due to regulatory requirements that they must cover routine preventative care. – jpmc26 Mar 6 at 20:22
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Health insurance, like any other insurance, is about pooling groups together to spread out the risk of a catastrophic event. Why wouldn't someone just pay directly for something, and why does insurance cover it? Because what is being covered is the entire spectrum of services and protection against something significant. It's that protection that is key to insurance.

Why do you pay premiums for homeowners insurance? My house will probably never burn down. It will probably never be hit by a tornado. And yet, people like me pay hundreds or thousands of dollars to an insurance company for something I will probably never need in my lifetime. However, if I do need it, I can't afford to pay it out of pocket. So, insurance bands together groups of people, all willing to pool their money and their collective risk, so they are protected IF an event happens where they need that protection.

With health insurance, it's the same thing, except it's not just catastrophic events that are covered. As a company that has to deal with financial arrangements with healthcare providers, it's more convenient and efficient to pay for the service of having the whole spectrum of health care needs covered.

One year, I might just come in for my annual physical and associated blood labs. My premiums that I pay cover way more than that. Another year, I might fall on the ice, and when I heal, accidentally have a piano dropped on me.

While I can afford to pay regular monthly premiums that add up to much more than I'd need in a non-eventful year, I could not afford the financial hit that one or more major events would cost for me, out of pocket. So, like with homeowners insurance, I'm part of a group paying in more than I would typically use, for most of my lifetime, for the security and protection of having that pool of resources available for me should something bad happen or I incur larger expenses during other parts of my life. Health insurance covers preventative physicals and screenings. Why? Why don't they just pay when bad things happen? Because if they pay for a dozens of $300 screenings and are able to catch and prevent a $20,000 event from happening later, when it is more serious and expensive to treat, then they have just saved money.

Drugs are part of treatment. I may have blood clots and need prescription blood thinners. This would be, clearly, part of "something happened to me, and I need treatment." But drug coverage can also be for that preventative aspect. Doctor says "take a half-aspirin a day" - now, that's something easily available over the counter, but perhaps, to encourage me to take the preventative drugs, they state they will cover the cost if the doctor has it dispensed from a pharmacy. That's a more expensive way to do it, overall, vs just buying aspirin from the grocery store, but by making it "free," there's a higher likelihood that I will do it, I will take it, and then I won't have to take the much more expensive treatment drugs later on, for chunky blood.

By the same token, if someone does not necessarily want to have a child, but will go ahead and carry it to term and raise that child, then you are looking at $100 a month for contraception versus $15K to $20K for actual childbirth, with additional pre-natal costs and screenings, and then a lifetime of healthcare expenses for a whole other human being. By avoiding that unwanted pregnancy the system is saving hundreds of thousands of dollars of medical expenses that the shared pool would have to pay for. Volunteering to cover the cost of the preventative treatment (contraception) makes fiscal sense.

  • "it's more convenient and efficient to pay for the service of having the whole spectrum of health care needs covered...My premiums that I pay cover way more than that." There's a lot of hand-waving here. What isn't clear to the OP is why it's more "efficient" to pay an insurance company to pay your health care provider instead of cutting out the middleman (the insurance company, which needs to make a profit) and paying the health care provider yourself for predictable (and relatively inexpensive) costs like contraception. – Null Mar 6 at 21:37
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    "lifetime of healthcare expenses for a whole other human being". While that "whole other human being" will incur significant health care expenses early in life, the insurance company will also be able to charge higher premiums to insure that person in addition to the parent(s). It's not like the insurance company is going to be paying the health care expenses without getting anything at all for the entire lifetime of that person. – Null Mar 6 at 21:41
  • @Null - Yeah. Which is why I wrote "that the shared pool will have to pay for." Not sure if you missed that or chose to ignore it. Just because rates can be raised doesn't mean it's not prudent to avoid more expenses when possible. You know the whole "sustainable vs unsustainable" cost increase topic. – PoloHoleSet Mar 7 at 0:05
  • @Null - Well, I can probably craft an entire answer explaining the efficiencies. There's a reason why someone paying out of pocket pays many times more than negotiated insurance reimbursement rates. Insurance companies have entire IT systems built to coordinate coverage, when they can be done, what else has to be done before a particular service should be offered.... to coordinate the very complicated and intricate spectrum of health care. And, no, insurance companies don't have to make a profit - single payer and non-profit insurers follow similar practices. – PoloHoleSet Mar 7 at 0:09
  • An answer to this question should explain any efficiencies since the question is asking why it makes sense to have an insurance middleman. Simply declaring that there are efficiencies doesn't really explain why insurance makes sense here. Furthermore, an answer should make a case that cost savings of those efficiencies are more than enough to pay for the costs of the insurance middleman (even if the insuring organization is non-profit it has to pay the salaries and benefits of its employees, capital costs for things like its IT systems, supply and maintenance costs for its offices, etc.). – Null Mar 7 at 2:18
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While in school, I studied a little bit of actuarial science. This answer is based entirely on my exposure there.

Insurance is based on the idea of an insurable event. In many cases this is intuitive - your home owner's insurance covers things like a tornado. In the case of a pharmacy benefit, the insurable event is the prescription claim. The insurance company has a statistical model which predicts what the total pharmacy claims for a group of insured people are likely to be.

It doesn't really matter that birth control is taken to deter pregnancy. You aren't being insured against pregnancy, you are being insured against the loss of paying a pharmacy bill.

For more information on the basic mathematics behind insurance, check out the Society of Actuaries document 'Risk and Insurance'. It's the basis behind their introductory exam.

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    About being insured against "the loss of paying a pharmacy bill", assuming one is fertile + going to have sex anyway, then wouldn't this loss be 100% guaranteed? For the insurance company, it'd be like insuring someone against having to eat - sounds kind of silly, just let the person buy food himself/herself and skip the insurance part. – Allure Mar 6 at 20:19
  • @Allure Nearly everyone has pharmacy bills. It's just a question of how much. Birth control is only one portion of all of the things this insurance covers. The amount that you are going to pay is a random number which the insurance company has statistically modeled. They just have to be sure they are charging more than they are likely to pay out. – indigochild Mar 6 at 21:53
  • That's not entirely true. The cost/benefit of offering to cover the entire "nut" of contraception, for example, is from the preventative model where you look at potential costs being avoided, as well. – PoloHoleSet Mar 7 at 0:12
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There's different models in the US but much of this still applies (it does in every other industrialized country):

Vision insurance covers you for eye exams. Not just after your friend throws a dart into your eyeball but every year.

Dental insurance covers routine preventive exams. Not just after your friend punches out one of your teeth (you should consider getting better friends, there seems to be a pattern evolving).

Health insurance should cover things like birth control and other preventive care. They should cover exams to see if children develop as expected. They should cover vaccines. All of this is in their best interest.

Should my homeowner's insurance cover preventive treatment for termites ? Yes. It's in their best interest. Should your car insurance pay for you getting a safer car ? Yes. (and they do by giving you a lower rate).

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What is called health insurance in the U.S. is actually two products: actual insurance and a payment plan for medical services.

By packaging the two, it is harder for customers to differentiate the portion of premiums going toward risk management and that going toward expected costs such as birth control and preventative checkups. Plans that include such services will necessarily have much higher premiums to account for the increased usage of the plan for expected costs.

Because of the higher premiums, it is in the interest of the customer to use it for more expected or preventative services more in order to benefit from the plan. However, as all customers do this, it increases the portion of the premium that funds the payment plan.

By creating a pool for sharing expected costs, this actually introduces a "tragedy of the commons" problem as the expected benefit of one additional preventative visit is greater than the increase in the premium because the cost of your visit is spread amongst all members of the pool.

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My picture of how insurance works is, I pay the insurance provider a certain amount of money. In return, the insurance provider promises that if something untoward happens to me (e.g. I'm knocked down by a car), they'll pay for my treatment

And that's where your problems come from. While that might be the initially correct way of handling insurance, all insurance providers have figured out that if you extend your services from "just dealing with the aftermath" to "also covering provision/preemtive treatment" saves a ton of money overall.

Thats why they give out contraceptives: because it's far cheaper to give everyone (who wants it) contraceptives than to deal with the pregnancies that would be the alternative.

TL:DR: Handing out contraceptives is saving them money in the long run.

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    Gotcha, so all insurers already do this based on their own self interest and there is no reason to regulate that insurance must cover contraceptives? – lazarusL Mar 7 at 15:41
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    The assumption that all parties will act in what rational people would think is their own self-interest is, unfortunately, not always valid. After all, if the customers are also rational, they'll pay for their own contraceptives rather than having unwanted pregnancies. – David Schwartz Mar 7 at 17:59
  • @lazarusL that is not really what I meant. I come from Germany, where, since everyone is always insured (and denying care is not a viable option as opposed to the US), it does make sense for the insurance companies to cover ANY preventative measures. I'm sorry for your 3rd world country where stuff like that has to actively be regulated, I forgot that was an issue – Hobbamok Mar 8 at 8:57
  • @DavidSchwartz thats why I only assumed the rationality of the big players, since they have departments of people doing nothing but shuffle numbers, leading to (more or less) rationale. I know that there's a ton of really stupid individuals out there – Hobbamok Mar 8 at 8:58
  • @Hobbamok Even big players can have interests other than the financial success of their ventures. For example, a manager who has to meet a particular revenue target for one quarter may be perfectly happy to save money on contraceptives even if it means higher expenses two or three quarters later. – David Schwartz Mar 8 at 17:15

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