Considerations to Make when Selecting a Health Plan After Childbirth

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The cost of family health insurance coverage varies so widely depending on the state in which you live, whether or not you or your spouse (or both) have employer-sponsored coverage, how many people you have in your family and which plan you choose, it’s difficult to give an accurate average for all families.

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New parents face a number of financial burdens, some of which can be completely unexpected. Prenatal care alone can cost a few thousand dollars over nine months, while the average cost of childbirth can exceed $30,000 in some states, even with an uncomplicated birth.

Prior to giving birth, all health-related childcare costs are covered by the parents’ insurance or paid for out-of-pocket (or both). However, once a child is born, parents need to add the child separately to a health plan to avoid incurring a large number of out-of-pocket expenses. There are several different options new parents should consider before selecting a health plan for a newborn child.

Legal protections for new parents

The Newborns’ and Mothers’ Health Protection Act requires health insurance providers to cover the costs of a post-birth hospital stay for at least 48 hours, or 96 hours for mothers who birthed using a cesarean section. This gives new mothers time to recover while receiving additional postpartum care.

Additionally, the Health Insurance Portability and Accountability Act requires insurance providers to allow a special enrollment period for newborns, even if the birth does not occur during a regular enrollment period. Private or employer-provided insurance providers offer a 30-day window to add a new child to the insurance.

Enrollments during that time cannot be treated as delinquent enrollments, and newborns added to an insurance policy during this time must receive retroactive coverage to the day of birth.

Some insurance providers will reach out to new parents after childbirth to offer insurance options. However, this may not always be the case, so new parents should be proactive and contact their insurance providers soon after childbirth to ensure there’s ample time to choose the right healthcare plan.

Health insurance considerations for newborns

During the legally-required special enrollment period, new parents may want to consider one of several insurance options. Depending on their employment status, income level, and new child’s health concerns, preferred health plan options may vary.

A.   Low deductible plans

New parents struggling with newborn health issues should strongly consider a low deductible health plan. These plans have higher premiums but provide more coverage and reduce out-of-pocket expenses. The Patient Protection and Affordable Care Act also prevents health insurance providers from excluding newborns with pre-existing conditions.

Low deductible plans can also benefit new parents who have multiples, such as twins or triplets, who expect to accrue higher healthcare costs. It may also be a good option for new parents who expect to have another child within the next few years, as the usage of the insurance will increase to cover new prenatal costs.

B.   High-deductible plans

High-deductible plans offer lower premiums but higher out-of-pocket expenses, whether for pediatrician visits or major health concerns. For low-income parents with a healthy newborn, high-deductible plans can help provide more affordable premium options.  High earners who can absorb unexpected medical costs may also come out ahead with a high-deductible plan.

C.  Health Savings Plans (HSAs)

A Health Savings Account is a tax-favored account that new parents, their employers, or family and friends can invest in. The HSA account holder can withdraw from the account at any time for health-related expenses.

This may be a good option for expectant parents since anyone can contribute to an HSA account. New parents who have financial support from family or friends may be able to set up an HSA and use the funds for a newborn’s healthcare costs without having to go through an insurance provider.

Other types of health spending accounts exist as well, including Flexible Spending Accounts. Employer-sponsored healthcare plans may offer a few additional spending account options for new parents.

What to do before selecting a newborn health plan

Before you select a health care plan for your child, make sure you’ve explored and compared the potential costs as well as the potential risks associated with each option. You will also want to ensure you have all of your child’s necessary legal documents in order– such as their Social Security Number and birth certificate — before enrolling in a health plan. With research, you may find that you have better options than your current healthcare plan.

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Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.