The Pre-Pregnancy Insurance GuideInsurance is certainly a hot topic these days and is something that needs to be considered during the pre-pregnancy planning period. Let’s look at an example to understand what you may have to pay out of pocket. We’ll assume your plan covers 80% after the deductible and you have a $1,000 deductible per person. (I’m assuming you haven’t paid anything else against it for that year.) Remember from the budget plan that you will have to pay bills for both the mother and the baby. Since the costs can range from $5,000 to $10,000 we’ll take a middle of the road and say the bills total $7,000. We’ll split that between the mother and child with $4,000 for the mother and $3,000 for the child. Since you have to pay the deductible first you’ll owe $1,000 for the mother and $1,000 for the child for a total of $2,000. Now the insurance kicks in. They will pay 80% of the remaining balance - $3,000 for the mother and $2,000 for the baby for a total of $5,000 x .8 = $4,000. You will be left with having to pay the remainder of $1,000. Still with me? The total out of pocket expense you would pay is $3,000 which is just under 43% of the total cost. Of course this is assuming that you have a normal pregnancy with no complications. If there were complications the costs can quickly rise. As a quick example, if your wife needed a cesarean section her costs might be closer to $10,000. Using the same coverage as before you would owe $2,000 for the deductibles plus $2,200 for your part of the rest ($11,000 x .8 = $8,800 leaving you with $2,200) for a total of $4,200 or about 32% of the total cost. Now it isn’t always this simple as health insurance tends to make things more complicated than they need to be, but you get the general idea. So now that it looks like you’re going to have to pony up several thousand dollars to cover this you’d probably like some ideas on how to make it cheaper. Well you’re in luck, you have some options. One of the best ways to save money on health care expenses is to put money into a flexible spending account or health savings account (up to $5,000) if offered by your employer. This is money that you don’t pay taxes on. The savings here depends on your tax bracket, but also includes the Social Security and Medicare taxes - a savings of 7.65%. On $3,000 you saved almost $230 just in Social Security and Medicare. There are however certain risks associated with this. With the flexible spending account if you don’t use the money you lose it. You also have to make these elections during your annual enrollment period. So now you’re asking “How do I know how much to put in?” and “What if my wife is not pregnant during that time?” Great questions! If your wife is pregnant during your enrollment period put a smaller amount aside like $1,000. Once the baby is born you should be able to make changes to your coverage plan since you have what is called a “life event” with the addition of your new dependent. You typically have 30 days after the birth to make changes. In that time you will start to get bills and will have a better sense of what you owe. At this time call and have any additional funds added. One item to note is that even if your wife has a separate insurance plan you can use flexible spending dollars to pay for her bills. While health care insurance is the coverage that will help pay for the pregnancy and delivery, life insurance is also something that you should consider. At this point you may or may not have life insurance. Chances are your employer provides a small amount (1 or 2 times your annual compensation) and may offer you the opportunity to purchase more. If so I strongly recommend purchasing as much as they offer. “Why on earth would I need to buy so much life insurance? That means I’m worth more dead than alive – sounds like motive!” Yes – that is true and hopefully you trust that your wife doesn’t want to off you just to collect a big pay day. Most of the time employer offered insurance is very inexpensive so you won’t miss it and the incremental cost from one level to another is negligible. So why so much? The fact of the matter is that now you are responsible for another life for the next 18, 20, 30 years. Remember how expensive those things are? If something were to happen to you the last thing you want your family to have to worry about is money. You want enough insurance to pay off all debts (including a mortgage), to set up funds for college, and to cover the loss of your income. The cheapest way to do this is through an employer sponsored plan. If your employer does not offer life insurance or does not offer enough then check out some other companies (start with the ones who provide your auto and home owner's coverage) and see what they offer. My only advice here is Term Life for a variety of reasons, but if you want to better understand it click here. Wow! That was a lot of information. Good for you for reading through it all. I know it is confusing and can cause your brain to start smoking, but it is very important to understand how all of this works. I promise you that it will get easier, and you will be glad that you thought about it now – before the pregnancy! |
