As my regular readers know, I am well into my second trimester. Being the practical sort, I am more interested in figuring out the cost of delivery and maternity leave than getting together the nursery. My husband can take care of the nursery. He is more creative than me. There is a reason why I always knew I do not want to marry another engineer.
This post is a discussion of how I ended up figuring out the cost of my delivery to fund my flexible spending account and how thankful I am that I have a good health insurance plan.
Using a flexible spending account to reduce delivery cost
This month is open enrollment for health insurance for most companies in the U.S. It is also the nudge I needed to start calculating the amount I want to contribute to my company’s flexible spending account. If you never contributed to a flexible spending account before, pregnancy is a good time to do so. You are contributing pre-tax dollars for your co-pays and other miscellaneous health expenses like contact lens solution. Funding your flexible spending account for pregnancy is a good way to save on the cost of delivery.
For example, your entire maternity hospital stay could end up costing $6,000 in co-pays due to using pre-natal ICU (typical for a PPO where you have to pick up 20% for the cost of delivery). To make the math easier, I usually use a 30% tax savings, which is approximately how much income taxes (federal and state) I pay for living in California. If I have a flexible spending account, I would effectively pay $4,200 for the medical bill (the savings come from not having to pay income taxes for $6,000).
In order to contribute $6,000 into your flexible spending account, your payroll will credit $250 per pay period for 24 pay periods into your account (contributions made with pre-tax dollars are often taken from 24 pay periods instead of 26). However, you will not see a $250 reduction on your take home pay. Your actually reduction on take home pay is approximately $175 because of the tax savings. So this is a good way to stretch the money you pay for health care expenses.
In addition, if you deliver your baby in January, you can ask for reimbursement in January for the full $6,000 amount even before you made all your contributions to your flexible spending account. This is invaluable if you have a hard time saving this kind of money beforehand.
Another little known secret about flexible spending account is that if you decided to quit your job after using up the entire amount (even before you made all your contributions), your company picks up the tab. Using our example above, if you ask for reimbursement in January for $6,000, but you only paid $300 into the account, your flexible spending account have to reimburse you for the entire $6,000. And if you decide not to come back from your maternity leave, well, too bad for the company. Not that you or I will do such a thing.
Consider switching to a HMO before delivery
A lot of people have PPO for the flexibility of seeing doctors outside their network. But the cost of delivery for a PPO can be expensive because of the percentage you have to pay.
When I called the hospital associated with my medical group to get an estimate on the cost of delivery, they were quoting me $20,000 for the mother and $3,000 – $5,000 for the baby for a non-complicated vaginal birth. I didn’t know that you have a separate bill for the baby, but it is for all the testing and care of the newborn during the hospital stay. And here I am thinking nice thoughts about the hospital for giving new mothers these lovely newborn gifts.
But most HMOs cover most of the cost of delivery. Switching to a HMO before a delivery is going to save you the most money. Most pre-natal visits are about $150/visit. If you have to pay 20% of the cost in a PPO, you have to pay $30 each visit. With an average of 15 visits for pre-natal care, you will end up spending a good amount of money. However, it is the hospital cost that is going to hurt your wallet. If you have a non-complicated vaginal birth that cost $25,000, you will have to pay $5000 out of pocket. You can always use a flexible spending account to bring down the cost of delivery, but you only pay between $0 – $300 with a HMO for the delivery. You can always switch to a HMO for the year you are going to have the baby and then switch back to a PPO (if you have the option).
Uninsured delivery or already have a hospital bill?
$23,000 – $25,000 would be the cost of uninsured delivery. If you do not have health insurance, you can read my post on how to get health care if you have no insurance for pre-natal and delivery care. If you already have a hospital bill, be sure to read the section on hospital financial aid.
You can always negotiate a reduction on this medical bill, but that is still more money than the average family has sitting around in a savings account. No wonder one of my cousin complained that the cost of delivery for his daughter almost caused him to file for bankruptcy.
With the gazillion health care plans, the billing department at the hospital cannot tell me what my cost of delivery would be with my HMO. But they did give me the idea of calling my health insurance to ask for the cost of a maternity hospital stay.
So here is a breakdown of my cost for this pregnancy:
Pre-natal office visits: $15 co-pays (approximately 15 visits) = $225
Maternity stay at hospital (non-complicated and complicated): $0
Newborn immunizations and office visits: $15 co-pays (approximately 6 visits to first birthday) = $90.
Total pregnancy cost: $315 with my HMO
You must be thinking, gosh, it’s a luxury to have such a good health insurance. But you know what? I pay through the nose for it. My employer pays $1,100 a month and my premium is $490 a month for me and my husband. So each month, the health insurance company gets $1,600 just to insure two (young) people. My company only has two real options for health insurance and the cheaper health insurance is with a network that I despise.
If you are going to delivery anytime next year, now is a good time to figure out the cost of delivery. After open enrollment ends, it would be impossible for you to switch health insurance or start a flexible spending account (unless you are starting a new job).
Until next time and thanks for stopping by Small Steps to Health.
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{ 2 comments… read them below or add one }
Great tips for how to use a flexible spending account. Don’t forget that in addition to saving federal and state income taxes, you may also be saving FICA taxes as well. This amounts to 7.65% for any individual whose income is less than $106,800. So this pushes your savings up to 38%.
Once your child is born you can make changes (increase) in your annual election. The birth of a child is a qualifying life event. This becomes important if your child has an illness that requires extra medical care.
After delivery mom may return to work and then pay for child care. A dependent care flex spending account in another way to cut those costs by 38%.
@Family – I did not know that the birth of a baby is a qualifying event. That is good to know that I can make adjustments to the flexible spending account after the delivery. I was just concern with turning in the paperwork for adding my baby to my health and dental insurance. Thanks for the advice.