Switching from High Deductible Plan when planning children

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
pghpens
Posts: 118
Joined: Wed Jun 18, 2014 3:08 pm

Switching from High Deductible Plan when planning children

Post by pghpens »

Hello, open enrollment for 2018 health insurance is this week and I have a co-worker who is currently on a high deductible plan of $54 per paycheck with $2700 deductible but is planning on having one child during 2018 and is worried about the costs. He has read that having a child in the hospital can cost upwards of $10,000 and was wondering if he would have to meet his $2700 deductibles to pay that. He was thinking about switching to the PPO plan which is $110 per paycheck but only has a $400 deductible. Anyone with experience having a child that can discuss the costs and the best way to approach insurance?
hobbes
Posts: 41
Joined: Fri Apr 18, 2008 9:19 pm

Re: Switching from High Deductible Plan when planning children

Post by hobbes »

Everyone's situation is different but here is what happened to us. My daughter was (still is) very small and needed to be monitored throughout the pregnancy. She got to spend a week and half in the NICU after she was born. Her bills were near 100k. Everything turned out fine and she is perfectly healthy.

The most important insurance consideration was not the amount of the deductible, but the out of pocket maximum. The standard plan has a much lower out of pocket max than the HDHP. Once we hit the max we were covered.
Afty
Posts: 2390
Joined: Sun Sep 07, 2014 5:31 pm

Re: Switching from High Deductible Plan when planning children

Post by Afty »

The hospital bill when my daughter was born was over $50k for a totally normal birth with no complications. Would definitely recommend switching away from a HDHP if they are planning to have a child next year.
limeyx
Posts: 308
Joined: Wed Sep 07, 2016 5:34 pm

Re: Switching from High Deductible Plan when planning children

Post by limeyx »

Afty wrote: Thu Oct 05, 2017 1:02 am The hospital bill when my daughter was born was over $50k for a totally normal birth with no complications. Would definitely recommend switching away from a HDHP if they are planning to have a child next year.
Yeah, we maxed out the plan this year when our second (and final) was born. Took the $500 deductible and saved a bunch of money doing so
For 2018 will likely dial it down to the $1500 or maybe the high-deductible depending on the prices & details which i dont know yet
stlutz
Posts: 5585
Joined: Fri Jan 02, 2009 12:08 am

Re: Switching from High Deductible Plan when planning children

Post by stlutz »

Knowing what percent is covered after the deductible and what the OOP maximum are is what you need to find out.
motorcyclesarecool
Posts: 956
Joined: Sun Dec 14, 2014 6:39 am

Re: Switching from High Deductible Plan when planning children

Post by motorcyclesarecool »

pghpens wrote: Wed Oct 04, 2017 10:23 pm....I have a co-worker who is currently on a high deductible plan of $54 per paycheck with $2700 deductible.... He was thinking about switching to the PPO plan which is $110 per paycheck but only has a $400 deductible. Anyone with experience having a child that can discuss the costs and the best way to approach insurance?
1. Understand that the insurance company might technically be a nonprofit, but it's not a charity. It more than breaks even one way or another. You have to take a "big picture" approach and look at total outlay for the year.

2. You didn't mention the frequency of pay. Assuming your employer pays every two weeks, and an average 26 pay periods per year, I can easily project the following:
HDHP annual premium = $1404. Premium + Deductible = $4104. Keep in mind that the entire premium and deductible are highly tax advantaged if your friend contributes to an HSA via a "cafeteria plan" payroll deduction.

PPO annual premium = $2860. Premium + Deductible = $3260. No HSA eligibility means it's harder to get a tax advantage from the deductible but it could be done if your employer offers an FSA, but some of those are a real hassle, and your friend would have to forecast his out-of-pocket with reasonable precision.

3. Is there an employer contribution or premium pass-through to the HSA? If so, that should be removed from the total cost for the year. In my case the premium pass-through tilted the scale decisively in favor of HDHP. YMWV.

4. Your friend needs to scour the official brochures of both plans to determine coverage once the deductible is met. When I was in open season prior to my wife having #2 child, I saw that the HDHP covered 100% of maternity expenses after meeting the deductible. The other plan I was considering had an additional hospitalization deductible and only paid 85% of the costs thereafter, leaving me on the hook for the final 15%. We wound up running up our deductible long before #2s arrival, due to me breaking a rib after an ice storm and #1 child taking a trip to the ER for an allergic reaction.

5. I ran all our family's Explanations of Benefits (EOBs) from the year child #1 was born through a spreadsheet so I had a decent ballpark figure for my estimate. I figured that I would have come out ~$3000 ahead for the year had I chosen the HDHP with HSA. $2500 of that $3000 was essentially the above-mentioned premium pass-through to my HSA.

EDITED TO ADD: N.B. We switched OB practices after a negative experience where the doctor failed to give her professional opinion (the very reason we went with an MD!) and left my wife to 5.5 hours of futile pushing. The first positive sign that the new OB group knew what they were doing was a form letter they gave us on our first visit outlining the average cost of a vaginal delivery with epidural and the usual insurance reimbursement. Your coworker should consider calling around or visiting different OB practices to see if any can give you a ballpark estimate since he or she's a first timer.

6. Your friend needs to understand that opting for an HDHP in the projected year of birth is very much a "red pill" approach in today's society. It feels weird shelling out $100 for a doctor's visit for an ear infection, or $400 for the panel of blood tests they give to pregnant women. The vast majority would rather pay a much higher annual premium in order to have a $20 copay per office visit, and will think your friend weird for opting for an HSA, should he do so.

Post edited for formatting, clarity, and completeness.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.
Rupert
Posts: 4122
Joined: Fri Aug 17, 2012 12:01 pm

Re: Switching from High Deductible Plan when planning children

Post by Rupert »

motorcyclesarecool wrote: Thu Oct 05, 2017 4:24 am
EDITED TO ADD: N.B. We switched OB practices after a negative experience where the doctor failed to give her professional opinion (the very reason we went with an MD!) and left my wife to 5.5 hours of futile pushing. The first positive sign that the new OB group knew what they were doing was a form letter they gave us on our first visit outlining the average cost of a vaginal delivery with epidural and the usual insurance reimbursement. Your coworker should consider calling around or visiting different OB practices to see if any can give you a ballpark estimate since he or she's a first timer.
+1. My family also received an estimate of total cost from our OB/GYN at our initial visit. That is the only time in my life I have ever gotten an upfront estimate of costs from a medical provider. I think it had to do with the way prenatal care costs were handled by insurance companies (at least before the ACA, not sure what they do now). There was a prenatal care deductible separate from the normal deductible under my insurance policy, and you paid it once per calendar year (if your pregnancy spanned two calendar years, you paid it twice). There were no additional copays or coinsurance for prenatal care, including ultrasounds. The estimate also outlined the cost of an uncomplicated vaginal or c-section delivery. At the end of the day, we had an uncomplicated c-section delivery, two healthy babies, and a 4-night hospital stay. There was a hospital copay that we had to pay, I think around $750. The hospital billed the insurance company almost $30,000 for the delivery and 4-night stay, and the insurance company paid them around $19,000, if I recall correctly. That was almost 10 years ago. Two OB/GYNs billed separately for the delivery, about $3000 each; I can't remember what they were actually paid. An anesthesiologist and a pediatrician also billed separately for the delivery. The pediatrician also billed for daily exams while the babies were in the hospital.

Hope this helps your friend figure out where all the costs may come from so that he can ask the appropriate questions.
dsmil
Posts: 773
Joined: Tue Sep 08, 2009 10:51 am

Re: Switching from High Deductible Plan when planning children

Post by dsmil »

Your summary of benefits and coverage may estimate the costs of a child birth for you. For us, the total bills were around $12k. We had to meet our $2,600 deductible and didn't pay a penny more.
new2bogle
Posts: 1779
Joined: Fri Sep 11, 2009 2:05 pm

Re: Switching from High Deductible Plan when planning children

Post by new2bogle »

motorcyclesarecool wrote: Thu Oct 05, 2017 4:24 am
6. Your friend needs to understand that opting for an HDHP in the projected year of birth is very much a "red pill" approach in today's society. It feels weird shelling out $100 for a doctor's visit for an ear infection, or $400 for the panel of blood tests they give to pregnant women. The vast majority would rather pay a much higher annual premium in order to have a $20 copay per office visit, and will think your friend weird for opting for an HSA, should he do so.

Post edited for formatting, clarity, and completeness.
What an informative post!

I wanted to highlight #6 again - having a $20 copay is a great way to hide medical costs and gives the patient no idea what is actually being charged. Because the copay is so low, the insurance company must make it up somehow - and that's through the extra money they collect in premiums. Please tell your friend to do the math.

In my case for my kids, HDHP made much sense. Again, this is for my case due to the employer (at the time) paying for the entire HDHP premium but not for the PPO premium.
open_circuit
Posts: 286
Joined: Thu Mar 30, 2017 9:20 am

Re: Switching from High Deductible Plan when planning children

Post by open_circuit »

It's a reasonable strategy. Just don't have the kid at the end of a calendar year or beginning of the following year unless you plan for that. One of our kids was born a little early, the last day of the year. This really complicated our billing with my FSA contributions set for the following calendar year (the very next day).

HDHP and HSA were not an option for us when my kids were born, so we had an EPO / HMO style plan back then.
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: Switching from High Deductible Plan when planning children

Post by grabiner »

pghpens wrote: Wed Oct 04, 2017 10:23 pm Hello, open enrollment for 2018 health insurance is this week and I have a co-worker who is currently on a high deductible plan of $54 per paycheck with $2700 deductible but is planning on having one child during 2018 and is worried about the costs. He has read that having a child in the hospital can cost upwards of $10,000 and was wondering if he would have to meet his $2700 deductibles to pay that. He was thinking about switching to the PPO plan which is $110 per paycheck but only has a $400 deductible.
Compare not only the deductible, but also the post-deductible coverage. A baby will certainly use up the whole HDHP deductible, but you may have better coverage under the HDHP once you have met the deductible, so that the total costs are not that different.

And then consider the difference in costs. $56 per paycheck is $1456 premium difference assuming biweekly pay, which covers more than half the deductible. Now add the tax savings for the HSA with the HDHP, and subtract any tax savings you could get from a flexible spending account if the conventional plan offers one.
Wiki David Grabiner
Topic Author
pghpens
Posts: 118
Joined: Wed Jun 18, 2014 3:08 pm

Re: Switching from High Deductible Plan when planning children

Post by pghpens »

motorcyclesarecool wrote: Thu Oct 05, 2017 4:24 am
pghpens wrote: Wed Oct 04, 2017 10:23 pm....I have a co-worker who is currently on a high deductible plan of $54 per paycheck with $2700 deductible.... He was thinking about switching to the PPO plan which is $110 per paycheck but only has a $400 deductible. Anyone with experience having a child that can discuss the costs and the best way to approach insurance?
1. Understand that the insurance company might technically be a nonprofit, but it's not a charity. It more than breaks even one way or another. You have to take a "big picture" approach and look at total outlay for the year.


2. You didn't mention the frequency of pay. Assuming your employer pays every two weeks, and an average 26 pay periods per year, I can easily project the following:
HDHP annual premium = $1404. Premium + Deductible = $4104. Keep in mind that the entire premium and deductible are highly tax advantaged if your friend contributes to an HSA via a "cafeteria plan" payroll deduction.

PPO annual premium = $2860. Premium + Deductible = $3260. No HSA eligibility means it's harder to get a tax advantage from the deductible but it could be done if your employer offers an FSA, but some of those are a real hassle, and your friend would have to forecast his out-of-pocket with reasonable precision.

3. Is there an employer contribution or premium pass-through to the HSA? If so, that should be removed from the total cost for the year. In my case the premium pass-through tilted the scale decisively in favor of HDHP. YMWV.

4. Your friend needs to scour the official brochures of both plans to determine coverage once the deductible is met. When I was in open season prior to my wife having #2 child, I saw that the HDHP covered 100% of maternity expenses after meeting the deductible. The other plan I was considering had an additional hospitalization deductible and only paid 85% of the costs thereafter, leaving me on the hook for the final 15%. We wound up running up our deductible long before #2s arrival, due to me breaking a rib after an ice storm and #1 child taking a trip to the ER for an allergic reaction.

5. I ran all our family's Explanations of Benefits (EOBs) from the year child #1 was born through a spreadsheet so I had a decent ballpark figure for my estimate. I figured that I would have come out ~$3000 ahead for the year had I chosen the HDHP with HSA. $2500 of that $3000 was essentially the above-mentioned premium pass-through to my HSA.

EDITED TO ADD: N.B. We switched OB practices after a negative experience where the doctor failed to give her professional opinion (the very reason we went with an MD!) and left my wife to 5.5 hours of futile pushing. The first positive sign that the new OB group knew what they were doing was a form letter they gave us on our first visit outlining the average cost of a vaginal delivery with epidural and the usual insurance reimbursement. Your coworker should consider calling around or visiting different OB practices to see if any can give you a ballpark estimate since he or she's a first timer.

6. Your friend needs to understand that opting for an HDHP in the projected year of birth is very much a "red pill" approach in today's society. It feels weird shelling out $100 for a doctor's visit for an ear infection, or $400 for the panel of blood tests they give to pregnant women. The vast majority would rather pay a much higher annual premium in order to have a $20 copay per office visit, and will think your friend weird for opting for an HSA, should he do so.

Post edited for formatting, clarity, and completeness.
Very informative post. Thank you. We get paid 26 times per year and the company contributes $500 to the HSA every year. We'll have to take a look at the specifics of the plan but it's United HDHP and Anthem Blue PPO. Idk if that helps
motorcyclesarecool
Posts: 956
Joined: Sun Dec 14, 2014 6:39 am

Re: Switching from High Deductible Plan when planning children

Post by motorcyclesarecool »

pghpens wrote: Sat Oct 07, 2017 8:37 amVery informative post. Thank you. We get paid 26 times per year and the company contributes $500 to the HSA every year. We'll have to take a look at the specifics of the plan but it's United HDHP and Anthem Blue PPO. Idk if that helps
By the raw numbers, that brings the annualized premium plus deductible cost of the HSA to $3604, that is really close to the PPO premium plus deductible. This will hinge on what the benefits after deductible are for each plan. Scout the brochure.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.
tech_arch
Posts: 253
Joined: Wed May 27, 2015 11:47 am

Re: Switching from High Deductible Plan when planning children

Post by tech_arch »

motorcyclesarecool wrote: Thu Oct 05, 2017 4:24 am 1. Understand that the insurance company might technically be a nonprofit, but it's not a charity. It more than breaks even one way or another. You have to take a "big picture" approach and look at total outlay for the year.

2. You didn't mention the frequency of pay. Assuming your employer pays every two weeks, and an average 26 pay periods per year, I can easily project the following:
HDHP annual premium = $1404. Premium + Deductible = $4104. Keep in mind that the entire premium and deductible are highly tax advantaged if your friend contributes to an HSA via a "cafeteria plan" payroll deduction.

PPO annual premium = $2860. Premium + Deductible = $3260. No HSA eligibility means it's harder to get a tax advantage from the deductible but it could be done if your employer offers an FSA, but some of those are a real hassle, and your friend would have to forecast his out-of-pocket with reasonable precision.

3. Is there an employer contribution or premium pass-through to the HSA? If so, that should be removed from the total cost for the year. In my case the premium pass-through tilted the scale decisively in favor of HDHP. YMWV.

4. Your friend needs to scour the official brochures of both plans to determine coverage once the deductible is met. When I was in open season prior to my wife having #2 child, I saw that the HDHP covered 100% of maternity expenses after meeting the deductible. The other plan I was considering had an additional hospitalization deductible and only paid 85% of the costs thereafter, leaving me on the hook for the final 15%. We wound up running up our deductible long before #2s arrival, due to me breaking a rib after an ice storm and #1 child taking a trip to the ER for an allergic reaction.

5. I ran all our family's Explanations of Benefits (EOBs) from the year child #1 was born through a spreadsheet so I had a decent ballpark figure for my estimate. I figured that I would have come out ~$3000 ahead for the year had I chosen the HDHP with HSA. $2500 of that $3000 was essentially the above-mentioned premium pass-through to my HSA.

EDITED TO ADD: N.B. We switched OB practices after a negative experience where the doctor failed to give her professional opinion (the very reason we went with an MD!) and left my wife to 5.5 hours of futile pushing. The first positive sign that the new OB group knew what they were doing was a form letter they gave us on our first visit outlining the average cost of a vaginal delivery with epidural and the usual insurance reimbursement. Your coworker should consider calling around or visiting different OB practices to see if any can give you a ballpark estimate since he or she's a first timer.

6. Your friend needs to understand that opting for an HDHP in the projected year of birth is very much a "red pill" approach in today's society. It feels weird shelling out $100 for a doctor's visit for an ear infection, or $400 for the panel of blood tests they give to pregnant women. The vast majority would rather pay a much higher annual premium in order to have a $20 copay per office visit, and will think your friend weird for opting for an HSA, should he do so.

Post edited for formatting, clarity, and completeness.
This is a great response. You need to consider the your worst case for the year; deductible, copays, co-insurance, and max Out of Pocket. You should also ask both insurers for estimated costs for vaginal/c-section births and speak with your OB/GYN to provide a sanity check.
tech_arch
Posts: 253
Joined: Wed May 27, 2015 11:47 am

Re: Switching from High Deductible Plan when planning children

Post by tech_arch »

One additional thing: consider the family deductibles, too. Once the child is born that will be a new deductible to meet.
gk231
Posts: 3
Joined: Sun Feb 22, 2015 2:49 pm

Re: Switching from High Deductible Plan when planning children

Post by gk231 »

motorcyclesarecool covered everything really clearly! We also approached from a "total outlay of care" perspective. There are a couple additional things to keep in mind:

1) Try to make sure that your facility - and to the extent that you can control - your providers - are in-network (e.g., you can't pick your anesthesiologist if you end up getting an epidural, but you can ask the hospital if all of their providers are covered by your insurance). There are usually separate deductibles and OOP maximums for in-network and out of network (OON), and some insurance plans are written so that money towards OON facilities and providers don't accrue towards in-network spend. So if you have a 5K in-network OOP max and a 10K OON OOP max, you could potentially be on the hook for 15K.

2) If both parents work and have insurance, and this is a first kid, run the numbers to see if the baby should go onto the mother's plan or the other parent's plan, as that plan will go from individual to family. The baby will start incurring separate costs as soon as he or she is born. For some families, having both the mother's and baby's costs on the same plan makes sense (e.g., if the family deductible and OOP max is low); for others, it might make sense to have the mom max out her individual plan to essentially cap expenses for her procedures, and have the baby's costs accrue towards the other parent's plan.

3) Not only scour the brochure for maternity coverage, but also check out the radiology and labs. We were surprised that for us, prenatal ultrasounds came under the radiology benefit (which didn't have such generous provisions) and not maternity (which was covered at 100%). I checked the procedure codes w/ the insurer and everything after the fact, and was told this was fairly standard. Had we known this, we would have budgeted a little differently during the year.
Post Reply