You’re probably thinking about having a child or already have one on the way. Congrats!
Last time we checked, bringing a whole life into this world can get expensive. But that’s okay! There are plenty of ways to navigate the costs of family planning and everything that comes along with it. We’re here to guide you through different stages of planning with an emphasis on our favorite healthcare companion: The health savings account (or HSA.)
The cost of having a child in the U.S. can be startling, nothing to sugar coat. With insurance, once could expect to pay around $4,500 for labor and delivery, according to a study by Health Affairs. Without insurance, that number can be upwards of $40,000. That also doesn't take into account all of the care needed prior to a child's birth and what to expect after.
According to the authors of the above study, one of the reasons costs of childbirth has risen in recent years is because the number of people on high deductible health plans (HDHP) has risen. Meaning, more people are choosing HDHPs due to low monthly costs and then having to spend more out of pocket before insurance steps in. however, one great way to combat those out of pocket costs is by utilizing a health savings account (HSA).
We know your burning question is all about if a PPO or HDHP is the better option, and we promise we’ll get there. But before we get there, we’re setting up a strategic timeline for you:
All experts can agree on one thing (and one thing only): It’s never too early to start saving. No matter what plans you do (or don’t) have, it’s never ever a bad idea to have savings set aside because you really have no idea what could happen. Now, you probably have some idea of when you’d like to start a family. And that’s all you really need to start making a plan for savings so that when the time comes, that’s less anxiety for you during a time where added stress is the last thing you need.
So, no matter what stage of life you might be in, if you know that you want to bring a life into this world eventually, there’s planning to do.
No matter which path to parenthood you take, it’s expensive. But a tool like your HSA can combat those costs and support you through it all. It just takes the right amount of planning, goal-setting, and determination to reach your dreams of having a family!
"Goal setting is crucial! If you don't plan out your goals you will never reach them. You are 1.5x more likely to achieve a goal if you write it out. Create a plan creates a clear picture of how to get there and can give you a boost of motivation to get going! Otherwise you will still be "wishing" for it year after year!"
So this is where the strategizing really comes into play. You have options like we discussed in the beginning of this article.
Keep your HDHP and HSA and use your savings to cover out-of-pocket costs? Sure. Switch to a PPO for the lower premiums but still use your HSA to pay for medical expenses? Also possible. Either way, each option offers the chance to meet your out-of-pocket maximum, meaning that insurance will step in and cover 100% of the costs after you reach that maximum for the year. It’s up to you to plan and strategize for that based on what health insurance option you ultimately choose.
Spoiler alert: this is the section in which we will answer your HDHP vs. PPO questions!
You will have a larger deductible and out-of-pocket maximum to reach before insurance steps in. But, because you’ve hit your savings goals, everything can be covered by pre-tax dollars from your HSA.
Talk to your providers and doctors to get a solid grasp on costs you’ll be taking on and plan around those. Prepare to take on out-of-pocket costs right off the bat so that insurance can step in ASAP. Use your HSA to reach that out-of-pocket max!
Save as many receipts along the way as you can and submit all of them to be covered by your HSA; you’ll probably be surprised at what your HSA will cover.
“Having a baby is going to max out your medical coverage, period. And depending on when you get pregnant, you may be reaching the out-of-pocket max for two different plan years (i.e. 2020 and 2021). It's important to factor in these expenses as early as possible so they don't throw all your other goals off track.”
You’ll spend more monthly, but you will use all of the care you’re paying for. You will pay less out of pocket and meet deductibles quickly so that insurance will step in and take care of the costs.
If you’re set on using a PPO for labor and delivery, seriously consider having an HDHP with an HSA in the years leading up. Just because you switch to a PPO, doesn’t mean your HSA is invalidated. You can still use these funds on qualified medical expenses, but you can no longer contribute money. Use the HSA dollars you’ve saved to meet deductibles and maximums and use them for other costs that insurance may not cover!
If you’re cutting down out-of-pocket costs by switching to a PPO, you’ll have leftover HSA savings that can be used on expenses for the new baby like baby monitors, breast pumps, and more.
...which is correct. But when you add ALL of the costs together and don’t have an HSA to support you, the HDHP with an HSA looks pretty dang good.
Oftentimes, an HDHP might even have a lower out-of-pocket maximum! Think about it like this: the money you could be spending on monthly premiums could go straight into an HSA instead. In the end, it really is all up to you and what you are willing to plan and pay for. But with the right amount of strategy and planning, the not-so-traditional route of an HDHP with an HSA could be the route that leaves more money in your pocket in the long run.
Additionally, things you will need the year you have a child can be taken care of by HSA dollars, regardless of your current plan. These include and are not limited to:
"Ironically, the reason I chose an HDHP + HSA initially was because I very rarely had medical expenses! As someone who didn’t have any medical necessities, paying less for our premium with a HDHP made the most sense. However, when we found out we were expecting, I was still glad we had the HSA.
Long term, having access to all the tax benefits an HSA provides is really important to us. Plus, I enjoy lower premiums for years we don’t have many medical expenses. We still get to have our deductible saved as backup while also having the ability to invest the rest which is huge."
CONGRATS! You did the dang thing and brought a whole life (maybe two or three, who knows?!) into this world. So what does that mean for your health insurance? Well, probably more money. And probably more doctors appointments at least in the new baby’s first year. The first year with a new child typically costs parents somewhere around $1,500 out of pocket. Many of those costs (baby monitors, wellness checks, check-ups for mom) could be covered by your saved HSA dollars whether you’re on an HDHP or PPO.