High Deductible vs. Traditional Health Insurance for Pregnancy

[J2]

Hi everyone,

My spouse and I have enrolled in high-deductible HSA plans for several years through our respective employers. The plans have worked fine for us but we're expecting a baby at the beginning of next March.

The general guidance I've typically heard over the years is to pay extra premiums for a plan with lower out-of-pocket expenses if you know you're going to utilize a bunch of medical services (like when you're expecting a baby), so I'm wondering if we should switch to a traditional plan during my company's open enrollment season. Here are the options:

High deductible HSA Plan Family
-Annual premiums: $2,340
-Deductible (in-network): $3,000 ($6,000 out-of-network)
-Out-of-pocket max: $6,000 ($11,000 out-of-network)
-Employer contribution to HSA: $1,500

Traditional Plan Family 1
-Annual premiums: $4,392
-Deductible (in-network): $2,000 ($4,000 out-of-network)
-Out-of-pocket max: $4,000  ($8,000 out-of-network)
-Employer contribution to HRA: $1,000

Traditional Plan Family 2
-Annual premiums: $8,592
-Deductible (in-network): $1,500 ($3,000 out-of-network)
-Out-of-pocket max: $2,500  ($5,000 out-of-network)
-Employer contribution: $750

All plans are with the same health insurance provider, so they have the same provider networks, cover the same preventive services at 100% before meeting the deductible, and have coinsurance of 10% (30% for out-of-network) for other services after meeting the deductible. The out-of-pocket max also includes the deductible.

The high deductible HSA plan seems the best plan even if I hit the out-of-pocket max because the premiums are so much higher for the other plans, but am I missing anything? The total costs appear much higher with the traditional plans because the premiums more than offset the the lower deductibles/out-of-pocket maxes.

I have over $25K in my HSA and my spouse has about another $10k in their own HSA. So far into the pregnancy, we've had about $800 in out-of-pocket expenses for prenatal care and we haven't touched our HSAs to pay for these services.

[Anon-E-Mouze]

Do either of your employers have a Health Advocate Service as part of your benefits? Sometimes they have access to some information that can help with decisionmaking. Other possibilities might be to see if a colleague who (or whose spouse) recently had a baby is willing to share some information about expenses and insurance coverage. Even if they're not willing to share exact details, they might be willing to give you a heads-up about what percentage of their costs were covered by insurance and what percentage they ended up paying for out of pocket.

[J2]

There's an employee advocate service but they are run by the health insurance company, so I'm not sure if they would have my best interests in mind.

[LightStache]

I ran the numbers using the figures you provided and also concluded that the HDHP option would be the least expensive by a significant percentage. I assumed a marginal tax rate of 24% and $7,200 HSA contribution.

This pricing doesn't shock me because it's plausible that families that chose the lower premium/lower OOP options use services more and drive up plan costs. It's also plausible that the costs are just completely irrational because it's American health insurance.

[Britan]

Can’t speak to your options, but we found that in our case, it was more cost effective to choose the HDHP, even for pregnancy. Not really sure why this is but I’ve seen it be the case across numerous friends working for various companies, so I think it’s not uncommon.

The only people I know who pay for the lower deductible plan and appreciate it are my BIL with 6 very active kids who end up in urgent care a lot for stitches. In their case, they’re paying more monthly but buying the convenience of not needing to figure out or think about deductibles or OOP max.

One consideration: anesthesiologists are often out of network even at in network hospitals. Assume that you will need to pay an additional couple grand to an out of network anesthesiologist if you’re getting any anesthesia. AmURica. 🇺🇸

[J2]

I called the health insurance hotline my company has for open enrollment and the rep I spoke with confirmed that the only differences between the plans are the deductibles and out-of-pocket maximums -- all the other benefits are the same. They also said I would come out ahead with the HSA plan in terms of total costs. Statistically speaking, I still find myself scratching my head as to why the total costs for the HSA plan are lower even during a birth.

I also spoke with a coworker who recently had a baby and they went with traditional plan 1. Their reason was that when combined with an FSA their out-of-pocket expenses would be close to zero, which gave them piece of mind. The phrase "piece of mind" is something I've heard a lot to make the case for the higher premium/lower deductible plans. If someone didn't have a savings cushion to pay a large medical expense I understand, but if you do, wouldn't the plan with the lowest total cost be the best choice?

Regarding anesthesiologists, I am very scared. Most hospitals and providers I speak to are weary to provide details, and my insurance said that I would have no choice buy to pay out-of-network deductibles at an in-network hospital if that's who was on call. When I asked if there was anything I could proactively do to avoid that and they said no. AmURica indeed.

[JJ-]

I ran the numbers using the figures you provided and also concluded that the HDHP option would be the least expensive by a significant percentage. I assumed a marginal tax rate of 24% and $7,200 HSA contribution.

This pricing doesn't shock me because it's plausible that families that chose the lower premium/lower OOP options use services more and drive up plan costs. It's also plausible that the costs are just completely irrational because it's American health insurance.

The employee can only do $7200-employer contributions, so in OP's case it is $5700 in 2021 or $5800 in '22

[LightStache]

I ran the numbers using the figures you provided and also concluded that the HDHP option would be the least expensive by a significant percentage. I assumed a marginal tax rate of 24% and $7,200 HSA contribution.

This pricing doesn't shock me because it's plausible that families that chose the lower premium/lower OOP options use services more and drive up plan costs. It's also plausible that the costs are just completely irrational because it's American health insurance.

The employee can only do $7200-employer contributions, so in OP's case it is $5700 in 2021 or $5800 in '22

Good catch. That reduces the benefit by ~$500 compared to my first calculation, but you still come out ahead with the HDHP.

[yachi]

Statistically speaking, I still find myself scratching my head as to why the total costs for the HSA plan are lower even during a birth.

I believe insurers have found that when patients are on the hook for 100% of the health care costs, they make decisions that reduce those costs.  Whether it's waiting out a cold an extra day before going to the Dr. office, or forgoing elective care, I'm not sure; but it makes sense from a cost-demand standpoint.  You get to experience the pain of an expensive Dr. appointment, so you start paying attention to costs.

All of my HDHP plans (I've had at least 2) have had 0% coinsurance after the deductible, and I think that's the better way of designing the plans.  After the deductible is met, there is like a $40 Dr. visit and $150 Emergency Room visit Copay.  The plans have always been cheaper than the alternative traditional plans.

Also, we've met the deductible almost every year on these plans.  It's been a history of asthma hospitalizations, child births, pediatric lung specialist visits, and broken bones - an arm, a toe, and a wrist (separate kids) - over the past 7 years.  It helps being a person who can allow an HSA to build up with funds without being tempted to spend it.

[chemistk]

You WILL hit the OOP max for pregnancy. In 2019, our total hospital bill before insurance was >$15,000. That was for a traditional delivery, no epidural, no intervention, no NICU, and no extended stay.

Given that, the net cost (to you) for each of the plans are, in order:

$6840, $7392, and $10342.

With childbirth, you should always assume that you'll hit the family OOPM. What you lost in pretax deductions on the most expensive plan, you can easily make up by continuing to max HSA contributions.

Stick with the HSA. Ignore the backwards nature of the pricing.

[yachi]

You WILL hit the OOP max for pregnancy. In 2019, our total hospital bill before insurance was >$15,000. That was for a traditional delivery, no epidural, no intervention, no NICU, and no extended stay.

Given that, the net cost (to you) for each of the plans are, in order:

$6840, $7392, and $10342.

With childbirth, you should always assume that you'll hit the family OOPM. What you lost in pretax deductions on the most expensive plan, you can easily make up by continuing to max HSA contributions.

Stick with the HSA. Ignore the backwards nature of the pricing.

Was that hospital bill prior to insurance negotiation by chance?  I wish we kept better records during our hospital stays.  www.healthcarebluebook.com is a site that's useful for looking up costs too.

Your numbers are a fair comparison.  If anything, the assumptions are tilted to give the HDHP a disadvantage -- As the plan with the highest OOPM, it suffers most when the assumption is that OOPM will be met.  Since it comes out the winner even this this disadvantage, that's good.

So for example, spending $15k* is enough to reach the OOPM for Family 2 and the comparison looks like this:
$5040, $6992, $10342

Then $22k* is needed to reach OOPM for Family 1 and the comparison looks like this:
$5740, $7392, $10342

We don't reach the OOPM for the HDHP until $33K*


*There's one caveat in here and that is, OP might have a bunch of $40 to $150 copays per Dr. visit.  Those hit the OOPM too.

[boarder42]

I ran the numbers using the figures you provided and also concluded that the HDHP option would be the least expensive by a significant percentage. I assumed a marginal tax rate of 24% and $7,200 HSA contribution.

This pricing doesn't shock me because it's plausible that families that chose the lower premium/lower OOP options use services more and drive up plan costs. It's also plausible that the costs are just completely irrational because it's American health insurance.

This is accurate. I just ran the numbers for the people that work for me at my company. And it's rare hdhps don't win when you account for the HSA tax savings. We stayed on the hdhp for both of our children's births and came out far ahead as well

[JJ-]

We were on PPO plans for 2 years of the last 8 years instead of an HDHP. This is because the PPO plans available to me covered maternity and delivery 100% no deductible and we have had two kids those 2 of the 8 years. For us, the math favored the PPO plans by thousands for those two years.

I have since found that is extremely rare as these are fed employee plans and most plans do not do this, but it's worth a glance to make sure.

However I agree with the consensus that the HDHP appears to be the winner here.

[chemistk]

You WILL hit the OOP max for pregnancy. In 2019, our total hospital bill before insurance was >$15,000. That was for a traditional delivery, no epidural, no intervention, no NICU, and no extended stay.

Given that, the net cost (to you) for each of the plans are, in order:

$6840, $7392, and $10342.

With childbirth, you should always assume that you'll hit the family OOPM. What you lost in pretax deductions on the most expensive plan, you can easily make up by continuing to max HSA contributions.

Stick with the HSA. Ignore the backwards nature of the pricing.

Was that hospital bill prior to insurance negotiation by chance?  I wish we kept better records during our hospital stays.  www.healthcarebluebook.com is a site that's useful for looking up costs too.

Your numbers are a fair comparison.  If anything, the assumptions are tilted to give the HDHP a disadvantage -- As the plan with the highest OOPM, it suffers most when the assumption is that OOPM will be met.  Since it comes out the winner even this this disadvantage, that's good.

So for example, spending $15k* is enough to reach the OOPM for Family 2 and the comparison looks like this:
$5040, $6992, $10342

Then $22k* is needed to reach OOPM for Family 1 and the comparison looks like this:
$5740, $7392, $10342

We don't reach the OOPM for the HDHP until $33K*


*There's one caveat in here and that is, OP might have a bunch of $40 to $150 copays per Dr. visit.  Those hit the OOPM too.

After insurance negotiation. All the charges are still visible in our insurance portal, and the total cost of the delivery & after care was $16968 after insurance negotiation. Pre-negotiation was $28663.

Again, that's without anesthesiology getting involved, or without any surgery - at all. The only "over the top" charges we had were related to glucose monitoring (GD), antibiotics (Strep positive), and jaundice monitoring.

The biggest difference between OP's plans in this context (apart from actual dollar costs) and the ones my company offers are the deductible offset after the deductible is met. While OP's is a flat 10% coinsurance for all plans, my HDHP is 20% coinsurance. Our "family 1" equivalent is 30% coinsurance and our "family 2" equivalent is 10% coinsurance. I guess it's worth mentioning that there's a smaller gap between Deductible and OOPM for our plan too ($3500 ded, $5k OOPM).

I think generally, unless you're really trying to be cost-conscious, hospital childbirth is all but a surefire guarantee to hit the OOPM. And if the birth itself doesn't hit it, the prenatal and postnatal care are usually enough to put it over the top.

Unless it's a horrible health plan, the only circumstance (apart from changing plans) where the OOPM probably isn't met with childbirth is if you have prenatal services in one year and then go into the hospital to deliver on or around Jan 1.

[seattlecyclone]

I think generally, unless you're really trying to be cost-conscious, hospital childbirth is all but a surefire guarantee to hit the OOPM. And if the birth itself doesn't hit it, the prenatal and postnatal care are usually enough to put it over the top.

Unless it's a horrible health plan, the only circumstance (apart from changing plans) where the OOPM probably isn't met with childbirth is if you have prenatal services in one year and then go into the hospital to deliver on or around Jan 1.

Really depends on the plan. When my kids were born my plan was ballpark $3k deductible, $6k OOPM, with 90% coinsurance after deductible. Pretty nice plan overall, relatively low expenses in the worst case, but the 90% coinsurance meant you needed to rack up $30k of medical bills after the deductible before hitting the OOPM. You can certainly exceed that with a more complicated birth or NICU stay after, but our uncomplicated births never quite hit that max. You'll definitely hit the deductible, but for the OOPM it will depend on the plan.

[chemistk]

I think generally, unless you're really trying to be cost-conscious, hospital childbirth is all but a surefire guarantee to hit the OOPM. And if the birth itself doesn't hit it, the prenatal and postnatal care are usually enough to put it over the top.

Unless it's a horrible health plan, the only circumstance (apart from changing plans) where the OOPM probably isn't met with childbirth is if you have prenatal services in one year and then go into the hospital to deliver on or around Jan 1.

Really depends on the plan. When my kids were born my plan was ballpark $3k deductible, $6k OOPM, with 90% coinsurance after deductible. Pretty nice plan overall, relatively low expenses in the worst case, but the 90% coinsurance meant you needed to rack up $30k of medical bills after the deductible before hitting the OOPM. You can certainly exceed that with a more complicated birth or NICU stay after, but our uncomplicated births never quite hit that max. You'll definitely hit the deductible, but for the OOPM it will depend on the plan.

I guess I'm looking at it from a different perspective. FWIW, my view is skewed a bit by the plans available to me - there's less than $1k annual difference in premium cost among the 3 plans my company offers. Going into '22, our hdhp (middle tier) is a hair under $5k for the family premium, the "cheaper" one is $900 less and the "pricier" one is $950 more.

But regardless, suppose OP will incur $20k of medical expenses for '22, including birth, postnatal, and routine care. Probably not realistic but meh.
 
With the HSA, op pays $2340 + $3000 + $1700 = $7040
Family plan 1 is $4392 + $2000 + $1800 = $8192
Family plan 2 is $8592 + $1500 + $1000 = $11092

Even if all bills were somehow only $10k, op is still paying $6040, $7192, and $10942.

And if all bills reach OOPM, it's $8340, $8392, and $11092.

Worse, with the other two he they lose the offset HRA if they don't use it all. The only circumstance where OP pays more out of pocket is if they decide not to touch the HSA and then only plan 1 becomes a better cost (at the expense of free HSA money).

My point is, when evaluating health plans, assuming most tenants are equal, I just look right at the premium + OOPM and then figure that's what I'm on the hook for.

Some plans, I definitely understand, have different aspects (coinsurance being a big one) that would steer towards one or the other but in OP's case, there's virtually no circumstance where the HSA isn't the cheapest (unless they've read the plan summaries incorrectly)

[seattlecyclone]

Right, I was just quibbling with your blanket assertion that of course someone giving birth will always use up their OOPM unless their plan is terrible. The rest of your logic is sound.

[chemistk]

Right, I was just quibbling with your blanket assertion that of course someone giving birth will always use up their OOPM unless their plan is terrible. The rest of your logic is sound.

Hah, understood!

Although it's a sad commentary on our healthcare system, that $17k is typical for such a very routine thing.

We have friends whose hospital that they intended to deliver their third at  told them in Sept. of last year that as of Jan 1 '21, their insurance would no longer be accepted. Their expected delivery was 12/30. They got in writing that they'd be on the hook for any charges incurred after the 31st. There's no hospital within another 46 minutes of them.

Thankfully she went into labor on the 26th, but the thought that a routine thing could end up financially crippling someone over an insurance thing is a really terrifying thing

[reeshau]

OP,
You are on the right track.  I think the standard advice you started with expects HDHP deductibles to be much higher.  For an HDHP,  yours has a pretty low deductible.  Ones I see shopping ACA are more like your out-of-network deductibles, which would reverse your choices.

For the anaesthesiologist, I would read up on recent laws and regulations regarding surprise billing:

https://www.kff.org/private-insurance/fact-sheet/surprise-medical-bills-new-protections-for-consumers-take-effect-in-2022/

https://www.hhs.gov/about/news/2021/07/01/hhs-announces-rule-to-protect-consumers-from-surprise-medical-bills.html

Texas has had a law against surprise billing since 2019.  That didn't stop my insurance company from doing just that, early this year.  So, be educated and push back if it happens to you.

[Britan]

OP,
You are on the right track.  I think the standard advice you started with expects HDHP deductibles to be much higher.  For an HDHP,  yours has a pretty low deductible.  Ones I see shopping ACA are more like your out-of-network deductibles, which would reverse your choices.

For the anaesthesiologist, I would read up on recent laws and regulations regarding surprise billing:

https://www.kff.org/private-insurance/fact-sheet/surprise-medical-bills-new-protections-for-consumers-take-effect-in-2022/

https://www.hhs.gov/about/news/2021/07/01/hhs-announces-rule-to-protect-consumers-from-surprise-medical-bills.html

Texas has had a law against surprise billing since 2019.  That didn't stop my insurance company from doing just that, early this year.  So, be educated and push back if it happens to you.

Oh this is so heartening! The new federal rule includes: “Bans out-of-network charges for ancillary care (like an anesthesiologist or assistant surgeon) at an in-network facility in all circumstances.”

Looks like it takes effect January 2022. So there is hope for anyone delivering in the new year! Every mother I know who had an epidural in the last 5 years was hit with a $2000-$3000 additional out of network cost for it, which is completely Kafkaesque. Not going to lie, the anesthesia cost was a non-zero factor in my choice to go medication free for both my children, but that is NOT a route for the feint of heart (nor an option if surgery becomes necessary).

[bryan995]

We just went though this.

1.  Sign up for an hospital indemnity plan if offered. We paid $100/month for 5 months and received a $3600 payout for the hospital stay.
2.  Opt for HMO (low deductible, low OOP) insurance up until the birth. Then switch back to HDHP after everyone is safe and healthy during the life event.
3.  This was our 3rd child and each time the ‘bill’ was >$60k (Caesarian) and the anesthesiologist billed separately as OON in the 4-8k range. Talk about a horribly broken system, eek. Each time we disputed and it went away. The HMO gave us $20 copay’s for all of the visits and $250 for the delivery. We went through a birth with the HDHP for 1 child and we ended up paying almost 12k OOP. Certainly did not come out ahead that year.

[J2]

Posting a summary for posterity's sake. The birth was uncomplicated and ended up costing about $4,500 OOP, so I didn't even hit my OOP max. Going with the HDHP has worked out well!

[Sibley]

Congrats on the baby! Glad everything went well.

[LightStache]

Yay! Congratulations!