HDHP or PPO during pregnancy and beyond?

[VioletVixen]

Hi all,

It's Open Enrollment time and I am almost 5 weeks pregnant with my first child. Expected due date is in July. I have been on the HDHP plan through my employer for the last few years and I think it will still be the smartest option even through pregnancy and potentially beyond, but I wanted to get a second opinion from you all to be sure. I've attached the stats of each plan.

Since I'm going to hit the deductible on the HDHP anyway, the plans look the same to me after that point (90% coverage). The only major difference I see is that prescription meds are not covered until after the deductible is met on the HDHP, but that's not a big deal to me because I'm not on expensive meds now. Am I being short-sighted, or is this a no brainer? HDHP wins?

Premiums for PPO: $5,616/year    Deductible: $1,950     Out of Pocket Max: $6,450
Premiums for HDHP: $564/year    Deductible: $3,000     Out of Pocket Max: $6,000

Also, I'm thinking of getting supplemental life insurance and short term disability insurance (in case things go sideways at delivery). Are these extra options a good idea? What is generally an acceptable amount to pay for these extra benefits?

Thanks for your help!

[cincystache]

Congrats!!!

I'm not an expert but I think you're right in choosing the HDHP. You're saving way more in premiums which more than covers the increase in deductible and the OOP max for both plans is the same. I don't see why anyone would choose the PPO in this situation but other folks might see something we are missing.

You don't mention anything about an HSA account but that's also a great idea if you choose the HDHP.

On life insurance, do you already have enough term coverage outside of your employer offerings to cover your family? (roughly 10X your salary) If so, I probably wouldn't bother with the extra unless it is really cheap and doesn't require a medical exam. If you don't have term life insurance outside your employer then get as much as you can through your employer for this year because that is probably your only option while pregnant. Once your baby arrives, you can sign up for cheap term insurance outside your employer.

For ST disability do you already get paid maternity benefits? If so, you might research whether ST disability would add anything to that equation. Cost should probably be between 1-3% depending on the disability benefit.

[ctuser1]

Back of the envelope of two extreme cases:

1. Uncomplicated pregnancy.
Your expenses stay below $1950/$3000 deductibles. Although sometimes deductibles in HDHP and PPO are not exactly comparable because of what gets paid for and what is counted, let's ignore that since we are focusing on the extreme case.

With PPO:
$5616 in tax (including FICA) exempt money. Assuming 25% total tax rate (state/local/federal) + 7.5% FICA => $3790.8 in after-tax money.
(Assume) $1950 in expenses => $1950.
Total cost: $5740.8 with PPO.

With HSA:
$564 in tax exempt money = $380.7 in after tax money.
$1950 in expenses
Total cost: $2330.7

HSA is a clear winner in this case.

2. You blow past all kinds of maximums for whatever reason.
This does not have to be for any catastrophic reasons. A bout of preeclampsia that heals itself -> additional day or two of hospital stay for observation will do it.
With PPO:
$5616 in tax (including FICA) exempt money. Assuming 25% total tax rate (state/local/federal) + 7.5% FICA => $3790.8 in after-tax money.
$6450 in expenses => $6450.
Total cost: $10240 with PPO.

With HSA:
$564 in tax exempt money = $380.7 in after tax money.
$6000 in expenses
Total cost: $6380

In both the extremes, HSA wins by a lot!
There is a zone in the middle, where you have met the deductible for PPO and the insurance starts paying, but HSA does not, where the PPO would gain some ground. I remember once doing a very detailed analysis on this for a case I faced with similar choices and found that there is never a situation where PPO came out a winner. In my case the HDHP was more expensive than yours, which would further favor the HDHP in any analysis!! ($564/year!! Holy cow!! Is your employer hiring? :-D)

Hi all,

It's Open Enrollment time and I am almost 5 weeks pregnant with my first child. Expected due date is in July. I have been on the HDHP plan through my employer for the last few years and I think it will still be the smartest option even through pregnancy and potentially beyond, but I wanted to get a second opinion from you all to be sure. I've attached the stats of each plan.

Since I'm going to hit the deductible on the HDHP anyway, the plans look the same to me after that point (90% coverage). The only major difference I see is that prescription meds are not covered until after the deductible is met on the HDHP, but that's not a big deal to me because I'm not on expensive meds now. Am I being short-sighted, or is this a no brainer? HDHP wins?

Premiums for PPO: $5,616/year    Deductible: $1,950     Out of Pocket Max: $6,450
Premiums for HDHP: $564/year    Deductible: $3,000     Out of Pocket Max: $6,000

Also, I'm thinking of getting supplemental life insurance and short term disability insurance (in case things go sideways at delivery). Are these extra options a good idea? What is generally an acceptable amount to pay for these extra benefits?

Thanks for your help!

[SimpleCycle]

My delivery was billed at $27k, and while there were a few out of the ordinary things (induction, 3rd degree tear repair), I’d probably assume you’ll be close to the OOP max.  The HDHP looks favorable in that case.

You’ll also need to account for adding the baby, and what is better once you’re looking at family deductibles and OOP max.

[VioletVixen]

Congrats!!!

I'm not an expert but I think you're right in choosing the HDHP. You're saving way more in premiums which more than covers the increase in deductible and the OOP max for both plans is the same. I don't see why anyone would choose the PPO in this situation but other folks might see something we are missing.

You don't mention anything about an HSA account but that's also a great idea if you choose the HDHP.

On life insurance, do you already have enough term coverage outside of your employer offerings to cover your family? (roughly 10X your salary) If so, I probably wouldn't bother with the extra unless it is really cheap and doesn't require a medical exam. If you don't have term life insurance outside your employer then get as much as you can through your employer for this year because that is probably your only option while pregnant. Once your baby arrives, you can sign up for cheap term insurance outside your employer.

For ST disability do you already get paid maternity benefits? If so, you might research whether ST disability would add anything to that equation. Cost should probably be between 1-3% depending on the disability benefit.

Thanks! Yes, I forgot to mention that I do max the HSA every year. :)

I have never thought about life insurance or ST disability insurance before, so this is all brand new to me. I don't think I get paid maternity benefits...is that even a thing in the US? Cost should be between 1-3% of what, my salary?

I do not have any insurance outside of my employer. You make it seem like that is the better option...Why would insurance outside of my employer be better (honest question)? And to get it outside of my employer would require an exam? I'm assuming pregnancy would be a pre-existing condition in that case, which is why I'm limited now to my employer's ST disability option?


This is what my employer covers, which seems pretty insufficient:

Basic Life and AD&D Insurance: $75,000 (not even 1x my salary of $80,000)

Long Term Disability Insurance: 66 2/3% of covered monthly earnings, $4,000 max (kicks in after 150 consecutive days of total disability)

These are my employee-paid additional coverage options, which I will have to ask my HR for the cost of:

Supplemental and Dependent Life Insurance: $10,000 increments subject to the lesser of: 5x earnings, or $500,000. The combined Basic and Supplemental maximum cannot exceed $575,000.

Voluntary Short Term Disability: Weekly benefit is equal to 50% of covered earnings, up to a max benefit of $1,200 per week, paid up to a max of 17 weeks, benefits begin on the 30th consecutive day of the illness or injury (maternity is covered).


Do you have any recommendations for external life insurance/disability insurance companies? Mustachian-approved? :)

[VioletVixen]

Back of the envelope of two extreme cases:

1. Uncomplicated pregnancy.
Your expenses stay below $1950/$3000 deductibles. Although sometimes deductibles in HDHP and PPO are not exactly comparable because of what gets paid for and what is counted, let's ignore that since we are focusing on the extreme case.

With PPO:
$5616 in tax (including FICA) exempt money. Assuming 25% total tax rate (state/local/federal) + 7.5% FICA => $3790.8 in after-tax money.
(Assume) $1950 in expenses => $1950.
Total cost: $5740.8 with PPO.

With HSA:
$564 in tax exempt money = $380.7 in after tax money.
$1950 in expenses
Total cost: $2330.7

HSA is a clear winner in this case.

2. You blow past all kinds of maximums for whatever reason.
This does not have to be for any catastrophic reasons. A bout of preeclampsia that heals itself -> additional day or two of hospital stay for observation will do it.
With PPO:
$5616 in tax (including FICA) exempt money. Assuming 25% total tax rate (state/local/federal) + 7.5% FICA => $3790.8 in after-tax money.
$6450 in expenses => $6450.
Total cost: $10240 with PPO.

With HSA:
$564 in tax exempt money = $380.7 in after tax money.
$6000 in expenses
Total cost: $6380

In both the extremes, HSA wins by a lot!
There is a zone in the middle, where you have met the deductible for PPO and the insurance starts paying, but HSA does not, where the PPO would gain some ground. I remember once doing a very detailed analysis on this for a case I faced with similar choices and found that there is never a situation where PPO came out a winner. In my case the HDHP was more expensive than yours, which would further favor the HDHP in any analysis!! ($564/year!! Holy cow!! Is your employer hiring? :-D)

Thanks for your expert analysis! I was pretty sure HDHP was the winner in any case, but thank you for running the numbers! Yeah, I was surprised at how cheap my HDHP premiums are (especially compared to the PPO). My dog's insurance costs more! (Yes, I have dog insurance...he's used it a lot, so thankfully it's not wasted money!)

What are typical premiums for HDHP plans? Just curious. I work at a hospital, so that may be why mine are lower?

[VioletVixen]

My delivery was billed at $27k, and while there were a few out of the ordinary things (induction, 3rd degree tear repair), I’d probably assume you’ll be close to the OOP max.  The HDHP looks favorable in that case.

You’ll also need to account for adding the baby, and what is better once you’re looking at family deductibles and OOP max.

I'm always amazed at how expensive delivery can be. Crazy!

The Employee+Family HDHP premiums are only $61/mo ($732/yr), while the PPO family is $630/mo ($7,560/yr). HUGE difference.

I'm tempted to say the HDHP will still win. I will probably never hit my $3000 deductible once the baby is born with simple office visits/checkups. Still, I think I'd be saving a ton on premiums and being able to stash that extra money in the HSA. The only wild card I can think of are prescriptions, which (depending on what they are for) can be pretty darn expensive. My HDHP does not cover prescription meds until I hit the deductible. Still, $732 premium +$3000 deductible out of pocket is a lot less than the $7560 premium cost (+ $1950 deductible) of the PPO!

[nereo]

Just chiming to say that we recently had an uncomplicated pregnancy and the charge for the birth & hospital stay alone was $5,700.  This was actually slightly *below* the median cost in our region for an uncomplicated pregnancy.  Add in some prenatal & postnatal visits and a trip to have an echo when they detected a heart murmur and wife + baby consumed over $8k in healthcare costs in three months, for a healthy, routine delivery.

[Luz]

My delivery was billed at $27k, and while there were a few out of the ordinary things (induction, 3rd degree tear repair), I’d probably assume you’ll be close to the OOP max.  The HDHP looks favorable in that case.

You’ll also need to account for adding the baby, and what is better once you’re looking at family deductibles and OOP max.

I'm always amazed at how expensive delivery can be. Crazy!

The Employee+Family HDHP premiums are only $61/mo ($732/yr), while the PPO family is $630/mo ($7,560/yr). HUGE difference.

I'm tempted to say the HDHP will still win. I will probably never hit my $3000 deductible once the baby is born with simple office visits/checkups. Still, I think I'd be saving a ton on premiums and being able to stash that extra money in the HSA. The only wild card I can think of are prescriptions, which (depending on what they are for) can be pretty darn expensive. My HDHP does not cover prescription meds until I hit the deductible. Still, $732 premium +$3000 deductible out of pocket is a lot less than the $7560 premium cost (+ $1950 deductible) of the PPO!

Never say never! I had an uncomplicated vaginal delivery, but developed a pregnancy-induced issue with one of my retinas in my third trimester and the baby ended up having to see 3 specialists due to relatively minor, but pressing issues. I think it's important to err on the side of overestimating pregnancy/newborn costs. There are just so many variables.

I'd still go with the HDHP, but just be prepared for the unexpected (as in, you may end up paying up to the PPO premium amount for relatively minor issues, as was pointed out).

Congratulations! Summer babies are the best!

[minimustache1985]

HDHP is a clear winner as far as I can see.  The premiums being so low make it a winner, and if you have a HSA with it just saving the premium difference in it would nearly cover the OOP max, and easily the deductible.

I was on a HDHP with a 4K OOP max when I had DS, and hit it easily.  I had an epidural but no other intervention or complications, discharged at the normal 2 day PP, and the hospital bill alone (OB was separate) was something like 17k.  Hitting that was actually nice because I didn’t have to worry about other stuff coming in since it was covered if it was for me- the family OOP was 8k so we just had a few misc bills for DS like the hearing test.

As for short term disability I don’t think you’ll qualify for any now that you’re pregnant beyond your existing employer plan.  Keep in mind if you have an uncomplicated delivery they’ll only consider you disabled for 6 weeks (8 for csection) so if there is a 30 day waiting period you won’t see much out of it.

[cincystache]

I do not have any insurance outside of my employer. You make it seem like that is the better option...Why would insurance outside of my employer be better (honest question)? And to get it outside of my employer would require an exam? I'm assuming pregnancy would be a pre-existing condition in that case, which is why I'm limited now to my employer's ST disability option?


This is what my employer covers, which seems pretty insufficient:

Basic Life and AD&D Insurance: $75,000 (not even 1x my salary of $80,000)

Long Term Disability Insurance: 66 2/3% of covered monthly earnings, $4,000 max (kicks in after 150 consecutive days of total disability)

These are my employee-paid additional coverage options, which I will have to ask my HR for the cost of:

Supplemental and Dependent Life Insurance: $10,000 increments subject to the lesser of: 5x earnings, or $500,000. The combined Basic and Supplemental maximum cannot exceed $575,000.


Do you have any recommendations for external life insurance/disability insurance companies? Mustachian-approved? :)

I'll answer the life insurance and the ST disability separate...

On ST disability:
It depends on how long you will be taking off work. For example, if you only take 4 weeks off you will get nothing paid out (not worth it). If you plan on taking 21 weeks or more off, you will get the max benefit paid to you, in which case it is worth it. Run your numbers and decide accordingly. As the previous poster mentioned though, they might only consider you disabled for 6 weeks regardless of how long you take off work, be sure to ask about this before signing up.

On life insurance:
If you aren't yet FI, please get some term life insurance ASAP, also if you have a significant other, have them get term life insurance right away. I think getting term life insurance outside your employer is a good idea because it is very cheap and it stays with you regardless of your job status. However, pregnancy will likely disqualify you from getting a policy right now so I would sign up for your employer's offer (5x earnings or in your case 400,000). Some employer's require med exam for supplemental life insurance and might not cover you if you're pregnant, another thing to ask HR in addition to the price. You will only need this coverage for one year until you can shop outside your employer so cost shouldn't be a big concern and it will cover your family and child in the event of catastrophy (death). If I were in your shoes I would definitely get as much term or employer provided life insurance as I could ASAP and also encourage your partner to get some as well.

Once baby arrives and everyone is healthy I would research a term life insurance policy for you. I had a good experience with the company Haven Life, the application is all online and the medical exam is done by a nurse that can come to your house. This was 3 years ago but I assume they still do this. We took out $1million on me for $34 per month and 250k for my wife for $10 per month for a 20 year term.

Good luck with everything and enjoy your time with your growing family.

[Proud Foot]

As for short term disability I don’t think you’ll qualify for any now that you’re pregnant beyond your existing employer plan.  Keep in mind if you have an uncomplicated delivery they’ll only consider you disabled for 6 weeks (8 for csection) so if there is a 30 day waiting period you won’t see much out of it.

Before you sight up you definitely need to find out if your delivery will be covered since you are already pregnant. This is always mentioned during our open enrollment announcement that it is not covered if you are already pregnant when you add the ST disability coverage. The ST disability typically can only be paid through payroll deduct so would have to be whatever plan your employer offers.

Otherwise the supplemental life insurance sounds good and is typically pretty cheap when purchase through your employer. And looking at your health plans the HDHP looks to be a whole lot better, especially once you consider moving to a family plan after adding your child.

[minimustache1985]

As for short term disability I don’t think you’ll qualify for any now that you’re pregnant beyond your existing employer plan.  Keep in mind if you have an uncomplicated delivery they’ll only consider you disabled for 6 weeks (8 for csection) so if there is a 30 day waiting period you won’t see much out of it.

Before you sight up you definitely need to find out if your delivery will be covered since you are already pregnant. This is always mentioned during our open enrollment announcement that it is not covered if you are already pregnant when you add the ST disability coverage. The ST disability typically can only be paid through payroll deduct so would have to be whatever plan your employer offers.

Otherwise the supplemental life insurance sounds good and is typically pretty cheap when purchase through your employer. And looking at your health plans the HDHP looks to be a whole lot better, especially once you consider moving to a family plan after adding your child.

This is a good point- I took the employer STD as being a benefit the employer provides to all employees as opposed to something she’d need to sign up for during open enrollment.

[mm1970]

My delivery was billed at $27k, and while there were a few out of the ordinary things (induction, 3rd degree tear repair), I’d probably assume you’ll be close to the OOP max.  The HDHP looks favorable in that case.

You’ll also need to account for adding the baby, and what is better once you’re looking at family deductibles and OOP max.

I'm always amazed at how expensive delivery can be. Crazy!

The Employee+Family HDHP premiums are only $61/mo ($732/yr), while the PPO family is $630/mo ($7,560/yr). HUGE difference.

I'm tempted to say the HDHP will still win. I will probably never hit my $3000 deductible once the baby is born with simple office visits/checkups. Still, I think I'd be saving a ton on premiums and being able to stash that extra money in the HSA. The only wild card I can think of are prescriptions, which (depending on what they are for) can be pretty darn expensive. My HDHP does not cover prescription meds until I hit the deductible. Still, $732 premium +$3000 deductible out of pocket is a lot less than the $7560 premium cost (+ $1950 deductible) of the PPO!

Never say never! I had an uncomplicated vaginal delivery, but developed a pregnancy-induced issue with one of my retinas in my third trimester and the baby ended up having to see 3 specialists due to relatively minor, but pressing issues. I think it's important to err on the side of overestimating pregnancy/newborn costs. There are just so many variables.

I'd still go with the HDHP, but just be prepared for the unexpected (as in, you may end up paying up to the PPO premium amount for relatively minor issues, as was pointed out).

Congratulations! Summer babies are the best!

+1.

I had a few choices - HDHP, PPO, HMO (I found out I was pregnant right before open enrollment).  I signed up for the HMO (but they lost my paperwork, ahh!  My HR got it worked out though.)  In my case, it was a bit easier as my premiums were a LOT lower ($100/ month for the HMO), and OOP max was lower. 

My son was born with a birth defect that required surgery at 9 months old, and that was ~$25,000. 

[VioletVixen]

I do not have any insurance outside of my employer. You make it seem like that is the better option...Why would insurance outside of my employer be better (honest question)? And to get it outside of my employer would require an exam? I'm assuming pregnancy would be a pre-existing condition in that case, which is why I'm limited now to my employer's ST disability option?


This is what my employer covers, which seems pretty insufficient:

Basic Life and AD&D Insurance: $75,000 (not even 1x my salary of $80,000)

Long Term Disability Insurance: 66 2/3% of covered monthly earnings, $4,000 max (kicks in after 150 consecutive days of total disability)

These are my employee-paid additional coverage options, which I will have to ask my HR for the cost of:

Supplemental and Dependent Life Insurance: $10,000 increments subject to the lesser of: 5x earnings, or $500,000. The combined Basic and Supplemental maximum cannot exceed $575,000.


Do you have any recommendations for external life insurance/disability insurance companies? Mustachian-approved? :)

I'll answer the life insurance and the ST disability separate...

On ST disability:
It depends on how long you will be taking off work. For example, if you only take 4 weeks off you will get nothing paid out (not worth it). If you plan on taking 21 weeks or more off, you will get the max benefit paid to you, in which case it is worth it. Run your numbers and decide accordingly. As the previous poster mentioned though, they might only consider you disabled for 6 weeks regardless of how long you take off work, be sure to ask about this before signing up.

On life insurance:
If you aren't yet FI, please get some term life insurance ASAP, also if you have a significant other, have them get term life insurance right away. I think getting term life insurance outside your employer is a good idea because it is very cheap and it stays with you regardless of your job status. However, pregnancy will likely disqualify you from getting a policy right now so I would sign up for your employer's offer (5x earnings or in your case 400,000). Some employer's require med exam for supplemental life insurance and might not cover you if you're pregnant, another thing to ask HR in addition to the price. You will only need this coverage for one year until you can shop outside your employer so cost shouldn't be a big concern and it will cover your family and child in the event of catastrophy (death). If I were in your shoes I would definitely get as much term or employer provided life insurance as I could ASAP and also encourage your partner to get some as well.

Once baby arrives and everyone is healthy I would research a term life insurance policy for you. I had a good experience with the company Haven Life, the application is all online and the medical exam is done by a nurse that can come to your house. This was 3 years ago but I assume they still do this. We took out $1million on me for $34 per month and 250k for my wife for $10 per month for a 20 year term.

Good luck with everything and enjoy your time with your growing family.

Thank you!

I'll find out about the ST disability coverage. I'm not sure how long I'll take off, but I do want to take at least the full three months.

For the life insurance, I applied online via Haven Life and got a quote. They said I wouldn't even need an exam (didn't even ask if I was pregnant in the application) and I can get a $1 million policy for $32.92/mo for 20 years or $56.16/mo for 30 years. I don't know much about life insurance, so which term should I get? I am 32, so I was thinking of going with the 30 years. What does the term dictate? Is that how long they are guaranteed to cover me if I continue my payments? Will the monthly payments go up as I age? Should my spouse sign up for the same amount of coverage?


Thanks to everyone else for the thoughts about ST disability. I will do more investigation and crunch the numbers. Yes, it is voluntary, so I do have to sign up for it during open enrollment.