This article is an original article from January 5, 2009. It was written by Nick Perry.
At the risk of sounding like a broken record, health insurance can be complicated. When you buy a new policy, or you’re looking over your current policy, there are a hundred things to remember to look for: what’s my deductible? What’s my copay? If I go to the chiropractor on the Tuesday following a full moon, will I receive full benefits?
I’m exaggerating, of course, but only barely. If you want to make it a little more complicated, all you’ve got to do is throw in a dash of maternity coverage.
The important thing to keep in mind when you’re dealing with maternity coverage is that most maternity-related expenses are going to have little or nothing to do with your normal benefits. The costs of pre-natal care, delivery, and post-delivery care are almost universally not covered expenses under your normal health plan. The second thing to keep in mind is that if you’re currently pregnant, you’re out of luck. If you don’t already have maternity coverage, you’re not going to be able to add it. Actually, if you don’t currently have health insurance of any sort and you’ve just gotten pregnant, then no major carrier will issue you a health insurance policy of any sort. If that’s the situation you’re in, I suggest checking out your options with state assistance.
The third thing to keep in mind is that maternity coverage on an individual policy can be very pricey, and here’s why: health insurance is all about risk. When a health insurance company issues a policy, they’re hoping that you never, ever, ever get sick or injured, because then they’ll have to pay a claim. If an insurer issues a hundred policies and only one person files a claim, then the insurance company’s expenses are kept low, and that means that their premiums can stay lower. That’s why it’s also more expensive to get health insurance when you’re older or when you have a more colorful health history — you present a bigger risk to the insurance company (in other words, there’s a greater chance that you’ll actually use your health insurance to pay a claim), so they charge you more to accept that risk.
Now, nobody is out trying to get sick or injured, and that means that every year loads of people with health insurance will pay their premiums and not file a claim. Health insurance companies love this, and you should too — fewer claims means lower expenses for insurers, and that means lower premiums. However, as a general rule, nobody buys maternity coverage unless they’re thinking about getting pregnant, and that means the chance of a claim being filed against that insurance policy is much higher than the chance of a claim being filed against a normal health insurance policy. That means that policies that include maternity coverage have significantly higher premiums than policies without it.
Now, what does maternity coverage do?
In a nutshell, maternity insurance covers the costs of pregnancy and delivery. Of course, nothing could be that simple, so let’s elaborate a little.
There are two main ways in which maternity coverage can work.
The first is the method utilized by most insurance companies: subjecting maternity benefits to a maternity deductible separate from the normal medical deductible. So, if you break your leg, your costs associated with that apply to your medical deductible, and that medical deductible is completely separate from your maternity deductible. Aside from that, maternity benefits structured in this way are pretty normal.
The thing is, many maternity deductibles are pretty high, sometimes up in the $10,000 range, while the usual cost of a routine pregnancy only runs $4000 – $6500. It may seem pretty useless to have a maternity deductible that high, but there is a benefit to it.
As we discussed in the article on high deductible health plans, covered expenses get negotiated rates while non-covered expenses get billed the full amount. As a quick refresher: if you go to the emergency room and don’t have health insurance, you’ll get billed for the full amount of the ER visit (let’s say, just for example, that the cost is $4000). If you do have health insurance, then the insurance company will get a bill from the hospital for $4000, but chances are they won’t pay that much. Instead, they’ll pay the negotiated rate that the hospital has agreed to accept from the insurance company for the services rendered. This means that on a $4000 bill, an insurance company will probably pay $2400-$3200. Well, if you go to the hospital on a high deductible health plan and get that bill for $4000 and you haven’t yet met your deductible, you can generally negotiate to pay that negotiated rate, too. A high deductible maternity benefit works the same way — although you may never meet your deductible, since your maternity expenses are a covered expense you will be able to negotiate a lower rate than you would be able to if you had no maternity coverage at all.
The second way maternity coverage can work is the method employed by United Health Care’s individual division, Golden Rule. With Golden Rule, you get first-dollar benefits, meaning you don’t have to meet a deductible before your insurance starts paying benefits. Instead, you have a sort of bank of $4000 that you can draw on to pay maternity costs. Once you have used up that $4000, you’re responsible for the rest of your maternity costs. To get the full benefit, you’ve got to have the benefit added to your plan for twelve months — trying to use the benefits before that twelve month period is up means you’ve only got access to 50% of the bank, or $2000 worth of benefits. That twelve month waiting period does include conception, so patience is a virtue with this plan.
Depending on the carrier, your maternity benefit may also impose a waiting period for any maternity benefits of anywhere from 90 days to twelve months. Always remember, that waiting period includes conception. Also, maternity benefits cover routine expenses, but even if you don’t have maternity benefits on your health insurance policy, emergencies related to pregnancy (such as having to have an emergency c-section) may be covered. When it comes to maternity benefits, it’s vitally important to have your agent handy to help guide you through your policy.
If you have any questions about maternity coverage, please don’t hesitate to get in touch. Health insurance is complicated enough, and adding this extra layer of complexity can make it very difficult to determine exactly what is and what isn’t covered. As to which benefit structure is best for you, that depends on a number of personal factors — there’s no one-size-fits-all health insurance policy, and that doesn’t change when you throw maternity benefits into the equation. As always, I’d be more than happy to sit down with you and help you figure out what policy is the best fit for you.