Overview

In the United States, the average cost of vaginal birth is nearly $10,000, and the average price for a cesarean section is close to $14,000. There are tools and strategies you can use to save money on your medical bills. Insurance can help cover the cost of prenatal care and birth. Tax-advantaged accounts like flexible spending or health savings accounts can save you money on the expenses you have to pay.

This article will get you off on the right foot to minimize costs and ensure you are covered. If you already have health insurance, this article will help explain how your health insurance works during your pregnancy and birth. If you do not have health insurance or are in the process of changing your insurance, this article will help you figure out how to choose the right plan. Plus, get an overview of tax-advantaged accounts you can use to pay qualified medical expenses. If you are not in a financial position to obtain insurance or utilize tax-advantaged accounts, this article also has tips for understanding the costs and how you can get assistance with coverage.

This article is not intended to be used as tax advice. Please consult your CPA, accountant, or tax professional for questions and more information.

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Article and Resources

Resources

I am not an expert on health insurance. I have had a good amount of experience just from my struggles with insurance, especially through two pregnancies. This is an overview of how this works, so you can better understand your insurance. Your best bet is to get on the phone with your insurance company, compare plans online, and read the full explanation or summary of benefits. If you are choosing a new health plan and have a human resources department or someone helping to set these up, that will be a good resource.

Another great resource is your care provider’s office. If you are confused and have questions, ask for help. Request someone from your midwife or doctor’s office to get on a call with you and the insurance company. Don’t do this with your doctor or midwife during an appointment. Save that time for focusing on your prenatal care. Call the office and find out who can assist you with insurance. You can also call your insurance company and ask questions to understand what is covered and what isn’t. The more you know, the more you can prepare, and the less likely you will be surprised or stressed out by medical bills after your baby is born.

If you have any questions about tax-advantaged accounts or deducting medical expenses on your taxes, please consult your CPA, accountant, or tax professional.

The Cost of Having a Baby 

Fair Health is a non-profit that collects data on health insurance. They released data on how much it costs to have a baby in each state. This was broken down by vaginal and cesarean births, both with and without insurance. The average cost for a vaginal birth with insurance was about $7,000; without insurance, it was $12,500. The average cost for a cesarean birth with insurance was $10,300; without insurance, that cost was an average of $17,000. 

Right away, you can see that having insurance significantly decreases your costs. This is because health insurance companies often have negotiated rates with hospitals and care providers. An insurance company will pay less than an individual without insurance. These costs are the total bill from the hospital. If you have insurance, you can expect to pay less depending on what is covered by your policy. The cost of birth varies a lot by state. In Alabama, vaginal birth with insurance averages just over $5,000; in Alaska, this exact birth would be more than double at $11,600. You can see an enormous range here. Prices will vary depending on where you live, your care provider, the venue where you have your baby, the particulars of your pregnancy and birth, and whether or not you have insurance. For a breakdown of average costs by state, see this article.

How Health Insurance Works

Health insurance is like any insurance in that you pay a small amount if something very expensive happens, and then that cost is partially covered by insurance. You could have insurance and never need to take advantage of it. Or you could have insurance and have a significant expense that your insurance would cover. Overall, health insurance is not that different from car or homeowner’s insurance, except that there are more intricacies. 

Understanding Terms

There are a few terms that will help you understand insurance:

Coverage: what your insurance will pay on your behalf.

Premiums: your monthly cost for the insurance.

Copays: amounts you pay for a doctor’s visit or a prescription that come out of pocket. These amounts go toward your deductible. 

Deductible: the minimum amount that you have to pay out of your pocket before your health insurance will begin to help cover costs. The higher the deductible, the lower the premium.

Coinsurance: the percentage of expenses you pay. Every plan should break down specific things like an ER visit or delivery of a baby and list the portion you are required to pay. 

Out-of-pocket maximums: the most you will pay in one calendar year. Keep in mind this only applies to covered costs. If you see a provider out of network or have a procedure not covered, you could go over your out-of-pocket maximum. 

PPO vs. HMO 

PPO stands for preferred provider organization, and HMO stands for health maintenance organization. In general, if you have a PPO, you can see any doctor or specialist without a referral. If you want to make an appointment with a dermatologist, you can do that. With an HMO, you need a referral from your primary doctor to see a specialist. Sometimes this requires an additional appointment with your primary doctor before you can make an appointment with a specialist. 

Provider Networks 

With both PPOs and HMOs, there are Provider Networks. Using care providers in the network will be cheaper. In some cases, insurance may not cover out-of-network providers at all. PPO plans allow you to see a more comprehensive network of care providers. When I had my son at a birth center, it was in and out of network. My insurance considered the birth center in-network for the prenatal care but out-of-network for the birth. 

Prenatal Care Coverage 

Preventative care and prenatal care should be covered 100% by insurance. There is some grey area with expenses like lab work or ultrasounds. In general, if your doctor is ordering it, you would think it is covered. If you request additional tests or procedures outside the scope of what the insurance company deems you need, you may end up with extra bills. You would have to comb through the explanation of coverage, which will be a massive document, to know what is covered. Even after reading this, it can be confusing and unclear. If you have questions on exactly what is covered, ask. 

Costs for Pregnancy and Birth 

Everything is a la carte when you receive a bill for your pregnancy and birth. You will get a breakdown of all the costs, which will include: ultrasounds, lab work, doctor visits, tests, birth, anesthesiologist, medications, IVs, hospital stay, etc. It is nearly impossible to figure out which of these costs you will incur, how much it will be, and what your insurance covers. The easiest thing to do is look at your deductible and out-of-pocket maximum.

Hypothetical Example

As a quick example, let’s say you have a health insurance plan with a deductible of $1,000, an out-of-pocket max of $5,000, and a coinsurance amount of 20%. After you have your baby, the total bill comes to $10,000, about the cost of an average vaginal birth. These are just arbitrary numbers to keep it simple. 

Your deductible is $1,000, so you pay that first. Then the remaining $9,000 of your bill is split 80% to the insurance company, and you pay 20% ($1,800) because that is your coinsurance amount. In total, you pay $2,800, which is under your out-of-pocket max of $5,000. This does not include your monthly insurance premiums. In this case, you didn’t hit your out-of-pocket maximum, but if you ended up with a cesarean or additional expense, you could max out at $5,000.

Health Insurance Quotes and Examples

Here are four different health insurance plans for HMOs and four PPOs and an estimate of what you would pay out of pocket. These are actual quotes for health insurance for 2023 based on someone 30 years old living in San Diego, CA. Quotes are from a range of insurance providers. This is a very simplified example; I use the cost of $10,000 for easy math.  When looking at premiums, the least expensive plan may not be the cheapest overall. In some of these scenarios going with more expensive health insurance means you will pay less overall, even though your monthly premiums are higher. 

Sample HMO Health Insurance Cost & Plan Comparison	Bronze	Silver	Gold	Platinum
Deductible (calendar year)	$6,300	$4,750	$0	$0
Out of Pocket Maximum (calendar year)	$8,200	$8,750	$8,550	$4,500
Prenatal Care	$0	$0	$0	$0
Maternity Labor & Delivery Co-insurance	40%	30%	30%	10%
Estimated Cost of Vaginal Delivery	$10,000	$10,000	$10,000	$10,000
Deductible	$6,300	$4,750	$0	$0
Co-insurance for Labor & Delivery	$1,480	$1,575	$3,000	$1,000
Total	$7,780	$6,325	$3,000	$1,000
Lower of Total or Out of Pocket Max	$7,780	$6,325	$3,000	$1,000
Monthly Premium	$311	$352	$425	$530
Total Annual Cost of Insurance	$11,514	$10,543	$8,096	$7,359

Sample PPO Health Insurance Cost & Plan Comparison	Bronze	Silver	Gold	Platinum
Deductible (calendar year)	$6,300	$4,750	$0	$0
Out of Pocket Maximum (calendar year)	$8,200	$8,750	$8,550	$4,500
Prenatal Care	$0	$0	$0	$0
Maternity Labor & Delivery Co-insurance	40%	30%	30%	10%
Estimated Cost of Vaginal Delivery	$10,000	$10,000	$10,000	$10,000
Deductible	$6,300	$4,750	$0	$0
Co-insurance for Labor & Delivery	$1,480	$1,575	$3,000	$1,000
Total	$7,780	$6,325	$3,000	$1,000
Lower of Total or Out of Pocket Max	$7,780	$6,325	$3,000	$1,000
Monthly Premium	$350	$561	$669	$757
Total Annual Cost of Insurance	$11,981	$13,056	$11,027	$10,083

Your Health Insurance and the Calendar Year

An important thing to keep in mind is that health insurance works on a calendar year. On January 1, all of the numbers, like the deductible, and the out-of-pocket maximum, reset. If you have maxed out your deductible in December, that goes back to zero on January 1. This can be particularly frustrating if you accumulate charges in two calendar years.

Obtaining Health Insurance

There are many ways you can get health insurance.

Group health (through an employer or your partner’s employer) 

Individual coverage 

Military 

COBRA is a program that allows you to continue your health insurance from your employer if your employment is terminated.

Medicaid is federally funded insurance for low-income individuals.

If you are in the United States and do not have health insurance, visit healthcare.gov. 

Open enrollment begins November 1 and ends December 15 to get health insurance coverage starting January 1. There are subsidies available if you qualify based on your income.

Affordable Care Act

The goal of the Affordable Care Act was to give all Americans access to affordable health care. The ACA/Obamacare has pros and cons and has put some significant changes into effect. This expanded Medicaid and gives tax credits on government-sponsored health plans if your income qualifies. It made changes like not allowing companies to deny coverage based on a preexisting condition. In the past, pregnancy was considered a preexisting condition. It also standardized how plans are labeled, making it easier to compare different programs from different companies. Bronze plans are the cheapest but only pay 60 percent of your medical costs. Platinum plans are the most expensive and pay 90 percent. 

On healthcare.gov, you select the state you live in, and it will either let you continue on the healthcare.gov site or take you to your state’s marketplace. Either way, you will find out if you qualify for any subsidies based on your income and see what plans are available. One thing I do like about these marketplaces is that they make it easy to compare programs across different insurance carriers. Even if you do not qualify for assistance based on income, these marketplaces allow you to compare plans across multiple carriers and purchase insurance. 

Financial Assistance

If you think you cannot afford health insurance, you need to look at the available resources and see if you qualify for Medicaid or subsidies under the ACA. Also, talk to the hospital or birth center where you want to have your baby and find out if they offer reduced rates based on income or any types of discounts. Some organizations or care providers will base rates on a sliding scale based on income. You can also negotiate a payment plan. Even if money is tight, you have options. 

Making Sure Your Insurance Covers Your Provider

If you already have coverage, find a provider covered by your insurance. If you sign up for new coverage, you can find your ideal provider first, then work backward to find a plan covering them. This will be similar to finding insurance for your new baby and choosing a pediatrician.

Health Care Expenses and Your Taxes 

Many people are under the impression that you can write off health insurance expenses when you file your taxes. If you itemize rather than take the standard deduction, and your qualified medical expenses are more than 7.5% of your AGI, you may be able to write a portion of them off. Otherwise, you would likely take the standard deduction and not write off specific medical expenses. Are you confused yet? 

The standard deduction for 2022 is $12,950 for individuals. This is going up to $13,850 in 2023. The standard deduction for married couples filing jointly is $25,900 in 2022, increasing to $27,700 in 2023. Most taxpayers take the standard deduction, meaning you cannot deduct any additional medical expenses.

You may be able to deduct the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. For more information from the IRS on this topic, click here. For example, if your adjusted gross income is $100,000, and you spend over $7,500 on medical expenses, you may be able to deduct the costs exceeding $7,500. Please talk to your CPA or tax professional for specific questions on this topic. The takeaway is please do not assume you will be able to write off your medical bills. For more information on deducting medical expenses check out this article from Turbo Tax.

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) 

Another way to pay for medical expenses pre-tax is to use a flexible spending account or a health savings account. Again, this article is not intended to be used as tax advice. You should discuss this with your CPA, accountant, or tax professional. You also may be able to talk to your human resources department if your employer offers this type of account. But this should give you a brief overview so you have an idea of how these accounts work. 

Flexible Spending Account (FSA) 

A flexible spending account is an employer-sponsored account. If your employer or spouse’s employer offers an FSA and you are pregnant, you should look into it. Here is a simple example here is how this works:

The FSA contribution limit for 2023 is $3,050. This amount is inflation-adjusted for future years. You estimate your health insurance costs for the year. If you are having a baby, you will likely be paying more than the contribution limit. You divide the total by the number of pay periods you have, and those funds come out of your check pre-tax. You can expect about $127 deducted from each paycheck if you max out the account and are paid twice a month. When you incur an eligible expense, like a doctor’s bill, you submit that to your human resources department or whoever manages the FSA plan, and they reimburse you. This account saves you money because you are not taxed on this amount.

There is a catch because risk is involved for you and your employer. If you elect to have $3,050 taken out for 2023 and have your baby in January, you pay $3,050 out of pocket, submit your receipts, and get reimbursed; you have only paid 1/12 into this. If you quit, your employer loses out on that money, and you are not legally required to pay it back. On the other hand, if you elect $3,050 and only spend $2,000, you lose that extra $1,050 at the end of the year. If you find yourself in this position, some expenses like over-the-counter medicines and other health-related expenses can qualify, so you stock up your medicine cabinet and get reimbursed, so you don’t lose those funds. 

Health Savings Account (HSA) 

If you or your spouse do not have an employer that offers an FSA or you are unemployed or self-employed, you may be able to utilize a health savings account. To qualify for an HSA, you must have an eligible insurance plan. To be eligible, you must be enrolled in a High Deductible Health Plan (HDHP). The IRS defines an HDHP, and for you to qualify, it must meet specific criteria. For 2023 the IRS defines a high-deductible health plan as any plan with a deductible of at least $1,500 for an individual or $3,000 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $7,500 for an individual or $15,000 for a family. Health insurance plans will note if they are high deductible health plans, abbreviated HDHP. If you plan to utilize an HSA, you must ensure that your insurance is a qualified high-deductible health plan.

The limits on HSAs are much higher than FSAs. For 2023 you can fund the account with $3,850 for an individual and $7,750 for a family. These funds grow tax-free, and if you withdraw funds for qualified medical expenses, you do not pay taxes on the initial investment or the gain. There are strict guidelines for what is considered a qualified medical expense, and you want to ensure you know what is qualified. If you set this up through employer contributions comes out of your paycheck pre-tax. If you set this up independently, you deduct the contribution from your tax return. 

If you withdraw money for something not a qualified medical expense, like a vacation, you would be taxed on the entire withdrawal amount, plus a 20% penalty. Ouch! The good news is that these funds don’t go away. After age 65, you could pull funds out without the penalty, even if it is not used for a qualified medical expense, but they would be taxed. In this way, after age 65, an HSA works similarly to a traditional IRA.

The HSA account needs to be established before you incur the expense, but it does not have to be funded. You could potentially open an HSA and fund it and reimburse yourself as you go or even at a later date, as long as the account is opened before you incur the expense. This article is not intended to be used as tax advice. Please consult your CPA, accountant, or tax professional for questions and more information.

Hospital Indemnity Insurance

Hospital indemnity insurance is supplemental insurance coverage to help cover out-of-pocket costs associated with labor and birth. You pay a monthly premium, and you receive a fixed benefit if you are hospitalized. For example, a policy may pay $1,000 for the first day and $200 per day after that for up to 30 days. Some indemnity policies may include a newborn benefit, so you also receive a benefit amount for your newborn. The benefit is paid directly to you, and you can use those funds to help cover the costs of your birth.

This may sound great, but as with any insurance, you must read the fine print. Hospital indemnity policies are not subject to most federal health insurance regulations, like the Affordable Care Act. Although the ACA removed preexisting conditions from health insurance, most indemnity policies will not cover a hospital stay for pregnancy if your pregnancy is deemed a preexisting condition. Most insurers require coverage for a period of 10-12 months before your baby is born. Not all states allow insurers to sell hospital indemnity insurance. If it is available in your state, you may need to purchase an optional benefit to include pregnancy.

Hospital indemnity insurance may be available through an employer, or you may purchase it on your own. Start with your current health insurance provider if you are shopping for an indemnity policy. Ensure you fully understand the terms and conditions of the policy. These policies can be helpful and save you money, but they have a lot of restrictions and can be very confusing.

Be Prepared for Medical Bills

Insurance and medical bills are confusing and can be a huge pain. Understanding your insurance and how to take advantage of tax breaks if you are eligible will pay off and prepare you for upcoming expenses. You may want to set aside funds each month to budget for medical expenses. If you are concerned about paying medical bills, please inquire about payment plans with your provider or insurance company. If you receive a bill that you do not understand, please reach out to ask questions, make sure you know the charges, and verify the bill is correct.

Birth Centers and Home Birth

While the popularity of birth centers and home births is increasing, many health insurance providers have limited or no coverage for prenatal care and birth in these settings. If you are interested in having your baby outside of a hospital, please ensure you understand your insurance coverage and costs upfront, so you are not blindsided by charges later.

The Costs of My Births

When I was first pregnant with my son, I had no idea how expensive it would be just for my prenatal care and for him to be born. In the end, it cost us close to $7,000, not including my insurance premiums, which were around $300 per month. That was an out-of-pocket cost. My second birth was a home birth, which was not covered by my insurance. By the time my baby was born, I had paid around $6,000 for my prenatal care and birth with my midwife, plus labs, ultrasounds, and supplies for a home birth. This amount does not include the monthly premiums I paid for my insurance.

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