It is crazy to think that it has been two months since we have welcomed our newest family member. This is our second child and it has been a great experience. Our family members love watching our oldest take pride in becoming a big sister. My wife and I have thoroughly enjoyed the cuddles from the little one. We are thriving at being new parents again. This little one came because of amazing healthcare workers who helped with the delivery. Subsequently, this amazing experience does come with childbirth costs.
The cost to have a precious little one in America can be shocking. In fact, it is probably one of the most costly healthcare expenses a family can experience. For this reason, some families do not even think that it is financially feasible to have children. Families are paying thousands in out of pocket costs, even with employer-sponsored health care insurance plans. As a matter of fact, America has the 2nd highest average annual out-of-pocket medical expenses in the world.
Anyone who is expecting is probably wondering how much the childbirth costs will actually be. There are a slew of factors that cause medical bills to vary. One of those factors is the level of insurance an individual has. The level of insurance directly relates to your annual deductible amount. After the deductible has been reached, the family will pay a percentage of the remaining healthcare bills for the year.
Another factor to take into consideration are the varying hospital charges. The variance in costs can be a lot to take in. I recommended researching the average cost of childbirth for the state you plan to deliver in. The next few paragraphs will share how my family financially planned for the childbirth costs in our state. I will also provide actual costs received for the delivery of our little lady.
Financially Planning for Childbirth Costs:
It started out as another day at work when my wife called me. She asked that I come home early from work so she could tell me something. We met me in our mud room as soon as I walked in. As I waited for the news she handed me a pregnancy test. The test indicated that she was pregnant with our second child. I hugged her and immediately said, "You're welcome!"
We were looking forward to the newest member of our family. It was extremely exciting for our first born to become a big sister. It took a couple of days for the initial excitement to settle. After the initial excitement settled, I researched and evaluated the average cost of having a baby. I received numerous answers through reliable web sources. Provided that it is a healthy birth, the range appeared to be between $3,000 to $5,000. This cost was with a high-deductible health insurance plan.
This significant amount did cause some dismay. However, it was our second child so we knew what to expect. I went into the budget step of my money management workflow. I wanted to ensure that we could pay for the upcoming healthcare bills. In order to fully cover the costs, I had to increase our Health Savings Account (HSA) monthly contribution amount. Accordingly, I started contributing enough to max out the HSA by the end of the year. My HSA contributions should have been increased years ago. This provided me with motivation to change my contribution amount. No one should be stressed about the finances during this delightful time in life.
The 2020 contribution amount for an individual HSA is $3,550 and is $7,100 for a family. Therefore, it would take a year to have enough saved in the account to cover the birthing costs. According to Lively's 2019 spend report, 96% of Americans spend all of their annual contributions within the same year. You can invest the contributions if you find yourself in the other 4%.
Actual Birthing Costs
The party of 4 commenced at 8:30AM on a March 2020 morning. Our little 6 lb 14 oz baby arrived. Finally, we were complete as a family.
How Bills are Presented:
A couple months (and numerous dirty diapers) later we received all of the bills for the childbirth. The costs came in the mail on a Explanation of Benefits (EOB) from our insurance company. Explanation of Benefits are detailed cost breakdowns for each patient (momma and baby). They showed the following:
- The total "usual" charges (same fee offered to everyone)
- What our insurance company paid
- What we need to pay out-of-pocket (from our HSA account)
- The Adjusted Amount (amount written off by healthcare provider)
How Insurance Covers:
I am sure you all are wondering what the heck is an adjusted amount. An adjusted amount is a pre-agreed upon amount that is written off. Insurance companies have contracts in place with their in-network healthcare providers. These contracts document previously agreed upon amounts of money that their client and they will pay for a healthcare service.
Contrary, if your healthcare provider does not have a contract with your insurance company (a.k.a. out-of-network), they are NOT obligated to write off the difference between what the insurance company approves for payment and what the standard childbirth charges are. Therefore, you may be liable for the differences that are not written off by your healthcare provider.
A provider has to show the total "usual" amount on all EOBs, as they are required to by Federal Law. This helps prevent insurance fraud. Next, I will share the EOBs by each patient (momma and baby):
Total "Usual" Amount: $26,896
Insurance Paid: $4,867
Patient Out-of-Pocket: $2,277
Adjusted amount: $19,752
Total "Usual" Amount: $8,462
Insurance Paid: $6,417
Patient Out-of-Pocket: $714
Adjusted Amount: $1,331
Actual Costs Summary:
To summarize, we spent 3 days in the hospital. This included the delivery day and two recovery days. The total costs, for both momma and baby, were $2,991.
There are some considerations to evaluate with this total cost. The first, this was an overall healthy and natural birth. The second, these were only childbirth costs. There are additional healthcare service charges leading up to delivery day. The final consideration is that we had some previous medical services throughout the year. Consequently, the result of us meeting our deductible amount at the point of delivery.
Our annual deductible amount is $1,500. Once our deductible was met, we covered 10% of the allowed amount. The allowed amount is an amount an insurance company will pay for a covered healthcare service.
In conclusion, preparing your finances prior to having a baby is key. Therefore, adjusting all budgets to contribute more towards the HSA account. The HSA account should have a minimum amount to cover each state's average childbirth costs. Most importantly, be aware of the varying costs for additional medical services. Finally, a healthy financial position will allow you to focus on what really matters.