New parents face a broader set of issues when bringing a new child into this world. Some couples will be lucky and have direct solutions; others will need to be creative. Rather than focus on just one part of the question, expand your thinking to consider four health insurance related concerns during maternity leave:
What happens to your health insurance during your maternity leave? This is a common question asked by many new parents, often asked with a narrow focus on their employer-sponsored health plan.
- Maternity leave income – both during pregnancy if complications cause lost income, or after delivery while mom recovers from childbirth.
- Caring for your baby – all moms want to spend time bonding with baby, but sometimes when a child is born early mom may have to stay home from work longer than planned.
- FMLA and group health insurance – group coverage may or may not continue during parental leave if mom’s employer provides the plan.
- Coverage for your baby – most health plans will automatically cover your newborn for 30 days.
Income Insurance during Maternity Leave
Income insurance is very important during your maternity leave. Mom’s income is often needed to cover the everyday bills while she recovers from childbirth and spends time with her infant. But is she is not working she may not be earning an income.
Most employers do not provide paid maternity leave benefits, and only five states mandate disability coverage that will cover your maternity leave – and they leave you with a big pay cut if they do. Many new parents face an unpaid parental leave just when the extra bills for providing for a new infant begin coming in.
Short term disability insurance can be used during the time mom is physically unable to earn an income. Normal pregnancy is a covered benefit when delivery occurs more than nine months after the policy effective date. Any medical complications that require bed rest may also be a covered event.
State Mandated Short Term Disability - Many new parents assume the state government will take care of their income needs. Don’t assume anything. Only five states have such a program. A handful of others allow unemployment compensation to be used for a family leave.
Caring for your Baby during Maternity Leave
Most new parents prefer to spend as much time as possible at home bonding with their newborn baby before returning to work. But this is not always possible. Not all new parents are able to afford spending this quality time while missing one or both incomes, and they may not have any job protections or they may not last long enough. Outcomes vary by how well the parents planned ahead, their FMLA eligibility, and the state where they work.
Parents who planned ahead and bought disability insurance prior to conception can better afford their baby bonding time. Short term disability insurance covers the time mom is unable to work, which often overlaps with her baby bonding time. Having this extra income helps families better afford any extra time she chooses to take once she fully recovers from childbirth.
Two states currently have family leave insurance in place: California, and New Jersey. Both mom and dad can take time away from work, and receive a portion of their income during this time.
Your infant may be born prematurely or with a serious illness that requires specialized hospital confinement and treatment. This may leave you with a variety of unpaid bills. To add to the financial challenge, mom may need to an extended unpaid family leave from work to provide care for her sick infant.
Hospital indemnity insurance is a great way to make caring for a sick infant more affordable. Coverage must begin prior to conception.
Group Health Insurance and FMLA
The federal Family Medical Leave Act (FMLA) does not cover every new parent. You have to determine if you and your employer meet eligibility criteria. Many states have similar regulations that may apply to more parents, or extend the amount of job protected leave.
The Family Medical Leave Act provides 12 weeks of unpaid family leave for parents to spend time at home caring for their newborn. During this twelve week span the employer is required to continue its health benefits plan on the same basis. If the employer was subsidizing the premium, it must continue the subsidy and keep mom and her family on the plan.
Many couples find a nasty surprise upon taking maternity leave whether eligible for FMLA or not: health insurance costs skyrocket just as other expenses start pouring in and mom is not working. This happens when the couple uses the health insurance plan offered by mom’s employer.
One point that families often miss is the insurance premium they were previously paying pre-tax via payroll deduction. You must continue making the insurance premium payments during your leave, but do so with after tax dollars since you have no income. This may raise your out-of-pocket costs by 30% or more depending upon your tax bracket.
Another rude shock is what happens when a parental leave exceeds the 12 week limit. This may happen if you miss work prior to delivery due to complications, or after delivery if bonding with baby or caring for a sick infant. Your employer is no longer obligated to continue subsidizing your insurance premium. You can continue coverage via COBRA, but will have to pay 101% of the premium yourself – all with after tax dollars. When an infant is sick most families have no choice other than pay the added premium.
Yet another surprise is that many families are not covered by family leave laws. The federal law applies to employers based upon employee size and your work location. Sharply higher COBRA premiums may start the first day you take leave.
Add your Newborn to Insurance during Leave
Adding your newborn baby to your health insurance plan is a crucial step to take while on maternity leave. Caring for a newborn can be exhausting, with sleepless nights, followed by endless days, all while mom recovers from her childbirth.
Don’t forget to add your newborn to mom’s health insurance plan during the first thirty days of birth. Your newborn is automatically covered during the first thirty days. After that any medical needs may not be covered if you don’t take the time to complete this crucial bit of paperwork.
Most health plans will automatically accept a new child onto the mothers plan without evidence of good health, if addressed within thirty days. This problem area was addressed by the Affordable Care Act, and beginning in 2014, all health plans must accept children under the age of 19 into plans regardless of health conditions.