Patient Protection and Affordable Care Act (PPACA) insurance premium and cost sharing subsidies make it more affordable for many families when purchasing coverage for maternity and newborn care benefits.

Medical expenses relating to pregnancy and childbirth are both predictable, and very high. They are predictable because most expenses occur during delivery, and we have at least nine months to prepare.

Families who plan to take advantage of the maternity and newborn care benefits baked into PPACA policies need to budget and plan for these left-over expenses.

  • Premium subsidies and eligibility
  • Cost sharing subsidies and eligibility
  • Subsidies and out of pocket maximums
  • Estimating left-over maternity expenses

Insurance Premium Subsidies under PPACA

One of the provisions most helpful to many growing families is the PPACA premium and cost sharing subsidies for maternity coverage under ObamaCare. Not only are basic health benefits now more available the government may provide assistance in making the coverage more affordable – for some.

Insurance premium subsidies under PPACA are perhaps the concept most people are familiar with, and grasp most easily as the logic is more straightforward. People who purchase individual coverage through a state insurance marketplace, whose income is between 100% and 400% of the Federal Poverty Level (FPL), and whose employer does not offer an option that is both qualified and affordable may qualify for premium subsidies. And this is the easy part to understand?

The premium subsidies will come in the form of tax credits that are either advanced or refunded. In either case people must estimate their tax credit during open enrollment, the coverage will take effect in January, and the subsidy credit will be reconciled on April 15th of the subsequent year – up to eighteen months after the initial estimate.

Subsidies Applied to Low Value Plans

It is important to note that these subsidies are then applied to the second least expensive silver level plan available in your state-based health insurance marketplace. There are four metal plans (bronze, silver, gold, and platinum) you can choose from that have actuarial values ranging from 60% to 90%. The silver plan has an actuarial value of 70%.

An actuarial value of 70% means that the average policy holder can expect to pay 30% of his or her medical expenses out-of-pocket. If you are planning to have a baby, your medical expenses are not average. They are much higher, so be prepared for plenty of left-over medical bills on a silver plan.

  • The average cost of a c-section delivery is $16,700.
  • Your share of that amount is $5,010 if on a silver plan.

The chart below does most of the math for us courtesy of DC.gov in a presentation about premium subsidies and cost sharing. Compare these figures to recently published premium cost for 2nd lowest silver level individual coverage in NY State – $3,828. Click the picture for a larger view.

Premium and cost sharing subsidies by income

Cost Sharing Subsidies under PPACA

Cost sharing subsidies under the Patient Protection and Affordable Care Act (PPACA) are designed to limit the amount of out-of-pocket expenses for people and families with incomes under 250% of the federal poverty level.

The law is brand new, and many applications of rules are untested. It may be helpful to illustrate how the cost sharing subsidies may play out for a family giving birth during 2014. We again look at the average cost of a c-section delivery ($16,700).

Actuarial value of the plan with cost sharing Expected Out-of-Pocket for Normal C-section
94% $1,002
87% $2,171
73% $4,509
70% $5,000

As you can see the cost sharing subsidies can make a huge difference for families expecting to use the benefit. But also notice that even at the highest level of subsidy there is a thousand dollar out-of-pocket expense for a perfectly health pregnancy and delivery.

Costs can range much higher for complications prior to delivery, or a premature birth. Be prepared.

Subsidies and Out-of-Pocket Maximums

The last topic families need to understand when picking a maternity plan while using premium subsidies is the out-of-pocket maximum rules under the Affordable Care Act. The PPACA sets limits on the amount consumers must pay out of pocket: $6,350 for an individual, and $12,700 for a family.

All four metal plans (bronze, silver, gold, and platinum) have the same out of pocket maximum. The different actuarial values simply determine how quickly you reach the maximum amounts that must be paid out-of-pocket.

When picking a plan for the maternity and newborn care benefits families need to consider what happens to the out-of-pocket maximum when an infant is born prematurely or seriously ill and requires confinement to a neonatal intensive care unit (NICU).

  • When baby is healthy the individual maximum applies – $6,350 in possible out of pocket expenses
  • When baby requires specialized care the family maximum applies – $12,700 in possible out of pocket expenses

One of eight babies, or roughly thirteen percent requires care in a NICU. When this happens, your family’s out of pocket exposure doubles to $12,700. NICU stays are both expensive and lengthy and your metal plan choice determines how quickly you might reach these figures.

Estimating Left Over Expenses

Every pregnancy will generate left over medical expenses, regardless of premium and cost sharing subsidy levels as you will see illustrated below.

You may also experience a loss of income. Most employers do not provide paid maternity leave benefits. But you can protect your income during maternity leave by purchasing short term disability insurance. Coping with left over expenses may be very difficult during an unpaid maternity leave.

Your baby may also be born prematurely or seriously ill. Odds are one in eight that this may happen to you. Hospital indemnity insurance may help fill these holes. The average cost per night in Neonatal Intensive Care is $3,500. The average stay is fourteen days.

Estimated Unreimbursed Maternity Expenses

Actuarial Value Vaginal Birth- $12,250 C-Section Delivery- $16,700 Premature Birth and NICU- $49,000
Bronze – 60% $4,900 $6,350 $6,350
Silver – 70% $3,675 $5,010 $6,350
Gold – 80% $2,450 $3,340 $6,350
Platinum – 90% $1,225 $1,670 $4,900

Image credit: marigranula / 123RF Stock Photo

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