The New Parents’ Quick Guide to Choosing Health Benefits

 Natasha Burton
LearnVest | November 4, 2016

Welcoming a new baby into your family is an exciting time in your life. In addition to choosing a nursery room color and buying all the necessary—and probably some not-so-necessary-but-really-adorable—baby gear, you’ll no doubt start thinking about the road ahead with your little one as part of your daily life.

And a key part of that new journey is making sure your baby is immediately covered by health insurance. Certainly, deciphering health plans isn’t as fun as, say, wondering what your kid’s personality will be like, but it’s a critical step. Here’s how to navigate your company’s health plans to pick the right one for your expanding family.

1. Evaluate both parents’ coverage options.

Before anything else, it’s important to take stock of your and your partner’s respective health care plans, especially if both of you get coverage through work. Pay special attention to the different coverage tiers available under your plans, says Kim Buckey, VP of client services at DirectPath, an employee engagement and health care compliance company. For example, some plans allow you to cover just yourself and one dependent, either a child or a spouse; others might require coverage for the whole family.

In some instances it may be worth having two separate policies. “If both parents are on the same policy, then adding a child can sometimes turn the policy into a family policy at a much, much higher cost,” says insurance agent Greg Sanders, a father of three. He notes that, for example, a small company he works with offers an Employee/Children policy that costs almost $600 a month less than a Family plan that also includes a spouse.

In cases like this, it could be worth having your spouse on his or her own company plan instead of putting everyone on the same policy. Furthermore, adding a spouse to your own plan could lead to a spousal surcharge, Buckey says, in which your plan may charge extra to cover a spouse who is offered coverage through another employer and has declined to use it.

Bottom line: Be sure to read the fine print.

You may also want to check to see if your preferred pediatrician and nearby hospital are better covered by one company plan or the other.

2. Look at the total cost of a given plan, not just the monthly premium.

When you weigh the pros and cons of a plan, be sure to add in copays, deductibles and all other medical fees that you’re likely to have with a particular plan. As Buckey puts it, a plan with a low premium isn’t effective if you can’t actually afford the out-of-pocket costs that go along with it.

While you may have heard that the Affordable Care Act requires that certain preventive checkups be covered, it’s important to talk with your pediatrician, your insurance company and the benefits expert at your office to get the full picture for your situation.

And be sure to factor in any potential visits to urgent care or the emergency room as well as lab tests and prescriptions, says Raffi Terzian, M.D., senior vice president of clinical operations and senior medical director at Health Advocate, a health advocacy and assistance company. “If available, a lower deductible plan with higher monthly premiums may be more cost-effective for a family with a new baby or young children, but it’s worth the time to run estimates on all available options to determine the best fit for you,” he adds.

Finally, when it comes to out-of-pocket costs, you’ll want to consider if the pediatrician you’d like to use and a nearby hospital are in-network, in case of emergency.

3. Understand what documents you need to add a newborn to your plan.

“Giving birth or adopting a child is a ‘qualifying life event,’ meaning that you have a certain window to elect coverage for your child even if it’s not open enrollment season,” Buckey says. New parents typically have about 30 days after the birth or adoption to enroll in an employer plan or 60 days to enroll with a marketplace insurer. If you become eligible for premium assistance through your state’s Medicaid or Children’s Health Insurance Program, you have 60 days from becoming eligible to request enrollment in your employer’s plan. Coverage is retroactive to the date of birth or adoption in these cases.

You may not know in advance, of course, when this life event will occur—women rarely give birth on their due dates, after all. And since some plans require documentation within a certain time frame following the birth or adoption of a child in order to retroactively cover initial medical costs, it’s worth getting as much of the paperwork done ahead of time as possible.

Your HR department or insurance company may be able to provide enrollment or application forms in advance, Terzian says. “Since it can take time to receive a birth certificate or Social Security number, check if a letter from the hospital or other records confirming the birth can be used in the interim.”

4. Consider enrolling in your company’s Flexible Spending Account plan for Dependent Care.

If you know that you will need childcare, consider using a Dependent Care Flexible Spending Account (FSA) to get a break on the cost. “The 2016 limit for FSA Dependent Care is $5,000 for individuals or married couples filing jointly,” says John F. Knolle, CFP®, a financial planner at Saranap Wealth Advisors, LLC and father to an 18-month-old. “The $5,000 you’re spending is actually buying about $7,140 worth of services, since you’re not paying out taxes, which is essentially like receiving a 30% discount.”

Also consider timing: As Knolle points out, dependent care FSAs are “use it or lose it” plans. If you have your baby later in the tax year, you may consider contributing less than if you have your baby in January or February.

If you have a high-deductible health plan, your employer may also offer a Health Savings Account (HSA), an account to which you can contribute up to $6,750 of your pre-tax dollars in 2016/2017 if you have a family. This money can be withdrawn tax-free as long as it is going toward eligible medical expenses. While various health-care items are included, keep in mind that everyday costs like childcare or diapers aren’t considered medical expenses, so it’s important to know what’s covered before deciding if an HSA is right for you.