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FSA Strategy When Expecting A Baby

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  • FSA Strategy When Expecting A Baby

    Hi,

    Am enrolling for health insurance and FSA for the next year 7/1/20 to 6/30/21. If all goes well, planning to have a baby in mid-spring 2021. I want to set up an FSA for maternity, childbirth, and early pediatric care not covered by my insurance, which will be at least $1000 (the deductible) but also 20% of additional hospitalization expenses. Since I don't exactly know how much that 20% will amount to, and I don't want to risk losing funds if we don't end up using it, BUT the birth of a child will be a qualifying event to change FSA, can I increase my FSA amount in the middle of the plan year, once I know how much the hospital is charging me for my 20% maternity-related hospitalization fees? Since I won't be getting a hospital bill until a few weeks after the birth, I would have time to change the FSA with the birth of the baby. Is this a strategy people use? Or do they bite the bullet, estimate some costs, and hope they don't end up guessing wrong?

    Thanks.

  • #2
    FSA rules are weird, and it's easy to lose your money, which is a greater loss than the potential tax benefit. As far as I know, you can only change FSA elections once per year. (I think the changes with the birth of a child are only for other benefits). I would be really careful not to over-fund the account. Even if your deductible is $1000 you may owe less than that out of pocket for maternity services.

    Congrats on the baby!

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    • #3
      If you are not yet expecting I would not set it up. Sometimes it can take a few months and your delivery might fall in the next academic year. Talk with your HR department to make sure you know when you can make changes.

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      • #4
        Originally posted by Lordosis View Post
        If you are not yet expecting I would not set it up. Sometimes it can take a few months and your delivery might fall in the next academic year. Talk with your HR department to make sure you know when you can make changes.
        True, but if I partially fund it, it could take care of any early pregnancy expenses? i guess most of those expenses are covered by insurance

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        • #5
          Be very careful about estimating costs for childbirth. Costs vary considerably across institutions, states and cities, and whether or not your wife has a c-section or not. You can’t plan for the possible conversion to c-section. Also, factor in the at least two days of charges for in hospital newborn care and screening. At a 20% cost sharing you might find a 3k deductible in a high deductible plan is worthwhile. And certainly don’t plan on pregnancy at a specific time period.

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          • #6
            Originally posted by ENT Doc View Post
            Be very careful about estimating costs for childbirth. Costs vary considerably across institutions, states and cities, and whether or not your wife has a c-section or not. You can’t plan for the possible conversion to c-section. Also, factor in the at least two days of charges for in hospital newborn care and screening. At a 20% cost sharing you might find a 3k deductible in a high deductible plan is worthwhile. And certainly don’t plan on pregnancy at a specific time period.
            agreed, but it is 20% cost sharing AFTER meeting deductible.

            also agreed, not plan for conversion to c-section but could plan for at least the minimal expenses with a vaginal delivery. i would not of course overfund the FSA by anticipating a potential c-section.

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            • #7
              Originally posted by GastroMastro View Post

              agreed, but it is 20% cost sharing AFTER meeting deductible.

              also agreed, not plan for conversion to c-section but could plan for at least the minimal expenses with a vaginal delivery. i would not of course overfund the FSA by anticipating a potential c-section.
              All I’m saying is do some intense research re: costs (negotiated rate from your insurer with different hospitals). Also, call ahead to find out if anyone who might see your wife or child is potentially out of network (anesthesia is a big one followed by the pediatrician seeing your child).

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              • #8
                Originally posted by ENT Doc View Post

                All I’m saying is do some intense research re: costs (negotiated rate from your insurer with different hospitals). Also, call ahead to find out if anyone who might see your wife or child is potentially out of network (anesthesia is a big one followed by the pediatrician seeing your child).
                good call on the anesthesia, didnt think of that

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                • #9
                  Originally posted by GastroMastro View Post

                  good call on the anesthesia, didnt think of that
                  You could try asking any colleagues with recent deliveries to estimate their out of pocket expenses. Our recent delivery was ~$1,250 including uncomplicated hospital stay, anesthesia for epidural and OB services but these things vary by plan. Don't overfund. It's not the end of the world to pay some out of pocket costs and finally, as already stated above... wouldn't necessarily bank on a timely pregnancy. Nature sometimes has it's own plans.

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                  • #10
                    I wouldn't plan to contribute to the FSA with the expectation of pregnancy. You can find other ways to save money. Sure a few hundred dollars saved feels good but you can lose plenty on the FSA if plans don't go your way. We almost missed out on $5k of FSA money for childcare one year because of crazy rules. Just one year of missing that would have cost us 3 years of savings.

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                    • #11
                      Originally posted by Dicast View Post
                      I wouldn't plan to contribute to the FSA with the expectation of pregnancy. You can find other ways to save money. Sure a few hundred dollars saved feels good but you can lose plenty on the FSA if plans don't go your way. We almost missed out on $5k of FSA money for childcare one year because of crazy rules. Just one year of missing that would have cost us 3 years of savings.
                      Thanks. This is all the more reason for my initial specific question , if we DO have the baby during mid year can I then add to my FSA to pay for the hospitalization??

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                      • #12
                        Originally posted by GastroMastro View Post

                        Thanks. This is all the more reason for my initial specific question , if we DO have the baby during mid year can I then add to my FSA to pay for the hospitalization??
                        See the following:

                        https://www.google.com/amp/s/fsastor...25764.amp.html

                        Check with your employer.

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                        • #13
                          Originally posted by GastroMastro View Post

                          True, but if I partially fund it, it could take care of any early pregnancy expenses? i guess most of those expenses are covered by insurance
                          Depends on how the billing works. Sometimes you get a copay with each lab and ultrasound. Sometimes it is all at the end. You would have to check with your insurance and the practice and hospital.

                          It is insane that it is impossible to figure out the cost of something that literally happens all the time all over the country. But medical billing is way more confusing then it should be. Even to a forum full of financial minded physicians.

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                          • #14
                            Originally posted by GastroMastro View Post

                            True, but if I partially fund it, it could take care of any early pregnancy expenses? i guess most of those expenses are covered by insurance
                            Don’t guess. Know. Mandated preventative services include folic acid, preeclampsia screening, gestational diabetes screening, Rh compatibility screening, UTI screening. This doesn’t cover all the visits and ultrasounds or any screening testing that’s elective:

                            https://www.healthcare.gov/preventive-care-women/

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