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Using a PPO discount plan for maternity charges

TA | July 11, 2009

Q: My wife is pregnant in her 8th month, non-US citizen and she has no maternity cover insurance. She is residing in Houston. We are searching for a PPO Health discount plan that suits her during delivery. Is she eligible to enroll in any PPO health discount plan?

A: Yes, a PPO discount plan can be used to reduce participating provider fees but this response explains why a PPO discount plan is not a significant factor in addressing your overall out-of-pocket maternity costs. For this reason, we suggest that the bulk of your medical payment planning efforts should be directed to other channels. Her citizenship is not an issue, but the pre-natal care arrangements that she has hopefully already received do have a significant role in determining whether a PPO discount plan can be used at this late date in the pregnancy. First we want to be sure that she has some health insurance (this was not clear in the question), even if that insurance does not pay normal maternity costs. If not, this should be your primary concern. See the article "Finding Health Insurance to Cover Pre-existing Medical Conditions" for more information on this topic.

In most normal maternity care situations in the U.S.1, the largest fees are those of the physician providing care throughout the pregnancy. The fee for this service is usually contracted early in the pregnancy. Most individual insurance policies do not cover regular maternity costs (nor would it be cost-effective to include this coverage), so this fee is negotiated between you and the doctor. Some doctors use a sliding scale of fees based on income. Payments are typically required in installments throughout the pregnancy, so that most of these costs are already paid by the 8th month of pregnancy. At this point the largest remaining cost, assuming a hospital delivery is planned, would be the fees from the hospital itself. Presumably you know which hospital will be used (since most doctors use one primary hospital for their deliveries) for the delivery and it is possible to find the hospital's PPO network affiliations (this information is available on the hospital's Web site as well as the PPO Web site listing participating providers). If the hospital is not a PPO member, then it probably does not make sense to consider a change of providers this late in the pregnancy.

Cash-paying patients can reduce hospital fees by using a re-pricing agreement with a PPO discount plan. But remember that we are discussing a discount on the hospital fees only, which are a minority of your total maternity costs. The net result would be a savings of a few hundred dollars. In contrast, your total out-of-pocket expense for the total maternity cost would be thousands of dollars. (We assume that you will make payment arrangements with the hospital in a manner similar to which the physician's charges were handled).

For illustration purposes, let's assume that the physician's fees are $6,000, the hospital fees are $2,400, there are no other fees and that the PPO discount is a flat 20% of the cash price. (These are not accurate figures but used only to illustrate the calculation of the impact of a PPO discount plan). Without a discount plan, your total maternity cost would be $8,400. With a discount plan, the hospital charges would be reduced by $480 (20% of $2400). The net result in this example would be a savings of $480 on a total bill of $8,400. While a $480 savings is or course significant, your much bigger concern is the remaining $7,920 out-of-pocket cost! This is why we tend to downplay the role of a PPO discount plan in a situation like this. For more information on PPO discount plans, see the reputable doctor/hospital PPO plans from Careington listed at Ehealthdiscountplan.com.

Finally, we wish to point out that despite the high cost of normal maternity care, it usually does not make financial sense to attempt to cover maternity charges through a health insurance policy. The pricing is designed to ensure that the additional premium you pay is far more than the fee you will pay directly to the medical providers. Millions of healthy babies are delivered in the U.S. each year with the cost paid directly by the parents to the medical providers - bypassing the insurance company. This is never easy on the short term, but yields a significant net savings to you over the long term.  

Footnote:

1 If this typical scenario using a private OB/gyn physician does not apply in your case, then the rest of this discussion about PPO discount plans may not be useful. For example, if she receives pre-natal care from a community clinic rather than a private physician then the clinic would be the best source of information on managing the delivery costs.


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