Maternity Benefits

Eligible workers in the United States can take time off work after the birth of a child, but the federal law does not include maternity benefits. Health care costs may be covered under an existing insurance plan or a benefits continuation under federal law.

Maternity Leave

In the United States, the federal government has intervened with the Family and Medical Leave Act (FMLA). According to this act, qualifying expectant parents can take up to 12 weeks of maternity leave without concern about losing their jobs. The FMLA does not make provisions for financing this leave. It is up the parents to use the following as a means of replacing lost income during maternity leave:

Savings
Paid sick or vacation time
Loans

Maternity Benefits and Insurance

Not all insurance policies are created equally. This is especially true if you or your spouse has recently changed jobs. Pregnancy is considered a pre-existing condition, and your new policy may have a waiting period before the insurance company will cover the cost of your pregnancy. Depending on the length of that waiting period, that could mean paying for the cost of childbirth out of your own pocket. If this happens, you do have a few options:

Consolidated Omnibus Budget Reconciliation Act (COBRA)

If you had insurance with your previous employer, you may be able to continue coverage under that policy through COBRA. Of course, you will now have to pay the full cost of the policy, including the portion that your previous employer paid on your behalf.

Financial Planning

If COBRA is not an option, or your new employer's insurance is significantly less expensive, it may be prudent to speak with a financial planner about investing a portion of your income each month, with the ultimate result being the payment of your pregnancy-related medical bills from your savings.

Flex Spending (Section 125)

Flex Spending, more commonly referred to as a cafeteria plan, may be a benefit offered through your employer. It allows you to have a portion of your salary set aside for medical costs before tax. In reality, this can mean if you set aside $100 a week, if might only reduce your take home pay by $70. The difference between the $100 and the $70 is your tax savings. How much you will save depends on your personal tax bracket. As you accumulate medical costs, you turn in a reimbursement requisition to your employer, who will cut you a check for a portion of your flex spending savings.

Depending on how your employer has set up your cafeteria plan, you will need to carefully calculate your anticipated medical costs. This is because whatever funds you have taken out of your salary that you cannot provide current year medical receipts for reimbursement will not be returned to you. This means if you have $3,000 set aside and only turn in $1,000 in receipts, you will have lost $2,000 of your income; thereby negating any tax savings you may have gained.

Make a Plan for Maternity Benefits

In the case of a planned pregnancy, prospective parents can find out whether their health care costs relating to the birth and recovery will be covered under an existing health insurance plan. If the pregnancy occurs after the waiting period has been served, the woman will be entitled to benefits as set out in the plan. The insurance company or plan administrator (in the case of an employer-sponsored health insurance policy) can provide detailed information about what types of services are covered and to what extent. In a situation where the waiting period must be served before benefits are available or the woman doesn't have health insurance, consulting an expert about options for putting aside funds to pay for these expenses is an excellent strategy.