Embarking on a surrogacy journey is like opening a five-hundred-piece jigsaw puzzle and wondering where to begin. You start with one piece and add on, first an agency; then a donor; then surrogate; then legal and medical clearance, medical procedures, and pregnancy; and then the full picture of your happy family emerges! One critical but overlooked piece is insurance. Throughout the surrogacy journey, there are numerous financial risks to intended parents (IPs) that may be covered by insurance. The cost to “go bare”—without insurance—for these expenses could be catastrophic to the IPs and the gestational carrier and her family. The insurance piece mitigates these potential losses. Lawyers do not need to be experts on the types of insurance discussed below, but knowing they exist and being able to advise their clients accordingly are important to assembling the puzzle.
Egg Donor/Recipient Complication Insurance
This insurance, which is purchased prior to starting ovarian stimulation medications, covers the medical expenses associated with complications during the donor/transfer process. This insurance is necessary because in vitro fertilization (IVF) and any resulting complications are often excluded from any general medical insurance plan the donors may typically have in place.
Insurance Verifications for Gestational Carriers
An insurance verification is as important as the insurance itself. Gestational carriers (GCs) often enter the process having health insurance through an employer. An insurance review determines whether the GC’s current health insurance policy will cover the surrogate pregnancy. If done by a professional, a written review will be provided that may be used in the event the insurance company disputes coverage. Do not rely on the GC to call the insurance carrier herself—she may not know what questions to ask, may not be speaking to the correct person, or may be given incorrect information. This review should be done during the matching phase or concurrent with drafting the carrier agreement. Note: Some surrogacy statutes may even require an insurance review performed by an insurance expert in all surrogacy journeys.
Maternity Coverage for Gestational Carriers
Should the GC not have insurance or should her insurance not cover a surrogate pregnancy, it will be necessary to purchase insurance for her that will cover the prenatal, postnatal, and delivery costs, including complications. Most carrier agreements require that the insurance policy be in place prior to the embryo transfer.
There are two basic types of insurance that will cover this risk: traditional insurance through standard insurance companies via the Affordable Care Act (ACA, often referred to as “Obamacare”) and insurance plans that were designed specifically for surrogacy.
While all ACA plans must cover maternity, a surrogate pregnancy may not be covered or may allow a lien against the GC’s compensation. These plans have limitations that should be noted. They all have networks of providers, so check to make sure that the GC’s obstetrician/gynecologist and the birth hospital are included in the network before purchasing a policy. Many of the plans are HMOs with few provider choices. Both HMOs and PPOs have limited networks that do not cross state lines. While the premiums of a traditional insurance plan may be less than those created for surrogacy, the limitations may outweigh the savings. Plans purchased via the ACA renew annually, so deductibles and out-of-pocket maximums reset January 1, which could add to the expense. What’s more, there is no guarantee that the plan will be available in the next year—a plan purchased effective January 2018 may not be available in January 2019, leaving the GC without coverage.
Plans that were designed specifically for surrogacy vary as well, so a close look at the actual policy to ascertain what is and is not covered is vital. Some only cover complications of pregnancy; others will pay all expenses after the deductible. Some utilize a network of providers; others do not. The plans will cross state lines. There is no open enrollment period, so they may be purchased at any time and they do not renew annually.
The plans do have some limitations. There is a policy coverage maximum that may vary from $250,000 to $1 million. They often cover a limited number of ultrasounds. They commonly exclude genetic testing, preexisting conditions, and anything done to benefit the fetus, such as a fetal echocardiogram. One plan places a limit on hospitalization; another plan places limits on hospitalized bedrest. The deductible on the plans may be high, and the premiums are also high. However, the cost differential between an ACA plan and a plan created for surrogacy may not be significant considering the surety of coverage and flexibility.
This is insurance on your insurance. It is purchased when a GC has a plan that should cover a surrogate pregnancy but doesn’t because life happens and she loses the plan or the policy coverages change. In the case of an ACA plan, the plan may not be available any longer. In the case of an employer plan, the employer may change insurance plans and surrogate pregnancy is no longer covered, or there is questionable language in the policy and the insurance company denies coverage and all appeals get denied. At that time, the secondary plan, also known as a backup plan, would become the primary plan and pay the medical expenses associated with the pregnancy.
Most agreements specify that the IPs shall cover the cost of a short-duration life insurance policy for a GC. The most common coverage amount is $250,000 for the GC; sometimes there is an additional $100,000 coverage for the IPs.
Traditional plans are typically lower-cost and are purchased for a period of time known as a term. Term life policies are lower in cost than policies created for surrogacy, but term life policies do have some issues. Many will require a paramed (a medical exam including blood and urine) that may take three to four weeks to put into place. Problems with traditional/term life insurance include denial of coverage for a variety of reasons including health issues, lack of income, or the surrogacy itself. Another pitfall is that split beneficiaries may not be an option in some policies, so the IP would not be able to have the $100,000 written into the contract.
Plans created for the surrogacy journey may not be called life insurance but may have names such as AD (accidental death), CPI (contractual performance indemnity), or SAD (surrogate accidental death). Despite the difference in names, these plans serve the same purpose: to provide the GC’s family with funds to help with the financial loss in the event of her death during the surrogacy. These plans do allow for split beneficiaries and have a variety of limits, from $250,000 up to $1 million. Some plans allow for a payment to the GC for loss of reproductive organs or long-term disability, which is important as surrogacy contracts often require IPs to compensate for loss of organs and loss of income. These plans are not purchased for a term, but for a pregnancy. They do not require a paramed, and the application is a simple, easy process. These plans are a “forced placement”; in other words, the surrogate may not be denied coverage.
IPs commonly agree to pay lost earnings should the GC be unable to work for a period of time, usually due to doctor-ordered bedrest or recovery from birth. Short-term disability insurance plans will help to cover the lost wages. Many employers offer short-term disability insurance, as well as supplemental plans. The individual plans will offer a choice of elimination periods and the policy period (number of months the policy will pay). As these plans are income replacement, the GC must have an income to replace. Individual plans will not cover lost wages unless there is a complication of pregnancy; however, an employer-sponsored plan may cover lost wages due to pregnancy without complications.
The newborn is the IPs’ dependent, and therefore their insurance must cover the newborn nursery and costs of a neonatal intensive care unit (NICU). If the IPs live in the United States, they can (usually) easily add the newborn to their insurance and cover the child. IPs with HMO plans, however, may find that the hospital of delivery is out-of-network. IPs should research this prior to the birth. It may be possible to place the newborn on an ACA plan, but the cautions noted with ACA plans and GCs would also apply to newborns.
International IPs have a larger issue in that they may not be able to purchase insurance in the United States to cover the newborn due to the ACA’s residency requirements. Many opt to pay cash for the newborn’s hospital care, often negotiating rates or discounts in advance. The alternative is to purchase newborn insurance created for international IPs, which is available for singletons and twins, although these plans are expensive.
The insurance piece—or pieces—of the puzzle has many variations and is admittedly complex. Knowing prior to the start of the surrogacy journey the types of insurance needed and available and making sure they are in place at the proper time can remove financial risks so that the parties can focus on the big picture.