Catastrophic Health Insurance Plans

Healthy adults under the age of 30 may consider catastrophic insurance if they're looking to spend as little as possible on insurance.If you aren't suffering any chronic conditions and rarely get sick, a high-deductible plan could actually save you money.

Catastrophic Insurance Plans

Finding a good health insurance plan can be one of your most stressful undertakings of the year. Even with the changes of the Affordable Care Act (ACA), you may have difficulty finding an affordable health plan that suits your needs during the open enrollment period. Now that there’s no longer a federal tax penalty in most states for not having health insurance, it can be tempting for some to go without health coverage, especially if they rarely get sick.

Lacking health insurance can be much more costly, however. In a worst-case scenario of an unexpected injury or illness, you’ll be stuck with the full out-of-pocket costs. Without an insurance policy, you’ll also pay higher healthcare costs for things like preventative care, prescription drugs, and primary care visits. Luckily, you don’t have to be limited to the options on the healthcare Marketplace to find a plan with affordability. A catastrophic health insurance plan could be your best option.

What Are Catastrophic Health Insurance Plans?

Catastrophic health plans are high-deductible health plans (HDHPs) that are typically meant either for those under the age of 30, or those who qualify for hardship exemptions. A catastrophic plan is meant to protect you in case of a medical emergency that could leave you with insurmountable medical costs. This type of plan generally has a low monthly premium, although you may have to pay for other health care services, such as extra doctor visits, prior to reaching your annual deductible.

How Do Catastrophic Plans Work?

Catastrophic health insurance typically offers a lower premium in exchange for a high deductible. While lower monthly premiums likely sound great, it’s important to remember that you may have to meet your deductible before your catastrophic coverage starts paying any medical bills.

A high-deductible health plan means that if you do get sick or face a health-incident you will cover a larger portion of those expenses out-of-pocket before they begin to be covered by your plan. According to the health insurance exchange, the out-of-pocket maximum for single person coverage in 2020 will be $8,200. The pocket maximum for family coverage will be $16,400.

Who Should Consider This Type of Coverage?

Anyone who qualifies for a general hardship exemption.

Catastrophic health coverage isn’t necessarily the best option, even for those who need low premiums. While a catastrophic insurance plan may be your lowest-cost plan for monthly payments, a high-deductible plan may be more than you can handle once it comes time to pay for healthcare services.

You might also want a catastrophic plan if you qualify for any kind of general hardship exemption. These exemptions typically cover those of a lower income level or those who simply can’t afford or obtain health insurance from their work or the marketplace.

A qualifying hardship could also include something like homelessness, bankruptcy, being found ineligible for Medicaid, or a catastrophe resulting in significant property damage. If you have another hardship that you believe may qualify you for catastrophic health insurance, you can contact an insurance company for assistance.

What Do Catastrophic Health Plans Cover?

Your coverage will depend on the type of plan you have, but you can expect to pay at least some of your health-related expenses thanks to your higher deductible. Some plans will start paying a percentage of your costs immediately, while others won’t pay anything before you reach your deductible. Generally speaking, once you do hit your deductible, catastrophic plans will cover the rest of your expenses for the year.

Preventive services are an exception to the deductible rule, thanks to health care reform. These services are covered even before reaching your deductible, and you generally will have three visits to your primary care physician covered. Some plans will also provide a wider range of health care services than others. In addition to emergency services, most plans should offer essential health benefits such as vaccines and health screenings.

Is Catastrophic Health Insurance Right for You?

While catastrophic coverage can be great for specific situations, it’s important to remember this isn’t your only option for a high deductible health plan. As HDHPs become more popular, it’s worthwhile to look into HSA-qualified plans. HSA-qualified coverage allows you to place pre-tax money in a health savings account to help pay for medical care or retirement.

For those who get sick frequently or support family members with illnesses, you may find it more affordable to seek a PPO or HMO plan rather than an HDHP. A catastrophic plan simply makes less sense the more medical expenses you have. Ultimately, having a higher premium may be worth it if it saves you from spending your own money on frequent doctor visits. This can even be true for those below the federal poverty level, as you may qualify for a premium subsidy to help with the costs.

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