What Is Catastrophic Health Insurance?

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Catastrophic health insurance is a health coverage tier reserved for protecting against worst-case medical scenarios, like cancer, heart attacks or some other major illness or injury. This health plan tier has among the highest deductibles — potentially $9,000 or higher — but often charges relatively cheap premiums. Therefore, catastrophic plans may be unsuitable for consumers who need regular or ongoing medical care.

Read on to see how catastrophic policies compare to other healthcare plans and how to qualify.

How Does a Catastrophic Health Plan Work?

Catastrophic health plans are a type of health insurance that include essential health benefits designed to cover major illnesses or injuries, like heart attacks or cancer. With deductibles sometimes nearing $10,000, enrolled members will have among the highest out-of-pocket costs of any other health plan tier. Only after you meet the plan’s high deductible, will your health insurance plan start paying for your expenses.

Fortunately, the expensive deductibles are offset by much lower premiums, which can make catastrophic plans an affordable health insurance option — but only if you stay healthy and avoid visiting a healthcare facility.

Catastrophic health plans may be more suitable for those who do not require ongoing care. Otherwise, frequent visits to healthcare providers can quickly add up in exorbitant out-of-pocket expenses.

While catastrophic health insurance is intended for major procedures, you are covered for at least three primary care visits yearly without needing to meet your plan’s deductible. For instance, those who have an injury or illness that needs to be addressed by a PCP may only need to make a $35 copayment per visit.

Qualifying With the Hardship Exemption

Catastrophic health plans are only available to people under the age of 30 or those who meet a hardship exemption or affordability exemption. The affordability exemption applies if the lowest-priced coverage available to you would cost more than 8.09% of your household income. Qualifying events for the hardship exemption include:

  • Homelessness
  • Eviction, facing eviction or foreclosure
  • Death of a family member
  • Shut-off notice from a utility company
  • Property damaged by a fire, flood or another natural or human-caused disaster
  • Medical-related debt
  • You had another hardship
  • Bankruptcy
  • Domestic violence
  • Your state didn’t expand eligibility for Medicaid under the Affordable Care Act

You may also qualify for a hardship exemption if your expenses increased due to caring for an ill, disabled or aging family member. If another person is court-ordered to provide medical support to a dependent who is denied Medicaid or CHIP, you may still qualify for a hardship exemption.

What Does Catastrophic Health Insurance Cover?

Catastrophic insurance is meant to cover the worst-case scenarios. Here is a list of what a catastrophic plan will typically cover:

  • Inpatient and outpatient hospital care
  • Emergency care services
  • Prescription drugs
  • Primary and preventive care, such as vaccines and screenings (typically three primary care visits will be covered per year)
  • Mental health and substance abuse services

Additionally, all plans offered through the health insurance marketplace are required to cover essential health benefits, including:

  • Patient ambulatory services (outpatient care you get without being admitted to a hospital)
  • Emergency assistance
  • Hospitalization (such as surgery and overnight stays)
  • Infant, maternity and pregnancy care (both before and after birth)
  • Services for mental illness and substance abuse, including behavioral health care (this includes counseling and psychotherapy)
  • Medicines on prescription
  • Therapeutic and rehabilitative services and equipment (services and devices to help people with injuries, disabilities or chronic conditions gain or recover mental and physical skills)
  • Testing services
  • Services for chronic disease management and prevention
  • Services for children, including dental and vision care (although adult dental and vision insurance is not a necessary health benefit

What Isn’t Covered?

There aren’t necessarily exclusions under a catastrophic plan. The high deductibles simply make it difficult for your coverage to come into effect. They are not intended to cover the types of healthcare expenses you might incur regularly, such as regular checkups (only three primary care visits are covered). Instead, they are designed to protect you from very high medical costs in the case of a major illness or injury.

Buy a Health Insurance Plan That Meets Your Needs

How Much Does Catastrophic Health Insurance Cost?

A catastrophic plan has generally lower premiums than other types of health insurance. However, the specific cost for coverage will depend on several factors, including your age, location and the specific plan you choose. Deductibles, however, are quite high and can cost $9,100 annually according to the Kaiser Family Foundation.

Below is a comparison between a catastrophic plan and a bronze reserve plan:

 

EPO Bronze Reserve With an HSA

EPO Catastrophic

Deductible

$7,450

$9,100

Primary Care Physician Visit

0% after deductible

Visits 1-3: $50, no deductible

Visits 4+: 0% after deductible

Specialist Visit

0% after deductible

0% after deductible

Inpatient Hospital

0% after deductible

0% after deductible

Generic Prescription Drugs

0% after deductible (integrated with medical deductible)

0% after deductible (integrated with medical deductible)

Source: Independence Blue Cross

To help better illustrate the cost difference, we’ve created a simple graph comparing deductibles between catastrophic plans and the other healthcare tiers. Actual individual policies can vary.

deductible amount by tier in bar graph

Keep in mind that cost-sharing reductions and premium tax credits are not available for catastrophic plans.

Are Catastrophic Plans Worth It?

A catastrophic plan may be a good option for young and healthy people, but is generally not recommended if you’re older, need ongoing medical care and don’t have the financial reserves to pay a high deductible.

Consider the following factors:

  • Your age: Availability applies only to people under the age of 30 or those who meet certain exemptions.
  • Your health: If you have a pre-existing medical condition or expect to need frequent or ongoing medical care, a catastrophic health insurance plan may not be a good choice.
  • Your budget: These plans generally lower premiums than other types of health insurance.

How to Get Catastrophic Health Insurance

Here are some steps you can follow to get catastrophic health insurance:

  1. Determine if you are eligible. Eligibility is only available to people under the age of 30 or those who meet certain exemptions. If you are over 30 or do not qualify for an exemption, you will not be able to enroll.
  2. Shop around. Compare different plans from different insurers to find the one that best meets your needs and budget.
  3. Enroll in a plan. You can buy a policy during open enrollment, which runs from November 1st to January 15th in most states. Enrolling typically involves filling out an application and providing some personal and financial information.
  4. Pay your premiums. Once you are enrolled in a catastrophic health plan, you will need to pay your premiums in order to keep your coverage active.
  5. Renew your coverage. Most health insurance plans have annual enrollment periods, during which you can renew your coverage or switch to a different plan. Your health needs can change as you grow older and you’ll want to ensure your next plan addresses your needs.

FAQs

What are the downsides of a catastrophic health plan?

Downsides for catastrophic coverage include high out-of-pocket costs, limited coverage, limited availability and the potential of not covering pre-existing conditions.

Do I need catastrophic health insurance?

A catastrophic plan is not necessary and is meant for people who want coverage but will seldom ever use it or don’t mind paying out-of-pocket for everyday services. Premiums are low but deductibles are among the highest of any plan tier.

How is catastrophic health insurance different from major medical coverage?

Catastrophic plans are generally used for only major illnesses and injuries due to their high out-of-pocket costs making routine care too expensive. Most major medical coverage generally charges more affordable deductibles, which makes monthly doctor visits and prescription drugs more accessible to consumers. 

Key Takeaways

  • Catastrophic health insurance is a health coverage tier designed to protect you during worst-case medical scenarios and includes essential health benefits.
  • Catastrophic health insurance plans typically have very high deductibles. This means that you will have to pay for your healthcare expenses out-of-pocket until you reach the deductible.
  • Catastrophic health insurance plans generally have lower premiums than other types of health insurance, but they may not be a good option for people who need frequent or ongoing medical care.
  • Catastrophic plans are only available to people under the age of 30 or those who meet certain exemptions.

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