When you shop for health insurance, you will come across many different types of policies designed to match your financial and healthcare needs. Some policies have a higher monthly premium and a lower out-of-pocket cost when you visit the doctor. Others have a low premium but very high out-of-pocket cost for regular care.
One such health plan that has a lower premium and a higher deductible is a catastrophic health plan. Here's everything you need to know about catastrophic insurance plans.
How Does Catastrophic Insurance Work?
The government defines catastrophic health plans as plans that meet the requirements of other Qualified Health Plans (QHPs) but do not cover any benefits beyond 3 primary care doctor visits per year before the plan's deductible is met. The premium you pay each month for healthcare tends to be lower than for other QHPs, but the out-of-pocket costs for deductibles, copayments, and coinsurance are typically higher.
According to healthcare.gov, the deductible for catastrophic coverage is $6,850 per year. That means you will pay all expenses on your own until you reach the $6,850 deductible.
Why Purchase Catastrophic Insurance?
Due to the nature of these plans, they are designed for people who are generally very healthy and who want to cover their risk for a major illness or injury- but do not mind paying for routine medical expenses out-of-pocket.
If you have a catastrophic injury or illness, this type of plan prevents you from taking on the entirety of the expenses yourself, while offering a lower monthly cost when you do not need any medical care.
Do I Qualify for a Catastrophic Health Plan?
In order to qualify for a catastrophic plan, you must be under 30 years old or qualify for a "hardship exemption" which means the Marketplace has determined that you are unable to afford health coverage.
If you find deductibles and premiums confusing or want a quick refresher, check out this beginner's guide to deductibles, coinsurance, and copays.
The Limitations of Catastrophic Insurance
Though a catastrophic health plan meets the requirements applicable to other Qualified Health Plans and generally has a lower monthly premium, there are several things to consider when comparing a catastrophic plan to a standard Marketplace plan or a short-term health insurance plan.
Keep in mind that:
- A catastrophic plan is still a Marketplace plan and therefore must be purchased within the open enrollment period
- In order to qualify for a catastrophic plan, you must be under 30 years old or qualify for a "hardship exemption"
- Catastrophic plans don't cover any benefits other than 3 primary care visits per year before the plan's deductible is met
- These plans have a high deductible ($6,850) and tend to have high out-of-pocket costs for copayments and coinsurance
Short-Term Insurance Options
If you missed the open enrollment period and were therefore unable to apply for a Marketplace health plan (catastrophic or other), or if you find yourself without healthcare coverage at any point in time, one of the options available to you is short-term medical insurance.
A short-term medical plan is similar to a catastrophic health plan in that it covers unexpected illness or injury. However, unlike a catastrophic plan, a short-term plan:
- Is intended to bridge a gap in coverage for a short period of time
- Can be purchased outside the open enrollment period
- Does not meet the requirements of other Qualified Health Plans (QHPs)
Because short-term plans are not ACA-compliant, they do not allow you to bypass the fee for not having an ACA-compliant plan (though you can avoid this fee by claiming a "short gap in coverage" exemption if you have a short-term medical policy, or go without ACA-compliant coverage, for no more than 2 consecutive months).
Your health and finances are too important to risk living without coverage. Make sure you are covered today—just in case.