If you have gone through the metal tiers of health plans and feel that they are not a fit for you or what you want to pay each month, you might consider a catastrophic health insurance plan. These plans are only available to people who are under age 30 or those with a hardship exemption.3 Depending on your situation, there may be some benefits to choosing a catastrophic plan. However, there can be some disadvantages as well. That’s all for you to decide, though, but we’ll provide you with the facts to help you make that call.

I'm healthy, I'm young... Could a catastrophic plan be right for me?

Who Would Want a Catastrophic Plan?

If you consider yourself to be a generally healthy person, a catastrophic health plan might work for you. The plans have much lower premiums, in exchange for very high deductibles. As their name implies, catastrophic plans are designed to help cover you if you encounter catastrophic, major health issue like an accident or illness.3 Again, deductibles are extremely high with these plans so they are generally most helpful when a large, unexpected medical problem occurs, not if you need insurance to help cover trips to a doctor or specialist or prescription medications.

If you consider yourself to be healthy and think a catastrophic plan sounds right for you, you must be under 30 years old or qualify for a hardship exemption in order to be eligible.3 The age requirement is self-explanatory- you cannot be 30 years old or older to be eligible for this plan. A hardship exemption indicates some sort of recent financial struggle that would make it difficult to pay a metal tiered plan. Listed below are some examples of what would qualify you for a hardship exemption:

  • if you have filed for bankruptcy within the last 6 months
  • if you received a shut off notice from a utility company
  • if from caring from a disabled, ill, or aging family member you experienced unplanned increases in necessary expenses.4

To see the full list of exemption qualifications and locate the required forms and details, visit healthcare.gov.

Why Wouldn’t Someone Want a Catastrophic Plan?

The biggest disadvantage of these plans are the high deductibles. Under Obamacare (Affordable Care Act/ACA), qualified health plans cannot have a deductible exceeding $6600, which is right around the range you’ll find with the majority of catastrophic plan deductibles.2 If you expect to have doctor visits and prescriptions, or if you could not afford a $6600 hospital bill if something happened, this plan may not be a good idea for you.

Most other plans offer copayments for doctors, specialists, urgent care, and cheaper prescriptions, while catastrophic plans do not. This means that you will be responsible for the full amount of your bill until you reach your deductible.3 The metal tiered plans typically have lower deductibles, and once those deductibles are met, coinsurance kicks in and starts paying for a percentage of any medical expenses. Catastrophic plans have a much higher deductible, but most medical expenses are covered completely once it is met. The exception is that catastrophic plans will cover the first three visits to your primary doctor, but after that, again you will be charged the full price until you reach your deductible.3

A big perk of Obamacare is the use of premium tax credits to lower the amount you pay for your health insurance premiums. However, the tax credit does not apply to catastrophic plans.3 The plans do offer lower premiums compared to platinum, gold, silver, or bronze plans, but depending on your tax credit eligibility, it may be just as logical to opt for a metal tier plan.

The chart below provides a breakdown of the plans that Americans have enrolled in as of June of 2015. According to the Centers for Medicare and Medicaid, 63,174 Americans, or .6% of those enrolled in a Marketplace plan, are enrolled in a Catastrophic plan.4 This indicates that as stated above, it might make just as much sense for someone who qualifies for premium tax credits to enroll in a higher level plan, depending on health and financial concerns.

number enrolled by plan category

A Few More Determining Factors

You might still be a little unsure if a catastrophic plan is right for you, and you might still have a few questions…

Under Obamacare, individuals are required to have a qualifying health plan. Such plans offer minimum essential coverage and ensure that you are not responsible for paying a tax penalty at the end of the year. Tax penalties are likely to increase each year due to inflation and politics, so it’s good to know that a catastrophic plan is considered minimum essential coverage- meaning you would not have to pay a tax penalty at the end of the year.2

Finally, it’s important to know what health services are covered. Obamacare plans are required to offer free preventive services, such as mammograms, blood pressure screenings, and a variety of other services. Plans are also required to cover the 10 essential health benefits:3

  1. Outpatient services- no admittance to the hospital
  2. Emergency services
  3. Inpatient services- being admitted to the hospital
  4. Maternity and newborn care
  5. Mental health and substance use treatment
  6. Prescription drugs
  7. Habilitative and rehabilitative services and devices
  8. Laboratory services
  9. Preventive and wellness services and chronic disease management
  10. Pediatric dental and vision

Keep in mind, though, even though these are covered services by a catastrophic plan, they are not covered until the deductible is met. This means that $6600 deductible must be paid before your insurance company would foot the bill for a prescription or a trip to the emergency room.

These are just a few explanations that may be helpful when sifting through dozens of insurance plans. Because comparing so many options for plans and pricing can be overwhelming, Health Choice One recommends speaking with a licensed health insurance agent in your state. At no cost to you, they will walk you through your options and help you select a plan that works best for your health needs and your wallet.

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Citations

  1. 2015 tax year exemptions from the fee for not having health coverage. (n.d.). Retrieved September 16, 2015, from HealthCare.gov website: https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/#hardshipexempti ons
  2. Adleman, A. (2014, November 14). Compare the cheapest health insurance plans: Bronze vs. catastrophic. U.S. News and World Report. Retrieved from https://health.usnews.com/health-news/health-insurance/articles/2014/11/14/compare-the-cheapest-health-insurance-plans-bronze-vs-catastrophic
  3. Catastrophic health insurance plans. (n.d.). Retrieved September 16, 2015, from HealthCare.gov website: https://www.healthcare.gov/choose-a-plan/catastrophic-plans/
  4. June 30, 2015 effectuated enrollment snapshot. (2015, September 8). Retrieved from Centers for Medicare & Medicaid Services website: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-09-08.html