Catastrophic health insurance is a specialized form of coverage designed to protect against severe, high-cost medical emergencies. While it offers comprehensive benefits similar to standard Affordable Care Act (ACA) plans, it comes with significantly lower premiums and much higher deductibles. These plans are tailored for specific groups, particularly young adults and individuals facing financial hardships, offering them a financial safety net in case of catastrophic health events.
What Is Catastrophic Health Insurance?
Catastrophic health insurance is intended for individuals who typically don’t need frequent medical care but want protection against costly, unforeseen health issues. It’s a plan available only to those under 30, or to those who qualify for financial hardship exemptions. Though it provides essential health benefits like other ACA plans, the key difference lies in its high deductibles and out-of-pocket costs. In exchange for lower monthly premiums, policyholders pay more for services until they meet their deductible.
How Does Catastrophic Health Insurance Work?
Catastrophic health insurance operates similarly to other health insurance plans, but with a higher deductible. Premiums for these plans are lower than traditional health insurance, making them an attractive option for healthy young adults who may not require routine care but still want coverage for emergencies.
For 2024, the maximum deductible for a catastrophic plan is $9,450 for individuals and $18,900 for families. This amount also doubles as the out-of-pocket maximum, meaning once the deductible is reached, the plan covers 100% of healthcare costs for the rest of the year. Unlike traditional plans, there is no coinsurance with catastrophic health insurance, meaning the insurer takes over full payment of medical services after the deductible is met.
For example, if you incur $10,000 in medical bills throughout the year and your deductible is $9,450, you would be responsible for paying the full $9,450. Once that threshold is reached, the insurance plan would cover the remaining $550 and any other costs for the remainder of the year.
Who Qualifies for Catastrophic Health Insurance?
Catastrophic health insurance is only available to specific groups:
- People under age 30.
- Individuals who qualify for a hardship or affordability exemption.
To qualify for these exemptions, individuals must apply and receive an Exemption Certificate Number (ECN). Here are the two main types of exemptions:
- Affordability exemption: If the lowest-priced ACA plan available costs more than 8.09% of your household income, you can qualify.
- Hardship exemption: You may qualify if you face serious financial struggles, such as homelessness, eviction, medical debt, or a natural disaster.
Once approved, you can use the ECN to enroll in a catastrophic health plan through the ACA marketplace.
What Does Catastrophic Health Insurance Cover?
Although catastrophic health insurance comes with high deductibles, it offers the same essential health benefits as other ACA plans, including:
- Outpatient care (ambulatory services)
- Emergency services
- Hospitalizations
- Mental health and substance use disorder treatment
- Prescription drugs
- Laboratory services
- Pediatric care, including oral and vision services
- Preventive services and chronic disease management
- Pregnancy, maternity, and newborn care
- Rehabilitative and habilitative services
In addition, catastrophic plans offer three free primary care visits each year, even if the deductible hasn’t been met. Preventive services, such as immunizations and screenings, are also covered without cost-sharing.
How Much Does Catastrophic Health Insurance Cost?
Catastrophic health insurance is known for its low monthly premiums, making it an affordable option for individuals who don’t need frequent medical care. Below are the average monthly costs based on age:
- Age 21: $248
- Age 27: $260
- Age 30: $282
- Age 40: $317
- Age 50: $443
- Age 60: $673
While premiums are affordable, it’s crucial to remember that these plans come with high deductibles. Thus, they’re best suited for those who are unlikely to need regular medical services but want protection against major, unexpected health issues.
What Types of Plans Are Catastrophic Health Insurance?
Catastrophic health insurance can be any type of plan, including:
- Health Maintenance Organization (HMO): Requires referrals for specialist visits and covers care only from in-network providers, except in emergencies.
- Exclusive Provider Organization (EPO): Provides in-network care without the need for referrals, but doesn’t cover out-of-network care.
- Preferred Provider Organization (PPO): Offers more flexibility, covering both in-network and out-of-network care, though out-of-network services cost more.
Pros and Cons of Catastrophic Health Insurance
Pros:
- Low monthly premiums.
- Covers essential health benefits.
- No coinsurance; once the deductible is met, the plan covers all in-network healthcare services.
- Available through the ACA marketplace.
Cons:
- High deductible and out-of-pocket costs before coverage kicks in.
- Limited eligibility (only for those under 30 or those with exemptions).
- Ineligible for ACA premium tax credits.
When Is Catastrophic Health Insurance Needed?
Catastrophic health insurance is a good option for those who qualify and are looking for low-cost coverage primarily for emergencies. It offers basic healthcare protection and financial peace of mind in case of serious illness or injury. However, it may not be suitable for individuals who require frequent medical care due to its high deductibles.
Catastrophic health insurance provides vital coverage for people facing financial constraints or young adults who want to safeguard against costly medical emergencies. Though it comes with higher out-of-pocket costs, it’s a valuable option for those who need basic, affordable coverage
