Catastrophic Health Plans

Catastrophic health insurance

Catastrophic health plans come with lower monthly premiums but very high deductibles.

Health insurance is intended to protect you and your family in case of an emergency. Many of these plans may not do that.

Paying for insurance you might not need can be tough when money is tight. If this is your situation, a catastrophic health insurance plan might work for you.

♦ Catastrophic plans are intended for individuals under 30 and those with an extreme financial hardship.

These plans have lower monthly premiums and very high deductibles. The deductible is usually set at the maximum out-of-pocket allowed by the ACA.

♦ For 2024, the maximum out-of-pocket is $9,450 for an individual and double that for a family ($18,900).

Catastrophic coverage might protects you for worst-case scenarios, providing coverage for hospitalization or serious illnesses.

Catastrophic plans cover essential health benefits required by the Affordable Care Act

Monthly premiums are usually low but deductibles are high.

♦ Monthly premiums are usually low. But you cannot use a premium tax credit to purchase a catastrophic plan.

If you qualify for a premium tax credit, either a Bronze or Silver plan could be a better choice.

♦ Catastrophic plans cover certain preventive services like shots and screening tests at no cost and at least 3 primary care visits per year.

You have to pay all other medical costs yourself until you reach your deductible.

♦ If the deductible is equal to the maximum out-of-pocket financial risk will be very high.

What you need to understand about catastrophic plans

They are primarily intended for young people less than 30 years old. People who are less likely to incur major medical expenses.

People over the age of 30 are permitted to buy these plans if they can quality for a hardship exemption.

♦ The Affordable Care Act's individual mandate was not repealed as many people think. The penalty though was eliminated at the end of 2018.

Even though the individual mandate's penalty is gone, you would still need to request a hardship exemption from the "mandate" to be able to buy a catastrophic plan.

• The process is not easy and it is not quick.  If you are considering requesting an exemption you need to start before open enrollment or you may not have enough time.

Read more about Hardship Exemptions.

You pay more upfront

♦ You pay most routine medical expenses yourself. Up to the maximum out-of-pocket.

These plans are considered better than no insurance at all.

Catastrophic plans are estimated to cover less than 60% of total costs of care. That mean you could end up paying more than 40%.

♦ In most cases, a Bronze plan may be a better choice.

Bronze plans must cover essential health benefits, including emergency services and prescription drugs, which catastrophic plans may not cover until the deductible is met.

A premium tax credit can be used to help reduce the monthly premium for a Bronze plan.