Catastrophic health insurance is an inexpensive coverage option designed to protect you from major medical expenses. In exchange for a low premium, you'll have a high deductible. You'll pay most of your medical costs out of pocket until you reach it.
If you can’t afford to buy health insurance through your employer or from the Health Insurance Exchange, you still have options. You may be able to buy a basic health plan covering essential health benefits for unexpected illnesses or accidents. Learn how these plans work and what the real costs may be before you buy.
What Is Catastrophic Health Insurance?
These plans are designed to protect you from extreme out-of-pocket costs for catastrophic health events. They are still required to meet the minimum essential benefits under the Affordable Care Act (ACA). But you will generally incur high out-of-pocket costs before you reach your (very high) deductible.
Unlike some standard plans, catastrophic plans pay very few health expenses before you reach your deductible. That means they won't be much help when it comes to copays, prescription costs, and more.
Of course, one major accident could get you to your deductible quickly, and then you would be protected. But you'll spend a lot of money before you get to that point. On the plus side, your low premiums will offset some of these costs.
Under the ACA, the deductible for all individual catastrophic insurance plans in 2020 is $8,150. This would be the most you'd pay out of pocket.
Catastrophic plans are only available for a few groups: people under age 30; those who qualify under a hardship exemption; or those who cannot afford employer or marketplace insurance options.
- Alternate name: Major medical insurance
What Does Catastrophic Health Insurance Cover?
Like all insurance plans offered under the ACA, catastrophic plans must cover certain preventive services at no cost to you. This is true no matter whether you have met your deductible. These generally include basic shots, immunizations, and screenings. A full list is available at HealthCare.gov.
Major medical plans must also cover at least three visits to your primary care doctor before you meet your deductible.
Other than these benefits, you'll pay your medical expenses out of pocket until you meet your deductible. After that point, catastrophic insurance must cover the same essential health benefits as other health marketplace plans. These include:
- Ambulatory patient services
- Emergency services
- Pregnancy and maternity/newborn care
- Mental health/substance abuse
- Prescription drugs
- Rehabilitative services
- Laboratory services
- Preventive/wellness services
- Pediatric services
- Additional benefits, such as birth control or breastfeeding coverage
- Dental or vision coverage (based on your state’s requirements for minimum coverage)
You'll have no coinsurance or copay on any of these services once you've reached your deductible.
The availability and cost of catastrophic health insurance plans vary by insurance provider and by state.
How Do HSAs Fit In?
If you are employed and covered by only a high-deductible health plan, you can combine a catastrophic health care plan with a health savings account (HSA). HSAs allow you to set aside tax-free money to apply toward medical costs. These accounts help you pay for any of your out-of-pocket health expenses under a catastrophic health insurance plan.
Do I Need Catastrophic Health Insurance?
A catastrophic health plan is ideal for those who cannot afford a traditional health insurance plan but are looking for health coverage for emergency situations. What if you do not go to the doctor regularly or need a lower-cost health insurance plan? Or what if you are not concerned with paying out of pocket for minor health expenses? In these cases, a catastrophic health insurance plan may be right for you.
There are a few things to keep in mind before you decide to purchase a catastrophic plan. For instance, your deductible and out-of-pocket expenses will likely be higher than if you had a traditional plan.
No ACA subsidy payments are available to apply toward the premium for catastrophic health insurance plans. That means if you qualify for a subsidy, a bronze- or silver-level traditional plan may cost less and cover more than a catastrophic plan.
Whether you choose a catastrophic plan or something more, make sure you could afford it if you had to pay up to your maximum out-of-pocket amount. Like other health plans, you can only purchase catastrophic insurance during an open enrollment period, or after a qualifying event.
If you’d like more information about catastrophic health plans, contact HealthCare.gov, or call 1-800-318-2596.
- Catastrophic health insurance is a low-cost health care plan; it covers very few medical expenses until you reach a high deductible.
- These plans are only available to people under age 30, those who qualify for a hardship exemption, or those who cannot afford other options.
- After you reach your high deductible, a catastrophic plan covers all the essential benefits of a traditional health plan.
- Catastrophic plans do not qualify for government tax breaks and subsidies.