What Is Catastrophic Health Insurance?

Doctor and nurse caring for patient in emergency room

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If you can’t afford to buy health insurance through your employer or from the Health Insurance Exchange, you may be able to buy a basic health plan covering essential health benefits for unexpected illnesses or accidents. These plans are designed to protect you from high out-of-pocket costs for catastrophic health events. Catastrophic coverage plans are available at lower premiums and generally higher deductibles.

If you are shopping for insurance, you might consider catastrophic health insurance—it can cover many essentials, such as immunizations and emergency services while keeping you from depleting your bank account.

What Is Covered?

A catastrophic insurance plan might cover:

  • Essential health benefits such as ambulatory patient services, emergency services, pregnancy and maternity/newborn care, mental health/substance abuse, prescription drugs, rehabilitative services, laboratory services, preventive/wellness services, and pediatric services.
  • Additional benefits, such as birth control or breastfeeding coverage.
  • Dental or vision coverage (based on your state’s requirements for minimum coverage).
  • Preventive services like shots, immunizations, screening tests including cancer/mammography. Screenings for women every one to two years for women over 40.
  • Three primary care visits per year before you’ve met your deductible.

The availability of catastrophic health insurance plans varies by insurance provider and by state.

Who Needs Catastrophic Health Insurance?

A catastrophic health insurance plan is ideal for individuals who cannot afford a traditional health insurance plan but are looking for health coverage for emergency medical situations. This type of coverage is also known as major medical insurance. If you do not go to the doctor regularly, need a lower-cost health insurance plan, or are not concerned with paying out-of-pocket for minor health expenses; then a catastrophic health insurance plan may be right for you.

Catastrophic Health Insurance and the Affordable Care Act

You can purchase a catastrophic health insurance plan through the Insurance Marketplace. However, the Affordable Care Act subsidiaries do not apply to catastrophic health insurance. A catastrophic plan purchased on the marketplace is offered for a lower premium and has a high deductible amount.

While not as comprehensive as full medical coverage, catastrophic plans do offer some protection for expensive and unexpected medical expenses. You are eligible to purchase a catastrophic plan if you are under 30 or if you qualify for a special hardship exemption. You can complete a hardship exemption application to find out if you qualify.

If you qualify for a hardship exemption based on affordability, you can purchase a catastrophic health plan on the Insurance Marketplace. Some types of exemptions that are considered include hardship exemptions for homelessness, filing for bankruptcy, eviction/foreclosure or death of a family member.

HSA Option

If you are employed and covered by only a High Deductible Health Plan (HDHP), you can combine a catastrophic health care plan with a health savings account (HSA) which allows you to set aside tax-free money to apply towards medical care costs. An HSA is a tax-deductible saving account for health issues, in which you contribute pre-tax dollars to an account for health purposes spending.

These accounts help you pay for the deductible, coinsurance and copayment charges of a catastrophic health insurance plan. For more information about health savings accounts and how they affect your federal income taxes, check out IRS Publication 969 for health savings accounts and other tax-favored health plans.

Considerations Before Purchasing

There are a few considerations to make before deciding to purchase catastrophic health insurance. Your deductibles, copayments and coinsurance requirements will likely be higher than if you had a traditional health insurance plan. No ACA subsidiary payments are available to apply toward the premium for catastrophic health insurance plans.

If you can’t afford traditional health insurance through the marketplace or your employer, catastrophic health insurance can give you some level of protection against an unexpected accident or illness. You can only buy catastrophic health insurance during the open enrollment period or a special enrollment period if you qualify. If you’d like more information about catastrophic health insurance plans, you can contact HealthCare.gov, or by calling 1-800-318-2596.

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