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Catastrophic health insurance or high deductible health plans (HDHP) are low-premium and high-deductible policies that you can buy for health insurance coverage. Catastrophic insurance is a qualified health insurance plan that follows the guidelines of Obamacare. A catastrophic plan is a form of emergency health insurance designed to provide coverage in the event of a significant medical emergency while you pay for most day-to-day health expenses yourself. You are eligible for catastrophic health insurance if you are under 30 years old or currently approved to receive the hardship exemption.
- What Is Catastrophic Health Insurance
- Can I Buy Short-Term Catastrophic Health Insurance?
- Can I Buy Medicare Catastrophic Coverage?
- Cost of Catastrophic Health Insurance
- Who Is Eligible for Catastrophic Health Insurance?
- How to Buy Catastrophic Health Insurance
- Pros and Cons of Catastrophic Health Insurance
What Is Catastrophic Health Insurance?
Catastrophic health insurance is the lowest metal tier insurance plan but also includes all of the same essential medical benefits as other health plans under the Affordable Care Act (ACA). This is a group of 10 different categories of benefits that all metal tiers of health insurance must provide coverage for and include:
- Ambulance services
- Emergency services
- Mental health services
- Prescription drugs
- Rehabilitative services
- Preventive and wellness
- Pediatric services
Catastrophic plans also provide coverage for three primary-care visits every year and free preventive services. Primary-care visits include checkups and day-to-day care while preventive care includes screenings and immunizations. These two benefits are included with each catastrophic policy even if the deductible for the plan has not been met. However, once the three primary-care visits have been used, then it is your responsibility to pay for additional care visits until the deductible has been met.
Can I Buy Short-Term Catastrophic Health Insurance?
Short-term catastrophic health insurance is not a product that is offered under the ACA or in insurance marketplaces. Instead, short-term health insurance is a separate product that can be used to provide temporary coverage if you are bridging a gap between health insurance plans for emergency scenarios. For example, to fill a gap in coverage when switching from a previous plan to Medicare coverage once you hit the age of 65. This is different from catastrophic plans, which are a longer and more permanent means of health insurance. Catastrophic plans also provide additional benefits like full coverage of maternity and newborn care, which is not included in short-term health insurance.
Can I Buy Medicare Catastrophic Coverage?
Medicare catastrophic coverage is a form of additional coverage that falls under a Medicare drug policy. Catastrophic coverage assures you only pay a small coinsurance amount for covered drugs once you exceed more than $5,000 out-of-pocket.
Cost of Catastrophic Health Insurance
Catastrophic insurance plans differ from other metal tier plans due to their lower premiums and higher deductible levels. A deductible is the amount of money you pay for medical expenses yourself before the insurance plan pays anything. For 2019, the deductible for a catastrophic health insurance plan is $7,900. This means that you must first spend $7,900 out of your own pocket before your catastrophic insurance plan will provide coverage.
For example, in North Carolina, the cheapest health insurance plan is the Blue Value Catastrophic plan. This health insurance plan has an annual deductible of $7,900 and an out-of-pocket maximum of $7,900 as well. The cost of this catastrophic health insurance plan for a 40-year-old male would be a minimum of $231.32 per month.
Who Is Eligible for Catastrophic Health Insurance?
To be eligible for catastrophic health insurance, you must be either under the age of 30 or qualify for a hardship exemption. A hardship exemption is defined as a financial situation that prevents you from buying higher-coverage health insurance. Some reasons you may be able to buy catastrophic insurance by qualifying for the exemption include:
- Being homeless
- Utility company issued a shutoff notice
- You were evicted
- Domestic abuse
- Death of a family member
- Experienced a natural disaster that caused damage to your property
- Filed for bankruptcy
What Happens If my Policy Is Canceled?
It is also possible to receive a hardship exemption if you had a health insurance policy that was canceled between enrollment periods. For example, your bronze metal tier policy was recently canceled because you were unable to pay out the monthly premiums. In this case, you would be able to apply for the hardship exemption during a special enrollment period and then purchase catastrophic health insurance through off-marketplace institutions.
Some examples of off-marketplace institutions would include insurance companies, agents, brokers or online insurance outlets. At any of these providers, you would need to reach out and prove your hardship exemption. Then once accepted, you would be able to purchase an off-marketplace catastrophic health insurance plan.
How to Buy Catastrophic Health Insurance
Before you can purchase catastrophic health insurance, you must apply through your state's health insurance exchange. Enrollment for the hardship exemption includes an online application process where you describe your current hardship. If you believe that you experienced a hardship that was not listed above, we recommend you still fill out the application, as other hardships can be approved. Once approved, you will receive an exemption certificate number and can enroll in the catastrophic health insurance plan of your choosing. If you are over the age of 30 and have not filed for this exemption, then you will not be able to apply for a catastrophic plan on your state's insurance marketplace. Therefore, it is critical to file for this exemption if you want to purchase a catastrophic health insurance policy.
No Sell States for Catastrophic Insurance
Many state health insurance marketplaces offer catastrophic level plans, but not all states and counties do. No sell states include:
- Rhode Island
If you currently live in one of these no sell states and want to purchase a higher deductible health insurance plan, you may want to consider a bronze level tier health plan, which is available in every state. Bronze plans come with a slightly lower deductible and a higher cost than catastrophic plans but are the next lowest cost alternative. Using the North Carolina example from above, the lowest cost bronze plan (Cigna Connect 6400) has a deductible of $6,400 and a minimum monthly premium of $413.57. This premium is $182.25 more expensive than the catastrophic plan in the same state while having a smaller deductible by $1,500.
Pros and Cons of Catastrophic Health Insurance
Catastrophic health insurance's low premiums are meant for people who cannot afford the more expensive coverage plans. These policies' basic coverage typically is only suitable when you are young, healthy and rarely find the need to see a doctor. So long as you don't need medical attention, you would avoid having to pay for costs by yourself and would be able to save money by paying lower premiums. It would not be a good plan if you are a senior who regularly needs medical supervision or costly subscriptions.
If you need medical attention, catastrophic health insurance can become very costly due to the high deductible. For example, if you have one medical emergency, it would not be covered by the three initial primary-care visits. Then, if your total cost was less than $7,900 that entire amount would have to be paid for without the help of the insurance company.
Another example where catastrophic health insurance can become costly is if you currently have a large family with multiple children. In this scenario, your family may require several different health services throughout the year. This could include annual checkups, getting diagnosed, seeking treatment for an illness or any primary-care visit. Since the catastrophic health insurance deductible is set at a very high level, you would be required to pay a large amount of money out-of-pocket until the deductible of $7,900 has been met. Instead, a silver or gold plan with a lower deductible amount would provide better financial coverage.