Complete Guide for Catastrophic Health Insurance Plans [Updated 2018]

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Health insurance is necessary, but it can also be expensive. However, there’s an alternative for some Americans — catastrophic health insurance.

The Affordable Care Act (ACA) allows catastrophic health insurance for young adults and people who can’t afford other health insurance and have faced hardship. These plans have all the benefits of a standard health plan, but with much higher deductibles and lower premiums.

What’s a catastrophic health plan?

Catastrophic health plans have been around awhile as a low-cost alternative to health insurance. However, the ACA beefed up catastrophic health plans’ coverage while restricting plans to only two groups of people:

People under the age of 30
Anyone who qualifies for a hardship exemption

Catastrophic health plans offer the same comprehensive coverage found in regular health insurance plans, but with low premiums and high out-of-pocket costs when you need health care services.

Key Takeaways

Catastrophic health plans are a low-cost alternative to health insurance, with much higher deductibles and lower premiums.
It covers emergency medical costs, basic health screening and other routine check-ups.
To quality for this type of health plan you must be under 30 years old or if over 30 had recent financial hardships.
Hardships that can make you eligible for catastrophic health plans include: declared bankruptcy, suffered domestic violence, have disabled or aging family member, or face eviction or foreclosure.
It may be a good option for people who can afford giant deductible and still have medical needs.
ACA plan, Medicaid, CHIP (Child healthcare insurance plan) and short-term health plan are alternatives to the catastrophic health insurance you can also look into.

How much does catastrophic health plans cost?

The average cost of a catastrophic health plan in 2020 is $195. That’s signficantly less than the usual monthly costs in an employer-sponsored plan or an individual health plan.

One downside to catastrophic health plans is the deductible. Catastrophic health plans’ deductibles, which you have to pay for health care services before the plan chips in money, are much higher than other health plans. Catastrophic health plans’ deductible is $8,150. That’s significantly higher than other plans. For instance, high-deductible health plans’ average deductible is about $2,500 for single coverage. The deductibles in health maintenance organization and preferred provider plans are even lower.

However, once you reach your deductible in a catastrophic plan, the plan covers the rest of your health care costs for the year.

What does a catastrophic health plan cover?

Catastrophic health plans cover:

Emergency medical costs
Three primary care visits per year, including an annual check-up
Routine vaccines, such as a flu shot
Basic health screenings

Plans must also cover 10 essential services:

Outpatient care
Emergency services
Hospitalizations
Pregnancy, maternity and newborn
Mental health and substance abuse disorder services
Prescription drugs
Rehabilitation services and devices
Lab work
Preventative, wellness and chronic disease management
Pediatric services, including dental and vision

Who qualifies for a catastrophic health plan?

The biggest group who qualify for a catastrophic health plan are those under 30 years old. However, certain financial hardships will allow someone over 30 to get a catastrophic plan.

An important part to remember is that the hardship has to have happened within the past year, meaning it doesn’t have to be your current situation. For example, if you were homeless or evicted in the last year, you could qualify for an exemption, even if you have since landed housing.

Other reasons for exemptions include:

Bankruptcy
Your face eviction or foreclosure
You had damage to your property because of a natural or human-caused disaster
You suffered the death of a family member or your expenses increased unexpectedly because you had to start taking care of a disabled or aging family member
Your utilities were almost shut off
You suffered domestic violence

The best way to determine if you qualify for one of those exemptions is to go to your state’s health insurance exchanges. You’ll enter your information, including income, and the site will offer a catastrophic health plan option if you qualify.

If you qualify for an exemption, but your state’s health insurance exchange isn’t showing catastrophic health insurance as a choice for you, contact the exchange directly and provide your information.

What is the difference between major medical and catastrophic coverage?

major medical coverage in the ACA exchanges is tiered by metals — Bronze, Silver, Gold and Platinum. Bronze tiers have lower premiums and higher deductibles. As you work your way up toward Platinum, premiums increase and deductibles decrease.

On the flipside, catastrophic health plans don’t have tiers. It has one large deductible that needs to be met before the plan pays for care. However, once that deductible is met, there are no more charges to the insured for that year.

Is a catastrophic health plan worth it?

Those who benefit most from catastrophic health plans are healthy individuals under the age of 30. People under 30 are likely to not need as much health care as older people, so a catastrophic health plan can decrease health care costs. A catastrophic plan can serve as a safety net in case of a serious medical issue.

For those who have no other options but still have medical needs, a catastrophic health plan may be worth it. The question is whether you can afford the giant deductible if you need care.

How to buy a catastrophic health insurance plan

Buying a catastrophic health plan is fairly straightforward. The most comprehensive place to begin is healthcare.gov. However, insurance can also be purchased directly from carriers.

Some options include online purchasing, phone, community organizations, an agent/broker and even paper applications.

Alternatives to catastrophic health plans

Catastrophic health plans have low premiums, but those might still be too much for some people. Plus, the deductible means huge out-of-pocket costs when you need care, which isn’t ideal for everyone.

There are other options to catastrophic health plans:

ACA plan — ACA plans purchased in the marketplace are eligible for subsidies that reduce health plan costs. Your income must be between 100% and 400% of the federal poverty level to qualify. That’s between $12,760 and $51,040 if you’re single; $17,240 and $68,960 for a couple and $26,200 to $104,800 for a family of four.
Medicaid — People with low incomes may qualify for Medicaid. Thirty-eight states have expanded Medicaid eligibility so that people who make 138% of the federal poverty level can get Medicaid. The other states are stricter. However, states often have more flexible income levels for specific situations, such as for pregnant women.
Children’s Health Insurance Program (CHIP) — CHIP is an option for children who live in lower-income households, but whose families don’t qualify for Medicaid. State eligibility levels vary. The range goes from 170% of the federal poverty level to 400% of the federal poverty level. For example, in Alabama, children are eligible at 312% of the federal poverty level. In Florida, the limit is 210%. In some states, CHIP is also available for low income, uninsured pregnant women, who can receive prenatal, delivery and postpartum care.
Short-term health plan — A short-term health plan doesn’t offer the comprehensive coverage found in standard health insurance plans, but a short-term plan can offer temporary, low-cost coverage. Short-term health plans are available for one year in most states with the option to extend coverage for three years. They have low premiums but high out-of-pocket costs and limited coverage. For instance, you may have trouble finding a short-term plan with mental health and prescription drug coverage. Not all states allow short-term plans and some states limit the plan’s length.

Catastrophic health plans are an option for young people and those who are facing hardships. However, make sure to compare the pros and cons of each of your options to find a plan that best meets your needs.