Shopping for health insurance can feel like a daunting task — especially when you look at the cost. If you’re under 30, or if you meet other requirements, though, you may not be stuck paying hundreds or even thousands of dollars for coverage. Here’s what you need to know about catastrophic plans and how they may offer a cheaper alternative.
What Is Catastrophic Health Insurance?
Catastrophic health insurance provides low-cost coverage for those who can’t afford more comprehensive options. It might be a good option for young, healthy people.
Just realize that you will pay for most medical costs, with the exception of preventive care, out of pocket. That’s because they work by having low monthly premiums and a high deductible.
When you choose this coverage, it’s about making sure you’re covered in the event of a major illness or injury. A trip to the hospital without health insurance can financially devastate you. Catastrophic coverage can protect you from this risk without costing a lot of money in monthly premiums.
Who Qualifies for Catastrophic Health Insurance?
Catastrophic plans are available on the federal government’s Affordable Care Act (ACA) exchanges, Catastrophic health plans. To qualify, you must meet one of the following criteria:1
- Be under age 30
- Have a hardship exemption
- Have an affordability exemption
A hardship exemption relates to situations that keep you from getting health insurance.2 The government recognizes several circumstances, such as being homeless or experiencing a natural disaster, as hardships to getting health insurance. Additionally, if you filed for bankruptcy, have medical debt, or have expenses related to a disability, you may qualify. For more details, go to Hardship exemptions, forms & how to apply.
Similarly, an affordability exemption is based on your financial situation.3 If you can’t pay for the lowest-priced plan offered by your job or the marketplace, you may qualify for an exemption for catastrophic health insurance, How to claim an exemption because job-based health coverage is considered unaffordable. The monthly premium for those plans must cost at least 8.24% of your income.
What Does a Catastrophic Plan Cover?
All health insurance plans on the ACA marketplace, including catastrophic plans, must provide the same basic benefits, called essential benefits. They include:4
- Emergency services
- Pregnancy care
- Birth control
- Lab services
- Mental health services
- Substance abuse services
- Prescription drugs
- Injury rehabilitation
Preventative Care and Primary Care Visits
Like other ACA plans, catastrophic plans provide preventive care at no cost.5 This includes immunizations, screenings and some counseling. They also allow for three primary care physician visits a year.
What Isn’t Covered by a Catastrophic Plan?
While catastrophic health insurance covers some basic benefits, it does not provide access to other services you may want. For example, after you max out your primary care visits, you have to pay for additional doctor visits out of pocket until you meet your deductible. You will also have to pay for specialists and any tests or screenings that don’t come under preventive care. Additionally, you won’t have access to alternative therapies including massage and chiropractic visits.
How Much Does a Catastrophic Health Plan Cost?
As with most insurance, the price of a catastrophic plan depends on several factors, including your state of residence. For example, for a single female, age 25, living in Idaho Falls, ID, a catastrophic plan costs $240.91 per month. Compare this to $329 for the same individual buying the least expensive – a bronze – comprehensive plan on the ACA exchange.
With the catastrophic plan, the deductibles, copayments, and coinsurance, on the other hand, are higher. The deductible in 2020 is $8,150. This means you will have to pay this amount out of pocket before insurance kicks in. So while preventative care is covered, along with a few other costs considered “essentials,” you largely pay for everything else. The good news is if you end up in the hospital for illness or injury, your costs are limited to the deductible.
One other thing to consider is that catastrophic plans do not qualify for premium tax credits. This tax credit is designed to reduce the cost of your monthly premium if you meet certain income requirements. Before you decide on catastrophic health insurance, consider a bronze or silver ACA plan with the tax credit. A premium tax credit may lower costs enough to get you better coverage at an affordable cost.
How to Get Catastrophic Health Insurance
If you’re under age 30, you have no barriers to signing up for a catastrophic plan. They’ll appear on the ACA exchange, and you can compare the policy to those in the metal tiers, Getting covered if you’re under 30
However, if you’re 30 or older, you need to apply for an exemption. There’s an application you can fill out and submit. Once you qualify, you can then choose from available catastrophic plans.
What are the Alternatives?
If you’re under 26, one option is to stay on your parents’ health insurance plan until age 26.6 Also check out whether your school offers student health plans.
For everyone else, you can look at faith-based healthcare.7 These organizations charge a monthly payment, and promise to pay your bills when you submit them. However, this isn’t true insurance, As sharing health-care costs take off, states warn: it isn’t insurance. Instead, your monthly fee goes into a big pot, and bills are paid out of that pot. There is no legal way to force a healthshare ministry to pay your bill.
Is Catastrophic Health Insurance Right for You?
Having some type of health insurance is always better than not having any. If you can’t afford a comprehensive plan, a catastrophic policy at least covers you for a major illness or injury and could prevent you from a financial tragedy being added to your medical emergency.
Just be sure to have enough money to cover out-of-pocket expenses until you hit that $8,150 deductible. Run the numbers to see if this plan makes sense for you. Double-check that you don’t qualify for a premium tax credit on a comprehensive plan before moving forward. If you don’t qualify for the tax credit, and if you need coverage, a catastrophic plan might be the right move.