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 thousands of dollars for coverage. Here’s what you need to know about catastrophic plans and how they offer a cheaper alternative.
What is Catastrophic Health Insurance?
Catastrophic health insurance provides low-cost coverage for those who can’t afford more expensive or comprehensive options.
With catastrophic insurance coverage, you pay for most general medical costs. Your deductible is higher, but your premiums are lower than other plans.
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.
Who Qualifies for Catastrophic Health Insurance?
Catastrophic plans are available on ACA exchanges. 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.
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. The monthly premium must cost at least 8.16% of your income.
What Does a Catastrophic Plan Cover?
Catastrophic plans are ACA marketplace plans, so they cover some of the same basic benefits you get with an Obamacare policy.
Essential Health Benefits
When you get this type of plan, you can expect to receive coverage for the same essential benefits required of all ACA health insurance plans, including:
- Emergency services
- Pregnancy care
- Birth control
- Lab services
- Mental health services
- Substance abuse services
- Prescription drugs
- Injury rehabilitation4
As long as you see an in-network doctor, you get access to preventative care at no additional cost.5 So, even though catastrophic health insurance focuses on protecting you for major events, you still have access to basic care, including immunizations, screenings, and counseling.
Primary Care Visits
Even though catastrophic plans come with high deductibles, you can still benefit from primary care visits. You get up to three visits a year to your in-network primary care provider at no extra cost.
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.
Additionally, you won’t have access to alternative therapies including massage and chiropractic visits. For expanded coverage on the ACA exchange, you need to look for a plan that falls under one of the metal tiers.
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. Monthly premiums cost less than a bronze plan. For example, a single female, age 25, living in Idaho Falls, ID, a catastrophic plan costs $240.91 per month. However, the average cost of a bronze plan in Idaho is $329 per month, according to the Kaiser Family Foundation.
Deductibles, copayments, and coinsurance, on the other hand, are higher. For 2020, you’ll pay $8,150 out of pocket before insurance kicks in. While preventative care is covered, along with a few other costs considered “essentials,” you largely pay for everything else. If you end up in the hospital for illness or injury, your costs are limited to the deductible.
But you won’t get help paying for your premiums. Catastrophic plans do not qualify for the premium tax credit. 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.
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 Additionally, if your school offers student health plans, that may offer another way to get low-cost coverage.
Another popular option is 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. 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?
Health coverage can provide peace of mind so some insurance may make sense. If you want to make sure you’re covered for care for major illness or an unexpected injury, but you can’t afford regular health insurance, a catastrophic plan can help reduce your risk.
Be sure to have enough money saved up to cover out-of-pocket expenses since you’ll have a higher deductible. Run the numbers to see if this plan makes sense for you. Double-check that you don’t qualify for the health plan tax credit 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.