If you're under 30, or make too much money to qualify for Medicaid but too little money to qualify for subsidies through the Affordable Care Act, you might be wondering whether to purchase a catastrophic health insurance plan. We're here to help. Read on to learn more about catastrophic health insurance, what it does and does not cover, and whether it might make sense for you.
What is catastrophic health insurance?
Catastrophic health insurance plans provide bare-bones insurance coverage in exchange for low monthly premiums.
The plans can be offered by private or nonprofit health insurance providers, and they only pay for healthcare expenses once a patient has met his or her annual deductible -- which can run into the thousands of dollars per year. This setup is why they are referred to as catastrophic or "emergency" health insurance plans.
What does catastrophic health insurance cover?
The benefits provided by a catastrophic health insurance plan vary from plan to plan; however, once the annual deductible is met, these plans typically cover all -- or at least the vast majority -- of healthcare costs, including doctor visits, prescriptions, and procedures.
Additionally, due to requirements put in place when the Affordable Care Act was implemented, catastrophic health insurance plans pay for three free primary care doctor visits annually. They also cover some preventive care such as immunizations.
What isn't covered by catastrophic health insurance plans?
Catastrophic health insurance plans are a major financial help when an emergency strikes and health bills begin to pile up, but they're otherwise insufficient for most individuals and families. That's because members of such plans pay 100% of their healthcare expenses until their deductible is met, and those deductibles can be $6,000 per person per year, or more.
With deductibles as high as that, it's little wonder most people won't see any benefit from these plans in any given year.
Why does catastrophic health insurance exist?
There are two big reasons why people might want to buy a catastrophic health insurance plan. First, someone might want health insurance, but they may have insufficient income to buy a more comprehensive plan. Second, some people don't expect to use healthcare services but still want a low-cost safety net in case of an emergency.
The Affordable Care Act initially sought to do away with catastrophic health insurance plans by expanding Medicaid income limits to 138% of the federal poverty level and by offering significant subsidies to those earning between 100% and 400% of the federal poverty level.
However, a Supreme Court ruling eliminated the provision that required states to participate in Medicaid expansion, and that resulted in many states choosing not to expand the program. In many of those states, opting out of expansion created a coverage gap for those earning too much to qualify for Medicaid but too little to qualify for subsidies on the federal and state-sponsored health insurance exchanges.
In an attempt to close that gap, catastrophic health insurance plans were kept as an option for people under 30 and for people who qualify to buy them based on various hardship exemptions, including falling into the coverage gap.
Should I get catastrophic health insurance?
The Affordable Care Act requires everyone to have qualified insurance, or pay a penalty. Purchasing catastrophic health insurance enables individuals to avoid that penalty, and it does provide some free primary care every year and protection to your finances in case of an illness or accident.
If your income level allows you to qualify for subsidies, it might be better to consider a bronze or silver-level plan instead of a catastrophic health insurance plan. The ACA provides subsidies for metallic-level plans, but not for catastrophic health insurance plans, and those subsidies could mean metallic plans are cheaper than a catastrophic plan. Since metallic plans also offer better coverage, they're likely going to be a better option.
Regardless, deciding whether a catastrophic health insurance plan makes sense is a personal decision that will depend significantly on your health, your family history, your financial situation, and many other variables -- all of which should be carefully considered.