Catastrophic health insurance is commonly referred to as high-deductible health insurance or major medical insurance. This insurance is designed to insure you against a health catastrophe or "worst case" scenario, with the expectation that you'll pay for all other medical expenses out of pocket.
Catastrophic health insurance is a form of insurance that has a very high deductible. The average deductible is $6,350 for an individual or $12,700 for a family. You are responsible for paying for medical expenses out of pocket until that deductible has been reached. The high deductible translates to lower premiums.
You may also be able to save up to the amount of your deductible in a special health savings account (HSA) using pre-tax dollars. However, there is no tax subsidy for catastrophic health plans, so you will not receive a discount on this type of insurance the way you might with a bronze-level plan purchased through the Health Insurance Exchange.
Who Can Buy?
In general, only people under the age of 30 can purchase catastrophic health insurance in the HealthCare.gov Marketplace. This is because younger people have fewer inherent health risks and may not need the services of a full policy.
Some people who face economic hardships may also qualify for catastrophic health plans if no other insurance option is available. Note that in many states, Medicaid has been expanded to offer healthcare to low-income individuals and families, so this may be a superior option to catastrophic coverage.
Providers of Catastrophic Coverage
Several providers offer catastrophic insurance to individuals:
- Blue Cross Blue Shield offers catastrophic insurance on a state-by-state basis, so you'll want to check the BCBS site for your state. Plans are administered on an HMO basis, with coverage only available in network, or PPO, which offers some coverage outside of the network.
- Anthem sells a "Catastrophic Direct Access" PPO plan. It has a $6,350 deductible for individuals, but the deductible is also the out-of-pocket limit. Once you reach it, all further costs will be covered.
- USAA brokers major medical policies underwritten by Assurant. These plans are very affordable, with the cheapest being advertised as starting at $67 per month.
- CoventryOne sells health insurance in several states through the insurance exchange. One option is catastrophic health insurance.
Plenty of other options exist for this type of coverage. The easiest way to find catastrophic insurance in your area is through a comparison site or your state's health insurance exchange. Be sure to explore several options before making a final decision, and compare several types of plans to ensure you're getting the best value.
Types of Plans
There are two major types of catastrophic health insurance plans: a comprehensive plan and a supplemental plan.
- The comprehensive type of this plan works just like any other typical insurance plan. Deductibles are high, but the monthly cost remains lower. This is also called a major medical plan.
- Supplemental catastrophic insurance is exactly what it sounds like; it is used as a second billing source after you have received care and sent a claim to your primary insurance provider. This type of insurance is good to have in the case of an emergency, such as when you may need to take an ambulance to the emergency room, especially if your regular health insurance has limitations.
What Is Covered?
While each policy differs, generally this type of plan will cover major medical expenses that are deemed necessary in the event of a catastrophe to your health, such as a serious accident, heart attack, diagnosis of cancer, or anything else where the costs exceed the amount of your deductible.
Typically, the major medical expenses this type of plan will cover include hospital stays, lab tests, extended stay in an intensive care unit, and surgeries, among other things. However, the plan will only cover surgeries that are determined to be necessary and not those that are considered to be elective. These major medical expenses are covered by the insurance plan only after the agreed upon deductible has been paid in full.
Under changes made by the Affordable Care Act, catastrophic health plans must also offer minimal protection for health maintenance. All catastrophic plans purchased through the HealthCare.gov Marketplace must include three covered primary care visits per year. They must also give full coverage for select types of preventative care procedures, including vaccines and screening for several health risks.
Should You Get a Catastrophic Plan?
Catastrophic health coverage can be a good plan for someone who is in relatively good health and does not have to go to see the doctor often, does not receive other types of medical or health services on a routine basis, and does not take prescriptions on a daily basis. However, the value of the plan may not be high enough to make it worthwhile; for a few dollars more per month, you might be better off with a Bronze-level plan with lower deductibles and more thorough coverage.
If you're young and healthy or simply cannot afford a more thorough health plan, catastrophic insurance is better than having no coverage at all. If nothing else, it can act as a safety net against costly medical emergencies until you buy a more comprehensive healthcare plan.