Major medical insurance falls into 4 metal level categories under the Affordable Care Act (ACA): bronze, silver, gold and platinum. But did you know there’s a 5th Obamacare plan type that’s designed to help provide affordable health insurance to certain populations?
What is a Catastrophic health plan + what does it cover?
A Catastrophic health plan is pretty much what it sounds like: an insurance plan designed for worst-case scenarios. Catastrophic coverage is designed to protect against high out-of-pocket costs associated with medical bills incurred due to an accident or unexpected illness.
Under the Affordable Care Act, Catastrophic plans cover:
- Essential health benefits, as defined by the ACA
- Certain preventive services at no additional cost (deductible does not apply)
- 3 primary care visits per year before you’ve met your deductible
Catastrophic health insurance plans work like other major medical plans; your deductible must be met before most benefits kick in.
Are Catastrophic plans minimum essential coverage?
Yes! Catastrophic coverage includes essential health benefits, preventive services and some primary care visits. It differs from major medical insurance in that typically is has lower monthly premiums and higher deductibles.
How much does Catastrophic health insurance cost?
By design, Catastrophic plans typically have lower monthly premiums and higher deductibles than traditional major medical insurance (i.e., bronze, silver, gold, platinum plans).
Those who buy Catastrophic coverage will be responsible for paying the entire premium and are not eligible for subsidies. Catastrophic plans do not qualify for premium tax credits or cost-sharing reductions.
As an example of how rates generally compare, here are sample quotes for unsubsidized bronze, Catastrophic and subsidized bronze plans for a hypothetical 27-year-old female living in two different states.
Arizona – Maricopa County (85001 ZIP code)
|Plan (Lowest-Cost)||Monthly Premium||Annual Deductible|
|Bronze – unsubsidized||$272.66||$7,900|
|Catastrophic (only 1 available in 85001)||$249.41||$7,900|
|Bronze – subsidized||$53.83||$7,900|
Minnesota – Hennepin County (55419 ZIP code)
|Plan (Lowest-Cost)||Monthly Premium||Annual Deductible|
|Bronze – unsubsidized||$190.98||$6,850|
|Bronze – subsidized||$90.98||$6,850|
What will you pay? You’ll need to gather quotes through HealthCare.gov or a state-based exchange, or in the private market (e.g. directly from a health insurance company or through an agent) to see which options are available to you.
What’s the best deal – Obamacare or Catastrophic coverage?
As you can see in the second example above, depending on factors such as where you live and how much you earn, it is possible you could qualify for a low-cost or no-cost bronze plan with a deductible that is lower than a Catastrophic plan deductible.
Again, you’ll want to compare quotes. You will also need to see if you qualify for an income-based subsidy when you buy coverage through HealthCare.gov or a state-based health insurance exchange.
Estimate your subsidy now.
Who qualifies for Catastrophic coverage?
The ACA allows people under age 30 and people of any age who qualify for a hardship exemption to enroll in Catastrophic health plans.
When you compare plans through HealthCare.gov or a state exchange, Catastrophic health insurance will appear in the list of plans available to you if you qualify for this option.
Where can you buy Catastrophic health insurance?
Catastrophic plans are only available during the annual open enrollment period or during a special enrollment period if you are eligible for one. You can purchase this coverage through HealthCare.gov or a state-based exchange.
If you are older than 30, you will need to follow the steps necessary to claim an exemption, and you may be required to submit proof when applying for coverage.
Is there Catastrophic health insurance for people over 30?
Again, only if you qualify for an exemption. Otherwise, individuals older than 30 do not qualify for Catastrophic health insurance and will need to consider another ACA-compliant plan or alternative health insurance (non-ACA-compliant) such as short term medical.
What are affordable alternatives if you don’t qualify?
If you’re not eligible for a Catastrophic plan but need an affordable alternative to going uninsured or want supplemental coverage to accompany a high-deductible major medical insurance plan, you have some options.
Short term medical insurance
Short term medical insurance is non-ACA coverage that provides temporary benefits for unexpected illnesses and injuries. Policies last as long as 30 to 364 days, depending on what state you live in. Short term policies are not guaranteed issue, meaning your application can be denied by the carrier, and policies do not necessarily cover the essential health benefits. This coverage is available year-round in most states.
If you purchase any type of ACA-compliant health insurance, whether you qualify for a Catastrophic plan or not, there are supplemental benefits that can help you manage your out-of-pocket medical expenses.
Medical Gap Insurance
Medical gap plans are a type of supplemental coverage that pays lump-sum, fixed-cash benefits for covered accidents and illnesses. While these plans do not coordinate with your ACA plan, they can pair well with it.
How? You can use the benefits to pay your major medical deductible, copay, coinsurance and medical expenses not covered by your ACA plan.
To help with lower-dollar claims, hospital (aka, fixed indemnity) plans pay set benefit amounts for covered medical expenses related to hospitalization, surgery, chemotherapy and radiation services, at specific durations such as per day, per week, per month, per visit or per event (benefit amounts and duration vary by policy).
In some states, you must already have a major medical policy in order to enroll in a hospital indemnity plan.
Critical Illness and Accident Insurance
A critical illness and accident insurance policy provides supplemental lump sum cash benefits for covered critical illnesses like life-threatening cancer, stroke and heart attack, and for costs associated with accidental injuries like sprains, fractures and burns. Like other supplemental coverage options, you can typically use the benefit however you’d like, whether to pay down a major medical deductible, pay for the costs of non-covered medical expenses or even other costs like transportation, childcare or housing.
Summary + next steps
You may qualify for a lower cost premium Catastrophic health plan if you’re under 30 years old and/or meet the criteria for a hardship exemption. However, you may be able to pay less for a subsidized bronze plan depending on your income and where you live.
Bottom line: Gather quotes and compare the plans available to you (start by looking at their monthly premium and deductible amounts).
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The materials available at this web site are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.