What is Catastrophic Health Insurance?

Jenifer Dorsey
April 2nd, 2019 March 6th, 2019 |
Read time: 12 minutes

Definition: Catastrophic health insurance

Catastrophic health insurance is low-premium, high-deductible coverage designed to offer some financial protection against expensive, unexpected medical bills. Only certain populations qualify for catastrophic health plans.

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?

It’s called catastrophic health insurance, and it’s an option you may qualify for if you are under 30 or qualify for a hardship exemption.1

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:2

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).

Additionally, copayments and coinsurance tend to be higher than other types of major medical plans.3

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 – unsubsidized4 $272.66 $7,900
Catastrophic (only 1 available in 85001)5 $249.41 $7,900
Bronze – subsidized6 $53.83 $7,900

Minnesota – Hennepin County (55419 ZIP code)

Plan (Lowest-Cost) Monthly Premium Annual Deductible
Bronze – unsubsidized7 $190.98 $6,850
Catastrophic8 $139.13 $7,900
Bronze – subsidized9 $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 with our calculator.

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.10

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.

Learn more about ACA exemptions and how to get one.

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.

Learn more about buying health insurance outside of open enrollment.

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 major medical insurance or want supplemental coverage to accompany a high-deductible major medical insurance plan, you have some options.

Alternative health insurance

Although they are not ACA-compliant, alternative health insurance options may appeal to you if you qualify (they aren’t guaranteed issue) and are okay with coverage that has fewer benefits than major medical insurance.

Coverage that falls into the alternative health insurance category is available year-round; however, you must apply and be accepted to enroll.

Learn about alternative health insurance now.

Short-term medical insurance

Short-term medical insurance provides temporary benefits for unexpected illnesses and injuries. Policies last as long as 30 to 364 days, depending what state you live in.

Get an instant short-term medical quote

Supplemental coverage

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.

Get an instant gap quote

Hospital Insurance

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.

Get an instant hospital insurance quote

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).

In addition to ACA-compliant health insurance, you may also want to consider your non-ACA-compliant alternative health insurance and supplemental health insurance options.

Don’t go it alone! Help is available.

Apply for Coverage in 3 Easy Steps!

Step 1: Get a quote within seconds
Step 2: Compare multiple plans
Step 3:Finish application online

Legal Disclaimer: 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.

Originally Published On January 10th, 2014
Independence American Insurance Company, Madison National Life Insurance Company, Inc. and/or Standard Security Life Insurance Company of New York may underwrite the products referenced on this website. Legal Disclaimers.