Catastrophic Health Insurance

Catastrophic health insurance is Affordable Care Act-compliant medical coverage open to people under 30 and adults of any age who have a government-approved general hardship exemption. Catastrophic health insurance has lower premiums than most metal-level marketplace plans, but the highest possible deductible and out-of-pocket maximum. It makes sense for some people who have little to spend on monthly premiums, but who don’t want to go without health insurance.

Catastrophic health insurance was first introduced by Senator Abraham Ribicoff in October 1973 when he proposed a bipartisan bill for catastrophic health insurance coverage. The coverage was meant to be for workers who were financed by payroll taxes and for Medicare beneficiaries. Now, catastrophic health insurance availability varies by state, with some states having no plans, some having few plans and some having several options to choose from. Catastrophic plans can be PPO or HMOs, and premiums vary by insurance company and location. If you buy this type of plan, you won’t be able to take advantage of any health insurance premium tax credits you might be eligible for based on your income, which means that some consumers can get better coverage at lower cost by choosing a bronze plan and using the subsidies. Is Catastrophic Health Insurance Right for You? will walk you through the decision process.

If you’re younger than 30 and don’t have a hardship exemption, having a catastrophic plan will get you out of paying the individual mandate penalty since it counts as minimum essential coverage (see Obamacare Penalty Enforcement: How It Works). Qualifying for catastrophic health insurance because you have a general hardship exemption doesn’t mean you have to buy a catastrophic policy to avoid the penalty. You aren’t required to buy health insurance at all if you have the exemption; you can also buy a different type of policy, such as a bronze plan, if you prefer.

Having catastrophic coverage, or any other health insurance, can save you money because you’ll get your insurance company’s negotiated rate for services, which is typically discounted. Because of ACA rules, catastrophic plans also give you 100% coverage for in-network preventive care services before meeting your deductible and access to the 10 essential health benefits, subject to your deductible. The premiums can seem like a waste of money if you don’t need to use your insurance much, but you don’t want to go uninsured and risk serious financial and medical problems.