Catastrophic Illness Insurance

Catastrophic illness insurance is a type of coverage which protects the insured for a specific and severe health problem over the defined period. It differs from other forms of health insurance in that there is limited coverage to the specifically named risk. An individual can buy the coverage as a stand-alone policy or as a rider to life insurance. 

This insurance is also known as critical illness and critical care insurance. 

Catastrophic illness insurance is limited to particular illnesses which may require long-term hospitalization or advanced treatment techniques. In most cases, catastrophic illness insurance can supplement a beneficiary's present health and disability coverage plans. Some life insurance policies offer additional benefits for critical illness known as dread disease riders. 

Catastrophic coverage may not include pre-existing conditions. Also, this coverage will include an elimination period. The elimination period usually starts on the date that your diagnosis renders you unable to work. Illnesses may need the diagnosis by a second physician or specialized test completed before coverage. Further, plans may require full medical underwriting.

Some plans may offer flexibility on how the money is allocated or provide a lump sum, tax-free cash benefit to cover the care for a qualified illness. That means the funds may help to cover out-of-pocket deductible and co-pay expenses. Other providers may offer plans which pay regular income installments. However, these plans may carry a lifetime benefit cap and elimination periods will vary by insurance provider. Covered illnesses can include heart attack, stroke, paralysis, organ transplant, renal failure, carcinoma, and others diseases.

As medical diagnosis and treatment advance, more patients receive successful treatment for critical illnesses, but these advancements come at a cost. Inflation and the cost of providing medical care for large numbers of individuals who may be under- or uninsured add to the cost of medical care. Also, the cost to develop and implement the advancements in medical treatments and drug research and development have driven the costs higher. Catastrophic illness insurance helps individuals pay for medical care in this high-cost environment. 

Other comprehensive types of health insurance will cover most medical expenses, although co-payments, deductibles, and other out-of-pocket costs may limit the benefits. The costs associated with critical diseases can be substantial, cause financial distress, and even bankruptcy, thus necessitating catastrophic illness insurance. 

The need for catastrophic illness insurance depends in no small extent on a country’s healthcare system. In many nations, various forms of universal coverage make affordable medical care services available to all citizens. The structure of such coverage can vary. In some cases, countries provide subsidies to private insurance companies and private providers of medical products and services.  In other cases, the government may be the single payer for most expenses.

In 1986 President Ronald Regan suggested the creation of a national catastrophic illness insurance program. The program was to focus on helping older Americans cope with the expense of long-term health issues but never received approval. 

The Affordable Care Act of 2010 aimed to reform health care, and government data suggests that over 20 million Americans benefited from insurance coverage under this law as of March 2016. However, after taking office, President Donald Trump signaled his intention to de-fund the Affordable Care Act. Attempts to roll back the ACA have been unsuccessful. In the spring of 2018, President Trump issued new rules which make it easier for Americans to buy cheaper insurance which provides less healthcare sector coverage.