Not all healthcare insurance plans are equal. Some plans are designed to help seniors get quality healthcare at an affordable price that supports them as they age. Others are most beneficial for families to stay on top of their health. In some cases, catastrophic health insurance may be an option to consider for individuals who need some type of coverage at a low monthly premium.

What is catastrophic health insurance?

Catastrophic health insurance is a high-deductible health insurance plan meant for people under the age of thirty. Anyone above 30 who wishes to get catastrophic insurance will need to qualify for a “hardship exemption.”

Catastrophic health insurance is very similar to major medical health insurance (also known as Obamacare plans). It covers all the same basic benefits; the difference is that it’s mostly meant for people who only expect to have high medical expenses due to an unexpected event. This means that deductibles are extremely high, but constant costs, such as premiums, are more affordable in most cases. You can learn more about deductibles here, but essentially, it is the cost you have to spend out of pocket on covered medical costs before insurance kicks in and starts sharing costs.

Why consider catastrophic health insurance?

Catastrophic insurance plans, or high deductible health plans, differ from other private healthcare insurance options on the market in several ways. First, they have high deductibles, which means you’ll have to pay more out-of-pocket expenses before the insurance will start to cover anything. Second, these plans only offer minimal coverage, including preventative care.

Lastly, catastrophic health insurance has very low monthly premiums. The low monthly payments are what makes these plans appealing and, oftentimes, necessary for some individuals who cannot afford other types of health insurance. Here are some reasons to consider catastrophic health insurance:

• You’re looking for lower premiums, or cannot afford the cost of more expensive coverage
• You don’t need a lot of medical care, and rarely visit the doctor
• High out-of-pocket costs in the case of needing medical care outweighs expensive monthly premiums
• You have the money saved in the case of a serious medical issue (since you have to pay completely out-of-pocket before you meet your deductible)
• You don’t qualify for Medicaid
• You do not qualify for subsidies, or wish to forgo your right to subsidies you may have qualified for

Qualifying for catastrophic health insurance

In order to get a catastrophic health insurance plan, you must qualify by falling into an approved category of being under 30 or dealing with financial hardship. Each plan has its own terms and limitations, so be sure to check the official plan documents to understand how that specific plan works. This article is only for general education.

What qualifies as an exemption?

When it comes to qualifying for catastrophic insurance under the Affordable Care Act (ACA), there are two primary types of exemptions that can assist individuals: personal hardship exemptions and affordability exemptions.

Personal Hardship Exemptions are granted to individuals who have experienced significant life events that impact their ability to purchase standard health insurance. Common qualifications for hardship exemptions include experiencing homelessness, filing for bankruptcy, the death of a close family member, or suffering from a disaster that substantially damages one’s property. These circumstances are recognized as creating undue burdens that compromise an individual’s financial capacity to afford health coverage.

Affordability Exemptions, on the other hand, apply when the lowest-priced coverage available costs more than a certain percentage of your household income. Essentially, if the cost of premiums in the marketplace exceeds this threshold, making regular health care coverage unaffordable, you may qualify for this exemption. This exemption acknowledges that even with available plans, the financial requirement may still be out of reach for some, thereby providing an alternative through catastrophic insurance which offers a safety net in severe health scenarios with lower premiums and higher deductibles.

What does catastrophic health insurance cover?

Catastrophic health insurance doesn’t provide the most comprehensive coverage. However, it does cover essential healthcare needs. Also, after you meet your deductible, it will cover all healthcare expenses.

In general, here is what a catastrophic health plan should cover:

• 3 primary care visits per year
• Preventive services
• Some vaccinations and immunizations
• Pregnancy and maternity care
• Some birth control options
• Other basic health benefits

It’s important to understand that coverage can differ depending on the insurance carrier, so you should make sure the plan offers what you need before you commit.

What does catastrophic health insurance not cover?

The truth is there’s a lot that catastrophic health insurance does not cover. Until you hit your deductible, you’re generally going to have to pay for any health services out-of-pocket. However, the plan will cover your expenses after you reach your deductible.

Most notably, a catastrophic health plan will not cover emergency care until you’ve met the deductible. This may include:

• Emergency care after an accident
• A sudden illness
• Unexpected injuries

Does catastrophic health insurance cover the ten essential benefits?

Catastrophic insurance plans do cover all 10 essential health benefits that all Obamacare plans are required to cover.  If you want to see what the 10 essential benefits are included in qualified health plans (Obamacare plans), refer to the list below:

• Laboratory services
• Emergency services
• Prescription drugs
• Mental health & substance use disorders
• Maternity and newborn care
• Pediatric services, including vision and dental
• Rehabilitative services and devices
• Ambulatory patient services
• Preventative & wellness services and Chronic disease management
• Hospitalization

The difference with catastrophic insurance is that you will likely have to spend a lot more money out-of-pocket before cost sharing with your health insurance company begins. But, since the plan does cover these benefits, the money that you spend on these services will go towards the deductible. If a catastrophe happens, which causes you to have unexpected high medical costs, you may meet your deductible or out-of-pocket maximum.

How much does catastrophic health insurance cost?

The monthly premium for catastrophic health insurance will differ depending on the plan and the tier, but they are generally low. However, the deductible is high. In 2024, the annual deductible and out-of-pocket maximum for these types of plans are $9,450 for an individual and $18,900 for families.

If you qualify for a catastrophic health insurance plan, you must pay a monthly premium to keep the policy in effect and meet the deductible of $9,450 before the plan pays for covered benefits.

Catastrophic health insurance: Pros and cons

Health insurance is important for everyone. With catastrophic health insurance, many people who may not be able to afford other policies are able to get coverage. But is catastrophic insurance worth it? Here are the pros and cons of this option.

Pros of catastrophic health insurance

The most significant benefit of catastrophic health insurance is its affordability. If you have financial struggles or simply do not need more comprehensive coverage than the basic essentials, these plans keep your payments low by offering low premiums. In addition to low premiums, other pros of catastrophic health insurance include the ability to have essential health benefits covered and coverage to pay for unexpected medical emergencies.

Cons of catastrophic health insurance

While there are several benefits of catastrophic health insurance, there are a few drawbacks to consider before purchasing one of these plans. While there are low premiums that come with catastrophic health insurance, you typically have a high deductible before you can enjoy most of the cost-saving benefits. Additionally, there’s limited eligibility, which means only people under the age of 30 or those with a qualifying hardship exemption can purchase this type of plan. Lastly, catastrophic health insurance plans do not qualify for tax breaks or subsidies, which are available for some other types of health insurance plans.

Who would benefit from a catastrophic health insurance plan?

While there is no definitive answer to the question of what plan works best, it’s safe to say that catastrophic insurance is probably going to be best for people who don’t foresee having many medical costs throughout the year. Since deductibles are higher with catastrophic health insurance plans, it means you’ll be paying completely out-of-pocket until you’ve met the high deductible. For someone who doesn’t plan on needing anything past the preventative care benefits that are paid for even before the deductible is met, a catastrophic plan makes sense.

The people who may find catastrophic health insurance to be most beneficial are the ones who qualify for these plans. If you’re not under 30 years old, you can qualify for a hardship exemption like:

• Homelessness
• Declared bankruptcy
• Been evicted
• Victims of domestic violence
• Victims of natural disasters

If you think you may qualify for an exemption due to financial hardship, you can apply for a hardship exemption through the Marketplace.

Somebody who has many medical costs might benefit from a plan that starts cost sharing earlier on. Although plans with lower deductibles often have higher premiums, for some individuals, that higher monthly cost is worth it. You’ll have to assess your personal health circumstances, do your research, and choose the plan that you feel offers you the right amount of coverage.

Find catastrophic health insurance with eHealth

Wondering where to buy catastrophic health insurance? For those who qualify for a hardship exemption, we can help you find health insurance that works for you. Contact us to speak with an eHealth licensed insurance agent who can help you purchase a catastrophic health insurance plan or discuss other insurance options that you may need, including small business health insurance for your employees.