What Is A Catastrophic Health Plan?

what is a catastrophic health plan? text overlaying image of a hand stacking building blocks with different health images on themHealth insurance can seem like a big expense, but the cost of a plan is nothing compared to the cost of a significant medical issue. That means it’s important to have at least some sort of coverage – but what if you’re struggling to find a plan that you can afford? 

 

In this case, you might want to look into catastrophic health insurance plans, which are designed to provide basic coverage for “just in case” scenarios, and which have affordable premiums. It’s important to note that these plans are not available to everyone, though. In order to purchase a catastrophic health plan, you must be under the age of 30 or meet the requirements for a “hardship” exemption.

 

Catastrophic plans are really only designed as last resort coverage, but they are a good option if you can’t afford another type of plan, because they will help you avoid a scenario in which you’re hit with a medical bill for thousands of dollars. The monthly premiums for these plans tend to be relatively low, but you will typically be required to pay for all of your healthcare expenses out-of-pocket until you reach the plan’s high annual deductible, which is typically at least a couple of thousand dollars. 

 

Below is an explanation of how catastrophic coverage works, along with its benefits and associated costs, as well as a look at whether this type of plan might be right for you. Once you’ve read through the following, contact an EZ agent with any questions you might have, and to get quotes on the right plan for you.

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What Do Catastrophic Health Plans Cover?

Catastrophic plans are like a financial safety net in case you end up incurring large medical bills that would be impossible to pay on your own. They also include coverage for the same preventive care benefits that all ACA-compliant plans offer. This includes coverage for the ACA’s 10 essential health benefits:

 

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Laboratory services
  • Mental health and substance use services
  • Pregnancy, maternity, and newborn care
  • Prescription medications
  • Preventative and wellness services and chronic disease management
  • Pediatric services
  • Rehabilitative and habilitative services

WIth a catastrophic plan, you will get most preventive care and up to three doctor visits a year fully covered. You will pay for most other covered services, like lab work and minor surgeries, out-of-pocket until you meet your plan’s high annual deductible. Once you meet your deductible, your catastrophic plan will pay for the rest of your essential health benefits for the rest of the year. 

 

A catastrophic health plan has a deductible that is so high that most people don’t meet it in a given year. These plan’s deductibles are the same as the federally mandated out-of-pocket maximums for healthcare plans, which for 2023 is $9,100.

 

The good thing is, though, with a catastrophic health plan, as with all health insurance plans, the amount you pay out-of-pocket for medical services will actually be less than if you didn’t have an insurance plan. This is because insurance companies typically negotiate reduced rates with healthcare providers. So, it’s always better to have a plan – even one with a high deductible – than no plan at all. 

What Isn’t Covered?

Because catastrophic plans have such high deductibles, they will most not likely not end up covering smaller medical expenses. Costs associated with medical services like treating a broken bone or minor illness, or seeing a specialist, will probably not meet your deductible, so your catastrophic plan will not begin covering your costs. 

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Who Are Catastrophic Plans For?

As mentioned above, these plans are only available to two categories of people. The first is young adults under 30 who don’t have other coverage options (such as through an employer or spouse). If you are in this category, you might consider getting one of these plans if you:

 

  • Are unlikely to need medical care throughout the year
  • Want to satisfy the legal requirements in your state for health insurance (if your state has a health insurance mandate) but don’t want to buy a more expensive plan
  • Want to have basic coverage in the event that something terrible does occur

Second, individuals 30 and over who qualify for what is known as “economic hardship,” and who don’t have access to healthcare through an employer or spouse, can also purchase catastrophic health plans. You may qualify for a hardship exemption if you:

 

  • Have experienced homelessness within the past three years
  • Were determined to be ineligible for Medicaid
  • Have experienced eviction
  • Have been the victim of domestic violence
  • Are filing for bankruptcy 

If you believe that your current economic situation makes it difficult for you to pay for health insurance and are interested in a catastrophic plan, you’ll have to submit an application for a hardship exemption through the Health Insurance Marketplace.

 

It is important to keep in mind that even if your income puts you in a position to receive reduced healthcare costs, also known as a subsidy, you will not be able to put those savings toward a catastrophic health plan. This includes tax credits for premiums, as well as subsidies for cost-sharing. That means that no matter your income, your monthly premiums for your catastrophic insurance plan will remain the same.

The Cost

A catastrophic health plan is essentially the same thing as a high deductible health plan but with a different name, and with restrictions on who can purchase them, as already discussed. Because they have such high deductibles, they can be quite expensive if you have a number of health problems. 

 

As of 2023, the annual deductible for individual catastrophic health plans is $9,100; for families, this doubles to $18,200. This means that you will most likely have to pay out-of-pocket for most smaller medical expenses, including lab work, minor surgery, or anything else other than preventive care.

 

The one good thing price-wise about these plans is that plans with high deductibles generally have relatively low premiums. So if you are healthy and don’t often see the doctor, the monthly cost might be worth it as coverage in case of an emergency, since a major medical event can be extremely expensive.

Pros of Catastrophic Health Plans

The following are some of the benefits of having a catastrophic health insurance plan:

 

  • In comparison to those of other types of health insurance, the monthly premiums are typically much more affordable.
  • Your coverage acts as a financial buffer, protecting you from the potentially catastrophic effects of a major illness or medical emergency.
  • If you are generally healthy and don’t require many medical services, you might find that your overall insurance and care costs are lower than they would be with either another plan or no plan at all.
  • Insurance companies typically negotiate lower rates for services with healthcare providers, so your out-of-pocket costs for care could be lower with a plan than they would be without one.

When determining whether or not a catastrophic plan is the best option for you, your current state of health is an important factor. If you are generally healthy, a catastrophic plan may be a good option. This is especially true if you have an emergency fund that can pay for any medical care you require up to the amount of your plan’s deductible.

Cons Of Catastrophic Health Plans

It’s important to note that catastrophic health insurance plans come with a number of significant drawbacks, including the following:

 

  • Because you will only be covered for preventative care, a limited number of visits to primary care providers, and the most expensive type of care, the benefits of your medical coverage will be severely limited.
  • Because your deductible will be very high, you will need to come up with a significant amount of money in the event that you require medical services, which can be a problem for a lot of people.
  • You will not be eligible for premium assistance through the Affordable Care Act (ACA).
  • You will not be able to open a health savings account (HSA), as you would be able to do with other qualified high-deductible health plans. With a health savings account (HSA), you can set aside money before it is taxed to use for medical expenses.

A catastrophic plan is not the best option for you if you are planning to have a baby or otherwise anticipate needing a significant amount of medical care during the course of the year.

 

Are Catastrophic Health Plans Worth It?

A catastrophic health insurance policy could be beneficial to have if you cannot obtain health insurance from another source. In this case, one of these plans will typically be the most cost-effective option, and it may be significantly less expensive than other available choices, such as COBRA coverage. A lot of people use this type of plan as a short-term solution for their emergency insurance needs.

 

It is most likely worthwhile to purchase a catastrophic insurance policy, since they have low premiums. Having one will protect you from incurring potentially bankrupting medical expenses in the event of an emergency or illness.

Working With EZ

If you find yourself in a bind, EZ.Insure is here to assist you. Our agents are incredibly knowledgeable. They can comb through all of the health insurance plans available in your area to find the right one for you. As quickly as possible and with no hassle to you. A personal agent will assist you in navigating the numerous coverage tiers and plan options available, and answer all of your questions. And the best part is that everything we do is totally free! To get your free quotes, simply enter your zip code into the space below. Or give us a call at 877-670-3557.

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Signed Up For A Plan & Regretting It? Let EZ Find You A New Plan

Buyer’s remorse- it happens to the best of us. It can even happen to you after you sign up for a health insurance plan. Now that Open Enrollment has ended and you have signed up for a plan, have you reviewed it and come to the conclusion that you don’t really like it? Maybe you felt rushed or pressured into buying a plan before Open Enrollment ended; whatever the case, know that you don’t have to stick with that plan. EZ.Insure can help you change plans if you live in one of the states that has an extended Open Enrollment. If you don’t live in one of these states, we can help find you another option.

Extended Open Enrollment Periodsstamp laying next to the word extended

The Open Enrollment Period (OEP) is from November 1 to December 15, but some states have an extended OEP. These states are:

  • California– Nov. 1, 2020 to Jan. 31, 2021
  • Colorado- Nov. 1, 2020 to Jan. 15, 2021
  • D.C.- Nov. 1, 2020 to Jan. 31, 2021
  • Massachusetts– Nov. 1, 2020 to Jan. 23, 2021
  • Nevada- Nov. 1, 2020 to Jan. 15, 2021
  • New Jersey- Nov. 1, 2020 to Jan. 31, 2021
  • New York– Nov. 1, 2020 to Jan. 31, 2021

During this time, one of our licensed agents can help you change plans. We will review all available plans in your area, compare quotes and coverage, and find a plan that meets all of your needs – and we won’t make you feel rushed to choose!

Special Enrollment Qualifying Events

When it comes to health insurance plans, you have two options: a private plan or a Marketplace plan. Private plans, like Marketplace plans,  meet all the requirements of the ACA, such as including pre-existing conditions and providing free preventive care. Also like Marketplace plans, private health insurance plans have to be purchased during the Open Enrollment Period, unless you qualify for a Special Enrollment Period (SEP).

two rings on the ends of a paper with the word divorce on the paper and a rip in the middle
Getting divorced is considered a qualifying life event for a Special Enrollment Period.

To qualify for a SEP, you must experience a qualifying life event. These events include:

  • Getting married
  • Having a baby, adopting a child or placing a child up for adoption or into foster care
  • Moving
  • Becoming a U.S. citizen
  • Leaving incarceration
  • Losing other health coverage due to job loss, divorce, or aging out of a parent’s plan
  • Losing eligibility for Medicaid or the Children’s Health Insurance Program (CHIP)
  • Change in income or household status that affects eligibility for premium tax credits or cost-sharing subsidies
  • Becoming a member of a Native American tribe

If you have experienced one of these events, speak to an EZ.Insure agent about finding a new plan. 

Short-Term Plans

If your state does not offer an extended Open Enrollment Period, and you have not experienced a qualifying life event that would qualify you for a Special Enrollment Period, you still have options. For example, you can look into a short-term health insurance plan. Not only are these plans affordable, but their coverage is flexible. Short-term plans can be sold year round and can cover you for up to a year, which will provide you with at least some health insurance until the next Open Enrollment Period. Or, if you are happy with your short-term plan, you can re-apply for another short-term plan. Although these plans are not required to cover the 10 essential health benefits that ACA plans are required to, they are good options for those who are looking for convenient and affordable coverage. 

Catastrophic Plans

If you are under 30 and qualify for a hardship exemption, then you can sign up for a catastrophic plan at any time. Hardship exemption means that due to financial hardship or other hardships, such as the death of a family member, you are unable to afford health insurance coverage. Many people are unaware that these plans are an option. These plans:

  • Cover all the essential benefits defined by the ACA
  • Have high deductibles
  • Cover at least 3 primary care visits per year before the deductible is met (copays can apply for these visits, but part of the cost will be paid by the insurance company, even if you haven’t met your deductible).caucasian hands holding open a brown wallet that is empty.

Some hardship exemptions include: 

  • Homelessness
  • Bankruptcy
  • Domestic violence
  • Death of a close relative
  • Utility services being shut off
  • Eviction
  • Home foreclosure
  • A fire or other natural- or human-caused disaster that results in substantial property damage

Beat Buyer’s Remorse

Purchasing a health insurance plan that you later regret is not the end of the world. You still have options. If you live in one of the states with an extended deadline, great! You can purchase a Marketplace plan or private health insurance plan through one of our agents. If you do not live somewhere that has an extended Open Enrollment Period, then consider a short-term plan or a catastrophic health plan. You do not have to stick with the plan you currently have and continue to pay monthly premiums for a plan that doesn’t meet your needs, or is too expensive. 

Your best bet? Speak to an EZ agent! Our agents are highly trained in the health insurance industry and work with the top-rated companies in the nation. To see all of your options and find out how to save money, simply enter your zip code in the bar above. We will provide you with free instant quotes within minutes. Or to speak directly with an agent, call 888-350-1890.

Catastrophic Plans Can Be Confusing, Let Us Help

The cost of health insurance is not one size fits all. If you’re healthy, under 30, and facing financial hardship, you could have some cheaper options available to you. For people in these categories, Catastrophic health insurance plans can provide essential health benefits without breaking the bank with monthly premiums. However, you should know that, while premiums on these plans are low, they have high deductibles. If you remain healthy, then your high deductible won’t be a problem, but if you have an accident or become ill, you could end up with huge medical bills. Before you decide if a catastrophic plan is right for you let’s take a look at how they work.

Who These Plans Are For

homeless person sitting outside with a black bag full of clothes
Catastrophic plans are ideal for people dealing with hardships such as homelessness.

Catastrophic plans are designed for individuals who are young or struggling to afford health insurance. Not everyone qualifies for these plans. They are only available to people who are:

  • Under 30 or are over 30 and meet the guidelines for a hardship exemption. This includes people whose plan was canceled by their insurer or small group employer.
  • Dealing with hardships such as homelessness, eviction, foreclosure or bankruptcy, domestic violence, or medical debt
  • Considered low-income and cannot afford insurance

These plans have the lowest premiums of any plans on the ACA exchanges, but they also have the highest out-of-pocket costs.These plans do not have a copayment or coinsurance and premiums will vary depending on where you live. Generally all plans have the same high deductible: deductibles were $7,900 for 2019, and they have risen to $8,150 in 2020. Once you meet your deductible, then the insurance company will pay for all covered services.

Who They Are Not For

weekly pill container filled with pills in it with Tuesday tab open.
If you are unhealthy with a condition, then these plans are not right for you.

Do you see the doctor often? Do you need a lot of coverage? Do you plan on starting a family in the next year? If you answered yes to any of these questions, then a catastrophic plan is probably not the best choice for you. Because of their high deductibles, these plans are not for people who have health conditions that need constant attention. In this case, you will probably want to look for a plan with a lower deductible, even if it means a higher premium. 

If you are over 30 or do not qualify for a hardship, then you can look into getting a Bronze level plan on the ACA Marketplace. These plans are very similar to Catastrophic plans, but with slightly higher premiums and without the same qualification requirements of Catastrophic plans. Even if your income isn’t low enough for a Catastrophic plan, you may still be able to get subsidies for a Bronze plan. 

Just The Essentials

Catastrophic plans must include all of the ACA’s benefits, and include some free preventive care. These plans cover:

  • Outpatient services

    tubes with purple tops filled with blood being held by a person with purple gloves on.
    Catastrophic plans cover the 10 essential benefits such as lab work.
  • Emergency services
  • Hospitalization
  • Pregnancy, maternity, and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Lab work
  • Preventive and wellness services, and chronic disease management
  • Pediatric services, including oral and vision care

Catastrophic plans aren’t for everyone. If you’re unsure what plan is right for you, come to EZ.Insure for help. We understand how intricate the insurance world is, and because we have been in the industry for over 10 years, we can offer you free expert advice on which direction you should go in. To get free quotes, enter your zip code in the bar above, or to speak directly to one of our experienced agents, call 888-350-1890.