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Catastrophic Health Insurance

What Is Catastrophic Health Insurance?

Catastrophic health insurance plans were created under the Affordable Care Act, and are designed to be an affordable option for those who are eligible. Catastrophic plans save money up front by offering low monthly premium options and high out-of-pocket costs and deductibles.

What Makes Catastrophic Health Insurance Different

Catastrophic doesn’t affect the quality of care you receive, nor do they affect how your claims are processed and reimbursed, they just offer a different premium and out-of-pocket cost relationship that can save you money. Catastrophic plans also come with a different eligibility process than other plans purchased through the health insurance marketplace.

How Catastrophic Health Plans Work

Catastrophic coverage works exactly like any other health insurance plan purchased through the marketplace. The first step is finding a plan and enrolling, once you do that, you’re officially covered.

With catastrophic plans you will pay a monthly premium in order to remain covered, your premium will also be lower than Bronze, Silver, Gold, and Platinum plans purchased through the marketplace. When it’s time to seek out medical attention, whether it be for a routine checkup or something a little more serious, that’s when your coverage will kick in, but only after you reach your deductible or out-of-pocket maximum.

Once you reach your deductible or out-of-pocket maximum, your catastrophic health plan will typically cover 100% of your medical costs for the rest of the year, or whenever your deductible or out-of-pocket maximum reset. It’s important to note that your deductible may be a significant chunk of change.

Example Of How Catastrophic Coverage Works

Imagine you are freshly out of college, 26 years old, and need to purchase an affordable health insurance plan. After doing some research, you settle on a catastrophic plan through the health insurance marketplace because it offers the lowest monthly premium.

Your plan only charges you $125 each month, which is a steal but does come with a $7,500 annual deductible. This is ideal for you because you are young, healthy, and living on a tight monthly budget.

Two months into your plan, you come down with a sharp pain. You head to the doctor and they rush you in for surgery. After a few days of recovery in the hospital, you get sent home and get back to your daily routines. However, a week later, you get a bill in the mail. The total cost of your hospital stay was $32,000.

After getting past the initial shock of how much you owe, you see that your health insurance company will be covering the majority of the bill. However, you still have to pay $7,500. The good news is that you will have met your annual deductible, so if any other medical service you receive during the year will be covered in full by your catastrophic plan, although you may have a small copay for your next visit.

What Catastrophic Plans Cover

The word catastrophic is a little misleading because when you think of catastrophic you think of medical emergencies that could mean the difference between life and death. However, catastrophic plans were created under Obamacare, and therefore need to cover the same minimum essential benefits all other ACA plans need to cover. Read more about minimum essential coverage here to find out exactly what will be covered under your catastrophic plan.

Who Should Consider Catastrophic Health Insurance

Catastrophic health insurance provides you with the same comprehensive and quality coverage you would get with any other health insurance plan. While these plans are going to be your cheapest option for monthly premium payments, they can end up costing you more in the long run if you end up having to pay your high deductible.

Graphic consider catastrophic insurance

If you are going to consider a catastrophic plan, you want to make sure it’s going to be a good fit for you before signing up for coverage, and you also want to make sure you are eligible. Here is a list of people who should consider catastrophic coverage.

  • Anyone under 30 years old: If you are under 30, you are eligible for catastrophic plans regardless of their financial situation. You just want to make sure you don’t have an extensive medical history because those high deductibles can end up costing you.
  • Anyone who qualifies for a hardship exemption: Regardless of your age, you still may be eligible for catastrophic coverage if you can’t afford other health insurance options. Keep reading for a list of exemptions.

Can You Get Catastrophic Coverage Over 30?

Yes, you can get health insurance over the age of 30.

The purpose of the Affordable Care Act was to provide affordable health insurance to everyone. If you can’t afford health insurance, rather than foregoing coverage, you may qualify for a hardship exemption. The following are some examples of what would qualify you for a hardship exemption, but for a full list, you can read more here.

  • You are currently homeless or have recently been homeless.
  • You have been evicted from your home, or have recently been evicted.
  • You were are or have been a victim of domestic violence. If you are currently a victim of domestic violence you can seek help here.
  • You have recently experienced the death of a family member.
  • You have current outstanding medical bills you have not been able to pay.

Graphic catastrophic insurance eligibility

If you do qualify for a hardship exemption, it would be worth exploring federally funded health insurance programs like Medicaid and Medicare. You may be eligible for subsidized health coverage that will cost you little to no money. You also may be exempt from any health insurance penalty should you choose to go without coverage for the year.

Pros And Cons Of Catastrophic Health Insurance

Catastrophic coverage may not be right for everyone, but it’s still an affordable health insurance plan you want to consider. Before signing up for any plan, it’s important to weigh the pros and cons, and the same is true for catastrophic health insurance.

Pros Of Catastrophic Coverage

Graphic catastrophic coverage pros cons

  • The biggest benefit of all is that you will be covered if there is ever a medical emergency.
  • Catastrophic plans are some of the most affordable plans available.
  • You have access to comprehensive health coverage that includes preventive care and other benefits.

Cons Of Catastrophic Coverage

  • If there ever is a medical emergency, you will end up paying more than you would with other health insurance options.
  • May leave out important health benefits like coverage for prescription medication.
  • You don’t have the ability to apply for federal subsidies through the health insurance marketplace.

Will Catastrophic Health Coverage Qualify Under Obamacare?

Yes, catastrophic health insurance plans meet all of the federal requirements to be considered qualifying health coverage. If you are eligible and choose to enroll in one of these plans you will be exempt from paying any tax penalty from the individual mandate.

Can You Get A Subsidy For Catastrophic Insurance?

Unfortunately, you can’t apply or receive a government subsidy or premium tax credit if you choose to enroll in a catastrophic health insurance plan. However, if you are eligible for a subsidy through the marketplace, you may find it’s cheaper for you to enroll in a lower tiered plan. For example, a Bronze Plan or Silver Plan may be cheaper with a subsidy than a catastrophic plan. Make sure to work with an experienced health insurance agent or broker to maximize your savings.

When Can You Purchase Catastrophic Plans

Catastrophic plans are purchased through the marketplace, and therefore can only be purchased during the Open Enrollment Period each year. Typically Open Enrollment will begin on November 1 and run through December 15.

If you qualify for a Special Enrollment Period you will also be eligible to sign up for catastrophic coverage. Special Enrollment Periods open up all marketplace plans to you for a 60-day window after you experience a qualifying life event. For a list of qualifying life events, you can look here, but some examples include:

  • You recently lost your health insurance coverage.
  • You had a change in your household size, including marriage, a newborn child, or adoption.
  • You recently moved or had a change in residence.
  • You just became a US citizen and are now eligible for coverage.
  • You recently lost your job.

Grpahic hardship exemption list

How Much Catastrophic Plans Cost

Catastrophic coverage will vary in cost depending on where you live, along with a few other factors, so there is no set price. In 2017, the average cost of catastrophic health insurance was around $167 per month, which translates into just about $2,004 annually. But again, these prices may not accurately represent what your catastrophic plan may cost.

How Much Are Catastrophic Plan Deductibles?

While the costs for catastrophic premiums may vary, the deductibles will be the same across the board. According to the health insurance marketplace, deductibles for all catastrophic plans in 2017 were $7,150. That means before your health insurance kicks in to cover medical expenses, with the exception of the minimum essential benefits, you will have to pay $7,150 out-of-pocket.

Applying For Catastrophic Coverage

If you’re looking to apply for catastrophic coverage, you will first have to meet the eligibility requirements and make sure that this is the right plan choice for your needs. The next step would be to create a health insurance marketplace account to view the different coverage options in your area. Once you find the plan you want, all that’s left to do is enroll.

Comparing Catastrophic Health Insurance Quotes

For the most part, you can compare all the health insurance plan quotes directly through the marketplace, including catastrophic plans. However, you don’t have the ability to compare catastrophic health insurance quotes with private health insurance quotes and benefits.

While catastrophic health insurance may be the cheapest option for you through the marketplace, more and more Americans are finding that they can save money by signing up for plans outside of the marketplace.

So when you are comparing catastrophic health insurance quotes, make sure to look over all of your options, because you may find something cheaper. First Quote Health makes it easy for you to review the plans available in your area, so you can compare them your quotes through the marketplace. All you have to do to get started is enter your zip code, and you can even get covered today.


What does the term catastrophic refer to in the medical field?

In the medical field, the term catastrophic refers to any severe illness or injury that requires an extended hospital stay or recovery process. These illnesses or injuries are typically accompanied by expensive medical costs.

What is the catastrophic cap?

The catastrophic cap is the maximum amount of money you will pay out-of-pocket for the year.

Can you use a Health Savings Account with your catastrophic plan?

Unfortunately, you can’t pair a catastrophic health insurance plan with a Health Savings Account (HSA). However, if you are looking to use an HSA to help with your medical expenses, you may benefit from a number of high deductible policies that can be paired with an HSA.

Is catastrophic coverage the cheapest health insurance option available?

No, there are cheaper options than catastrophic coverage both through the marketplace and private sector.