Individual and group tiered insurance plans get all the spotlight, but how much do you know about catastrophic health insurance? It may be the best for you now.
This article will define what catastrophic health insurance is, what such a policy covers, how its deductible functions, the unique factors that make catastrophic health insurance stand out, eligibility, cost, and any hidden benefits to such a plan.
A catastrophic health insurance policy is an individual insurance policy open to people under 30 looking to save costs on healthcare expenses with low premiums throughout the year. These plans have high deductibles but provide coverage for essential health benefits, with no coinsurance.
The information in this article has been collated from various trustworthy sources to ensure the statements made within this article are factual. Some of these sources include Healthcare.gov, various health insurance providers, the Affordable Care Act, and health industry watchers.
Definition of Catastrophic Health Insurance
Catastrophic health insurance is a unique form of health insurance coverage clearly defined by the Affordable Care Act. Before the ACA, the term "catastrophic coverage" strictly referred to any generic form of health insurance plan with limited coverage and high out of pocket expenses.
Catastrophic health insurance policies also have high deductibles. However, if an individual is eligible for a catastrophic health insurance plan, they are not required to complete the deductible payment before getting certain services.
The ACA has legally defined what catastrophic health insurance is, and these plans are available for individuals. Catastrophic health insurance can't be purchased as work-sponsored coverage.
What Do Catastrophic Health Insurance Policies Cover?
Catastrophic health insurance acts as a financial safeguard for young people under 30, with extremely high healthcare costs throughout a year. These policies can offer the same covered benefits which every ACA-compliant health insurance plan is expected to provide.
These benefits also include three copay-covered non-preventative doctor's visits per year. While most healthcare services count towards a deductible till it is met, a catastrophic health insurance plan differs in that essential health benefits are covered.
Covered in this sense means that they are eligible for the deductible, which, when met, would trigger the policy to pay for the essential health benefits for the rest of the year.
Apart from these specific benefits of non-preventative and preventive care, the deductible still has to be met before the policy begins to pay for your medical expenses. Before the deductible is met, a catastrophic health insurance policyholder can still pay the policy's negotiated rates instead of the total amount the medical provider charges.
It's essential to bear in mind that catastrophic health insurance plans typically have high deductibles that most policyholders cannot meet within a year. This deductible can be likened to a yearly out of pocket maximum for some other health insurance plans.
This structure means that catastrophic health insurance plans do not have coinsurance. Once the deductible is met, the policy begins paying for the entirety of the applicable services for that year.
This means, if you have high healthcare costs within a year, your catastrophic health insurance policy immediately kicks in and begins paying your medical expenses. The 2020 deductible for catastrophic health insurance policies is $8,200.
$8,200 might seem like a lot. However, it isn't that difficult to incur more than that in healthcare costs. Any number of outpatient procedures and inpatient hospital services can get you to that figure quickly.
What Counts As A Covered Healthcare Expense?
By law, catastrophic health insurance policies cover the same essential services that every other ACA-compliant health insurance policy covers.
This means these policies have to cover medically essential care such as blood tests, doctor visits, mental healthcare, substance abuse treatment, and maternity care.
It differs from other plans in that these benefits won't be paid for till your high deductible is met.
Are There Exceptions?
There are two exceptions;
Catastrophic health insurance plans are required to pay for preventive healthcare regardless of what your deductible level is. This includes mammograms, contraception, well-woman visits, and the annual flu shot.
Catastrophic health insurance policies are required to foot the bill for you when you visit your primary care doctors three times in a year without you having to pay your deductible first.
You might, however, be required to put down a copayment for the visits.
What Is The Cost Of A Catastrophic Health Insurance Policy?
Individuals eligible for a premium tax credit that could be used to reduce the cost of their premiums would be unable to use said subsidy with catastrophic health insurance policies.
To use the subsidy, you will need to select a tiered plan from the Marketplace.
While premium subsidies aren't eligible to be used on catastrophic health insurance policies, a healthy individual that doesn't meet the requirements for these subsidies might view the catastrophic policy as a much better deal.
While bronze tiered health insurance plans have similar out of pocket maximums to catastrophic health insurance policies, the latter are usually more affordable.
The metal plans usually have a risk adjustment program with which the costs that policyholders pay are calculated. The bronze metal plans and Catastrophic health insurance plans are in the same risk category. However, because catastrophic health plans are meant to be more financially flexible and less tasking, they don't use the same risk adjustment as bronze plans.
If you hold a catastrophic health plan, your risk adjustment is done in a pool with other catastrophic health insurance plans and not with the bronze plans they share similarities with. This is the basic mechanism with which catastrophic health plans are more affordable. Simply put, the costs are calculated on a lower scale than the metal plans.
Individuals that opt for metal plans may select platinum, gold, or silver tiered plans. Usually, these people usually want more health coverage, depending on their health needs. Catastrophic health insurance policies, however, are chosen by young individuals, which means there is no risk to level out. In this article, we explain the different tiers of insurance you may get.
Who Is Eligible To Purchase A Catastrophic Health Insurance Policy?
Only select individuals can purchase catastrophic health insurance via the insurance Marketplace. To qualify, you have to be under 30 years old.
Another way to qualify is via the hardship exemption from the individual mandate penalty provision.
More individuals than ever can now buy catastrophic health insurance policies as a result of the US government expanding the setlist of conditions that qualify for hardship exemptions.
A few of the hardship qualifications are:
- Bankruptcy
- Homelessness
- Eviction
- Domestic violence
- Home foreclosure
- Fire
- Man made or natural disasters resulting in significant property damage
- Death of a close family member
- Lack of utility services
It doesn't matter that the federal penalty for not having insurance was struck out after 2018. It is still necessary to get an exemption before purchasing a catastrophic health insurance policy if you are older than 30 years.
What Factors Define Catastrophic Health Insurance Policies?
Catastrophic health insurance policies available on ACA insurance marketplaces have the following features:
- Enrollment limitations. Catastrophic health insurance policies have eligibility requirements
- Catastrophic health insurance policies are not eligible for premium subsidies
- Catastrophic health insurance plans have extremely high deductibles, which equal the annual out-of-pocket maximum of some plans. (The ACA regulates just how high these out of pocket maximums can be. The federal government is responsible for setting the limits, which are reviewed each year).
- Catastrophic health insurance plans cover every essential health benefit, including specific preventative care services without out-of-pocket expenses.
- Catastrophic health insurance policies cover three non-preventative primary care doctor visits within a year.
Catastrophic health insurance policies generally have higher deductibles compared to the deductibles available in other health insurance policies.
Nevertheless, it is commonplace to have some bronze tier plans with comparable deductibles and out of pocket maximums.
These plans differ from catastrophic health insurance policies in that bronze tiered plans have some form of coinsurance and lower deductibles used until the out-of-pocket maximum is reached.
However, catastrophic health insurance policies have a deductible that is equal to the entire out-of-pocket maximum.
Once the policyholder has paid enough to meet the deductible, the policy provider begins paying for the entirety of the coverage-approved healthcare expenses within the network.
Do Catastrophic Health Insurance Policies Have Hidden Benefits?
A catastrophic health insurance policy is designed in a way that even if your healthcare spending doesn't meet your health insurance policy's deductible, you still pay less overall out-of-pocket costs. In any case, a catastrophic health policy is always better than not having an insurance plan.
Catastrophic health insurance policies can be POS, EPO, PPO, or HMO plans. Every one of these plans negotiates discounts with healthcare providers such as pharmacies, labs, hospitals, and doctors.
These healthcare providers provide discounted rates as part of the insurance policy's network of medical providers.
Individuals with a catastrophic health insurance policy can benefit from these lower rates before their deductible is even paid.
For instance, if you haven't met your required deductible on your catastrophic health insurance policy, you then sustain an injury to the arm and require an X-ray. If the X-ray has a market price of $300, you will be required to pay the entire $300 I'd you don't have a catastrophic health insurance policy.
If you had the X-ray at an in-network medical facility, you would gain access to the discounted rate for those with catastrophic health insurance policies. If the discount rate is $100, you will only have to pay $100.
This means you pay $200 less than what you would have done if you didn't have health insurance.
