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Compare catastrophic health insurance

This high-deductible plan keeps premiums low — but it’s only open to a small pool of Americans.

Under the Affordable Care Act (ACA), young adults and people facing financial hardship can apply for catastrophic health insurance. These plans help you pay for unexpected emergencies and cover some preventative care, like check-ups, health screenings and vaccinations. But eligibility is strict, and they’re not the best option for those with health conditions.

How does catastrophic health insurance work?

Catastrophic health insurance is a type of medical coverage with low premiums and high deductibles. You’ll pay for all healthcare costs out-of-pocket until you hit your annual deductible — which is $8,150 in 2020.

After that, your insurer pays for 100% of the expenses covered by your plan.

Who qualifies for catastrophic health insurance?

These plans are open to a limited pool of people. You’re eligible for catastrophic health insurance if:

  • You’re under 30 years old
  • You qualify for a “hardship exemption” or “affordability exemption,” which means you’re not in a position to buy a standard health insurance plan.

The exemptions apply to people of any age. You’ll meet the financial hardship criteria if you’re dealing with any of the following, according to Healthcare.gov:

  • Homelessness
  • Bankruptcy
  • Domestic violence
  • Death of a close relative
  • Debt due to medical expenses you couldn’t pay
  • Utility services shut off
  • Eviction
  • Home foreclosure
  • Substantial property damage due to a fire, flood, natural disaster or man made disaster
  • Ineligible for Medicaid in your state

And to get the affordability exemption, you’ll need to prove your income isn’t high enough to support a standard health insurance policy, or your expenses unexpectedly increased due to caring for a sick, disabled or aging family member.

Who should consider catastrophic health insurance?

Because of its high deductible and limited eligibility, catastrophic health insurance isn’t the best option for most people. But it might be right for you if low premiums are your number-one priority, or you don’t qualify for Medicaid or a subsidy based on your income.

It may also suit you if you’re generally healthy and simply want to protect yourself from expensive medical bills in a worst-case scenario. While plans cover three primary care visits per year, they don’t offer much preventative care beyond that. So, if you have a health condition and require regular doctor’s visits and prescriptions, it’s worth looking at policies with lower deductibles — like a silver or gold plan on the marketplace.

How much does catastrophic health insurance cost?

The price comes down to the plan you choose and where you live. But the average monthly premium for catastrophic health insurance is $195 — which comes to $2,340 a year.

To compare, the average cost of a silver marketplace plan is $462 a month, or $5,444 a year.

While the premiums are low, you’ll pay the full cost of all healthcare services until you meet your yearly deductible.

How to get catastrophic health insurance

If you’re under 30 years old, you can shop for a catastrophic health insurance plan on the Health Insurance Marketplace. The site will guide you to your state’s exchange, where you’ll be able to compare policies from a range of insurance companies.

If you’re over 30 years old and facing financial hardship, you’ll need to fill out an exemption form and submit it to your state’s exchange first. The form will ask you to describe your current hardship and provide details about your financial situation.

You can expect a written response within four weeks. If your exemption is approved, you’ll receive an Exemption Certificate Number (ECN) — and you’ll be able to enroll in catastrophic health insurance on the marketplace.

When can I buy catastrophic health insurance?

You can purchase a policy during open enrollment, which runs from November to December each year, or after a “qualifying event.” The list includes major life changes, like getting married, having a baby or losing health insurance coverage.

How to compare catastrophic health insurance policies

When you shop for catastrophic health insurance, you’ll be presented with a list of policies available in your state. The deductible is the same across all plans.

To narrow down your options, consider:

  • How much is the monthly premium?
  • What is the out-of-pocket maximum?
  • Does the plan offer additional coverage, like vision and dental?
  • Does the plan offer medical management benefits, such as programs for back pain?

What does catastrophic health insurance cover?

Like all ACA plans, catastrophic health insurance covers 10 essential benefits at a minimum. You’ll need to pay for these services out of pocket until you reach your deductible:

  • Outpatient care — including doctor’s visits
  • Emergency room visits
  • Hospitalization — including surgery and overnight stays
  • Pregnancy, maternity and newborn care
  • Mental health and substance abuse treatment — including counseling and psychotherapy
  • Generic prescription drugs
  • Services and devices required for recovery from an injury, or due to a disability or chronic condition
  • Lab tests
  • Preventative, wellness and chronic disease management — such as health screenings, immunizations and birth control
  • Pediatric services — including dental and vision care for children

Catastrophic health plans also cover these benefits, even if you haven’t met your deductible:

  • Three primary care visits per year
  • Free preventive services required under the ACA, such as certain screenings and vaccines. There are specific lists for adults, women and children.

Since these are private plans, coverage can vary between insurers — so it’s important to compare policies. For example, some plans offer additional benefits, like dental and vision coverage as well as medical management programs to address specific issues like diabetes, back pain and high BMIs.

Do I have to pay a copay or coinsurance?

No. Unlike most plans, catastrophic health insurance doesn’t charge coinsurance or copays once you reach your deductible. Your plan will cover the rest of your healthcare costs for that year.

Are catastrophic plans HSA-eligible?

Unfortunately not — you can’t use your health savings account (HSA) to pay for medical expenses with a catastrophic plan. Members of Congress introduced a bill to change this back in 2018, so this may change in the future.

What’s not covered by catastrophic health insurance?

Thanks to the high deductible, you’ll pay out of pocket for virtually everything outside of basic preventative care. This includes emergency care and hospital visits.

Your plan may also have limits on preventative care and the number of times you can see a primary care provider (PCP). To make sure you understand your coverage, read the policy’s fine print before signing up.

Alternatives to catastrophic health insurance

Catastrophic health insurance is only suitable for a small group of people. If you don’t qualify for coverage or need a plan with a lower deductible, explore these options:

  • Browse individual plans on the marketplace. Under the ACA, US citizens can apply for a subsidized policy through Healthcare.gov. If your income is between 100% and 400% of the federal poverty level, you may be able to cut down your costs with a tax subsidy. All plans are categorized by metal tiers: bronze, silver, gold and platinum. Bronze plans have the lowest monthly premiums, but you’ll pay more out-of-pocket if you need care.
  • Check if you’re eligible for Medicaid. The requirements vary by state, but you’ll typically qualify if your income is at or below 138% of the federal poverty level. Some states have looser restrictions for pregnant women and those with disabilities. You can enroll in Medicaid year-round.
  • Look into short-term health insurance. The length of coverage varies between states, but these low-cost plans typically last up to a year. However, they usually don’t cover the essential healthcare services that are standard in marketplace and catastrophic plans.
  • Join your spouse’s or parent’s plan. If your spouse has employer-sponsored health insurance, you may be able to join their plan during the next annual enrollment period. And similarly, if you’re under 26 years old and unmarried, you can ask to be added to your parents’ plan.
  • Sign up for COBRA coverage. If you recently lost your job, you may be eligible for COBRA. This allows you to keep your employer’s health insurance plan for up to 18 months, but your premiums won’t be subsidized — making this a more expensive option.
  • Consider a telehealth service. Companies like Teladoc and Doctor on Demand offer 24/7 virtual consultations with doctors, and you’ll typically pay a flat fee per visit. Be sure to compare telehealth platforms, because some charge membership fees.

Ask an expert: Who is and isn’t a good candidate for catastrophic health insurance, and why?

Grant Dodge

Grant Dodge
Licensed health insurance broker at Health Benefits Associates

A good candidate for a catastrophic plan is someone who very rarely uses medical services or someone who uses a lot of medical services. If you are somewhere in the middle, you might want to get a plan with more coverage.

The person who very rarely uses services will generally save more over a 12-month period buying a less expensive catastrophic plan than getting a rich policy. Even if you do need to go to the doctor, the amount you’re saving in premiums will still offset the out-of-pocket expenses for that doctor visit. But if you are young, the premium increase from a catastrophic plan to a higher-end policy might be minimal. In that case, it makes more sense to buy up.

If you are older and you know that you will be spending a large amount on medical services, it actually makes sense to buy a catastrophic plan as opposed to a very rich, gold level plan.

Here’s why: Every health insurance plan always has a maximum out-of-pocket amount. This is the most you can be charged annually for medical services before the insurance company pays for 100% of any expense for the rest of the year. If you know you are going to hit the max, no matter the plan you buy, then you will end up saving more money getting a plan with a lower premium. The lower premium on a catastrophic plan will outweigh the lower costing services on the gold plan.

Is there anything Americans should know about catastrophic health insurance?
When you buy a catastrophic plan, you are generally taking on more risk than a higher-tier policy. If you do need to use the plan, you are simply going to have a higher bill than more expensive plans. Nobody can tell the future, so this is a risk you have to accept before going this route. Although if you land in the hospital, a catastrophic plan will still save you a significant amount of money as opposed to having no insurance.

Compare alternatives to Catastrophic health insurance

Name Product Telehealth coverage Wellness support Membership required Average monthly cost
Healthsherpa
Healthsherpa
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No
$30
Zocdoc
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No
$0
Understand your health plan by uploading your insurance card to your account, revealing your coverage details and in-network doctors
4 Your Health
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Yes
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$15
Get 24/7 wellness advice, meal plans, workouts and telehealth doctors, including psychologists and pharmacists. No insurance needed.
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Bottom line

Catastrophic plans offer low premiums, but you’ll end up paying hefty out-of-pocket costs if you need care. They’re designed for young people who don’t want or need much health insurance, as well as people over 30 years old who can’t afford a standard policy.

If you don’t meet the eligibility requirements, compare your health insurance options.

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