What Exactly is Meant by the Term "Catastrophic Health Insurance"?

What Exactly is Meant by the Term

Catastrophic health insurance is a cheap type of coverage that protects policyholders from losing a lot of money because of large medical bills.

Catastrophic health insurance is a relatively low-cost coverage option that is aimed at shielding you from significant outlays of money for medical care. You will have a higher deductible, but the monthly premium will be much lower. Because of this, up until the point where you achieve it, the majority of your medical expenses will come out of your own money.

If you are unable to pay for health insurance, whether it be through your workplace or through the Health Insurance Exchange, there are other options available to you. You might be able to purchase a fundamental health plan that provides necessary medical benefits in the event of unforeseen injuries or illnesses. Find out how these plans operate and how much they might actually cost you before you buy them.

An Explanation of Catastrophic Health Insurance, Along with an Example

These policies are intended to shield you from having to pay a disproportionately large amount out of pocket for catastrophic medical expenses. They are still required to meet the minimum essential coverage under the Affordable Care Act (ACA), but in most cases, you will have to pay a significant amount of money out of pocket before you hit your (very high) deductible.

In contrast to some ordinary policies, catastrophic plans pay for a very limited number of medical bills before your deductible is met. This indicates that they won’t be able to provide much assistance with regard to copays, the cost of prescriptions, or any other expenditures that are your responsibility.

You may reach your deductible quite fast in the event that you are involved in a significant accident. However, before you get to that point, you will have to spend a significant amount of money. On the other hand, the cheap premiums you pay will help offset some of those other costs.

The Affordable Care Act (ACA) sets the deductible amount for all individual catastrophic insurance plans at $8,700 for a person in 2022 and $17,400 for a family.

That is the maximum amount of money you would have to pay out of pocket in a single year.

Only a small number of people can buy catastrophic plans. These include people under 30 years old, people who qualify for a hardship exemption, and people who can’t get affordable insurance through work or the marketplace.

How Does Insurance Coverage for Catastrophic Events Operate?

Regardless of whether or not you have reached your deductible, catastrophic insurance plans, like all other plans sold via the ACA, are required to cover certain preventative services at no additional cost to the policyholder. In most cases, these consist of the administration of standard vaccinations and screenings. HealthCare.gov provides access to the comprehensive list.

The major medical plans are required to provide coverage for at least three visits to your primary care physician before the deductible is considered met.

Aside from those advantages, you will be responsible for paying for all of your medical bills out of your own pocket until you meet your deductible. After that date, catastrophic health insurance will have to offer the same essential health benefits as other plans on the marketplace. These include:

  • Patient care is provided to ambulatory patients.
  • Emergency service providers
  • Hospitalization
  • care during pregnancy as well as for the mother and newborn baby.
  • Behavioral health issues and substance abuse
  • Prescription drugs
  • Rehabilitative services
  • Services related to laboratories
  • Services are oriented toward prevention and wellness.
  • Medical care for children
  • Additional advantages, such as insurance coverage for breastfeeding and birth control
  • Depending on your state’s minimum coverage requirements, dental or vision insurance.

When your deductible has been met, you won’t have to pay any further money for coinsurance or a copay for any of these treatments. Both the availability of catastrophic health insurance plans and the costs associated with purchasing them vary greatly from provider to provider and state to state.

Where Do HSAs Come Into Play?

If you are an employee who is only covered by a high-deductible health plan, you have the option of combining a catastrophic health care plan with a health savings account (HSA), which enables you to set aside money that is exempt from taxes and can be used to pay for medical expenses. If you are self-employed, you do not have this option. In the event that you have catastrophic health insurance, an HSA can assist you in paying for any out-of-pocket medical expenses that you incur. 

How to Obtain Health Coverage in the Case of a Catastrophe

There are several different insurance companies that provide catastrophic health care insurance. If you currently have health insurance, check with your provider to find out what plans are available and the prices associated with each one. You have the option of shopping for health insurance on the marketplace run by either the federal government or the state in which you live if you do not choose to use your current provider.

It is important to keep in mind that when investing in a catastrophic plan, both your deductible and your out-of-pocket costs will most likely be higher than they would be if you had a standard plan.

There is no possibility of receiving a subsidy payment under the ACA to go toward the cost of catastrophic health insurance coverage. If you are eligible for a subsidy, a standard plan with a bronze or silver level may cost less while providing more coverage than a catastrophic plan would. 

Whether you choose a catastrophic plan or something more comprehensive, you need to be sure that you can afford it even if you have to pay the maximum amount that your plan allows you to pay out of pocket. Catastrophic health insurance, like other types of health insurance, can only be purchased during open enrollment periods or if certain life events qualify as “qualifying events.”

Visit HealthCare.gov or give them a call at 800-318-2596 if you would like additional information regarding catastrophic health plans.

Key Takeaways

  • A catastrophic health insurance policy is a low-cost health care plan. However, until the policyholder meets the plan’s high deductible, it only covers a small number of medical costs.
  • People under the age of 30 and those who meet the requirements for an exemption due to hardship or affordability are the only ones who can sign up for these plans.
  • After you have met your high deductible, a catastrophic health plan will cover all of the key benefits that are included in a standard health plan.
  • Plans that are very bad don’t qualify for tax breaks or other help from the government.

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