You have a lot of options when it comes to Affordable Care Act (ACA) health insurance plans. There are all those metal levels, such as bronze, gold, silver and platinum, each of which has a different monthly cost (premium).
But if you’re looking for the cheapest plan, you may have seen something called a “catastrophic” health plan. The super low monthly bill might’ve sounded like a great deal, but was it too good to be true?
Read below to find out more about what catastrophic plans offer and whether you should choose one.
What is a catastrophic health plan?
A catastrophic health plan is one of the types available under the ACA. And as was mentioned above, comprehensive ACA plans are grouped by metal categories:
- Bronze
- Silver
- Gold
- Platinum
Generally speaking, bronze plans have the lowest premiums, but you may pay more out of your own pocket for care when you use it. On the other hand, platinum plans have the highest premiums but may have the lowest out-of-pocket costs.
All ACA plans also have an annual cap on out-of-pocket spending set by the federal government each year. In 2024, the cap is $9,450 for an individual (and double that for a family plan). Once you reach the out-of-pocket maximum, your plan will cover 100% of health care costs for the rest of the year.
Catastrophic plans are another option for certain people who qualify. They usually have even lower monthly premiums than bronze plans. But they have high deductibles, which is what you have to pay for covered services before the plan starts paying.
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Who qualifies for a catastrophic health plan?
Unlike the other ACA metal plans, only certain people can join a catastrophic plan. “There are 2 types of people who qualify for a catastrophic plan,” says Caitlin Donovan. She’s the senior director of public relations for the National Patient Advocate Foundation in Hampton, Virginia. “One is if you’re under 30, and the other is if you’re over 30 but have an affordability or hardship exemption.”
Here’s an overview of the exemptions:
Affordability exemption: You qualify for this exemption if there are no options available to you with a premium that costs less than 7.97% of your household income. This exemption can last until the end of the year in which you apply. If you want to get it for the entire calendar year, you have to apply for it before the end of the previous year.
Hardship exemption: You qualify for this exemption if you’ve faced a hardship that has kept you from getting health insurance. Examples include:
- Being homeless
- Getting evicted
- Having your utilities shut off
- Experiencing domestic violence
- Filing for bankruptcy
These exemptions usually cover the month of the hardship plus a month before and a month after.
“The idea here is that they’re trying to encourage you to go toward a comprehensive plan,” Donovan says. “It’s more to get your footing than to rely on it as a full-time health insurance policy.”
There are exceptions. For example, if you’re ineligible for Medicaid only because your state hasn’t expanded Medicaid, you can get an exemption for the entire year.
Are there government discounts for catastrophic health plans?
Most Americans shopping for an ACA plan qualify for a tax credit that lowers their monthly premium. In fact, 91% of ACA enrollees received a tax credit in February 2023.
But these tax credits can be used only for metal-level plans. They cannot be used for catastrophic health plans.
“There are a lot of people who qualify for either a free or single- to double-digit premium plan. And if that’s the case and you’re comparing those plans to a catastrophic plan, you should pretty much pick the comprehensive [metal] plan every single time,” says Donovan.
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What do catastrophic plans cover?
Catastrophic plans cover the same essential health benefits as other ACA plans. That includes certain preventive services at no cost to you, such as:
- Annual physicals
- Immunizations
- Preventive screenings for diseases such as colon cancer and breast cancer (depending on your age, gender and other factors)
Catastrophic plans also cover at least 3 primary care visits per year before you’ve met your deductible.
Beyond those services, you’ll have to meet your annual deductible before the plan starts paying. That means you could be on the hook for major health care bills if you get seriously sick or injured.
Should I consider a catastrophic health plan?
You might be attracted to a catastrophic health plan because of its low premium. But your monthly bill is just one number you should look at. Donovan cautions that you’ll always want to think about 3 factors when choosing a health plan:
- Annual deductible
- Cost-sharing amounts (copays and coinsurance)
- Monthly premium
Donovan adds: “As deductibles go up and high-deductible plans proliferate on the market, that deductible number is becoming much more important. If you’re looking at a plan and you see the deductible is something you can’t afford, it’s like not having insurance at all.”
Of course, if you don’t plan on needing health care beyond preventive services, the low premium can save you money. The ideal candidate for a catastrophic plan may be a young adult who’s healthy and doesn’t have access to health insurance at work, says Eric Starke. He’s the director of Starke Financial Services in Fort Lauderdale, Florida.
“This is where a catastrophic plan just might be the right plan for you,” Starke says. “Catastrophic plans are there for you in case you go to the hospital. Without them, 100% of the hospital costs would be the responsibility of the person rather than a percentage of the plan if they have a catastrophic plan.”
But Donovan cautions against catastrophic health plans. “I would always encourage someone to do a comprehensive [metal] plan instead of a catastrophic plan.” Why? “There’s always something, whether it’s an accident, whether it’s an injury, whether it’s a diagnosis,” she says. “You’re going to be a patient one day.”
Looking for the family or individual health plan that’s right for you? Learn more about your health insurance options today, or call a licensed insurance agent at 1-844-211-7730 to discuss them in greater detail.
Sources:
Centers for Medicaid and Medicare Services. “Effectuated enrollment: Early 2023 snapshot and full year 2022 average.” Retrieved from https://www.cms.gov/files/document/early-2023-and-full-year-2022-effectuated-enrollment-report.pdf Accessed May 14, 2024
HealthCare.gov. “Catastrophic health plans.” Retrieved from https://www.healthcare.gov/choose-a-plan/catastrophic-health-plans/ Accessed May 14, 2024
HealthCare.gov. “Health coverage exemptions, forms and how to apply.” Retrieved from https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/ Accessed May 14, 2024
HealthCare.gov. “The health plan categories: bronze, silver, gold and platinum.” Retrieved from https://www.healthcare.gov/choose-a-plan/plans-categories/ Accessed May 14, 2024
HealthCare.gov. “Out-of-pocket maximum/limit.” Retrieved from https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/ Accessed May 14, 2024
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