Understanding catastrophic health insurance

What are catastrophic health plans?

Catastrophic health plans are low-premium, high-deductible insurance plans that are designed to help cover large medical bills in situations like serious injuries or unexpected illnesses.

The low premium means you'll have a lower monthly bill, but because these plans have high deductibles, you’ll pay more of your medical care out-of-pocket before your insurance starts to pay.

So you'll pay the full bill for routine care, medications, and things like visits to specialists, emergency room visits, and hospital stays until you meet your deductible, which can be thousands of dollars for a catastrophic plan. That's why these plans are best suited for protection against a worst-case scenario, rather than everyday health care expenses.

Who can get a catastrophic health plan

Not everyone can buy a catastrophic health plan. Generally, you must be under 30 years old to enroll in one.

If you're 30 or older, you'll need to apply for a hardship exemption or an affordability exemption to buy a catastrophic health plan.[D] You might get a hardship exemption if you experience difficult life events that prevent you from getting standard health insurance, like facing eviction, filing for bankruptcy, or suffering from a natural disaster.

An affordability exemption applies if the lowest-priced standard health care options cost more than a certain percentage of your total household income. If standard plans are too expensive based on what you earn, you can apply for this exemption.

Is a catastrophic plan right for you?

The right answer depends entirely on your budget and your daily health needs.

If you are young, highly active, and rarely visit the doctor, a catastrophic plan may save you money on monthly premiums. The plan would be protection against the costs of a worst-case health event. But if you need regular checkups, take medications, or see specialists often, the high deductible might cost you much more over the year.

Also keep in mind that catastrophic plans don't qualify for premium subsidies.[D] If your income qualifies you for a tax credit, a Bronze or Silver tier plan might end up being cheaper than a catastrophic plan.

Take a close look at your personal health history, your current income, and your savings. Think about whether you could comfortably afford to pay a high deductible if a major medical emergency happens tomorrow.