Go To Top
See how much YOU can save
See how much YOU can save
Valid Zipcode Required
Invalid Carrier
Check this box if you have multiple vehicles in your family.

Want to bundle home and auto insurance for potential discounts?

Catastrophic Health Insurance: Pros and Cons

By Posted :

Catastrophic health insurance

Catastrophic health insurance is a low-premium, comprehensive health plan for young adults and people who can’t afford other health insurance plans and are facing hardships. 

These plans offer the same coverage as an Affordable Care Act (ACA) plan, but with much lower upfront costs. However, catastrophic health insurance can also result in high out-of-pocket costs when you need care. 

What is catastrophic health insurance?

The ACA provides catastrophic health insurance for people under 30 and people who qualify for a hardship exemption. 

These plans cover up to three doctor visits, routine vaccines and basic health screens. Catastrophic health insurance also covers the 10 essential services found in the ACA:

  • Emergency services
  • Outpatient care and physicians
  • Hospitalizations
  • Pregnancy, maternity and newborn
  • Mental health and substance abuse disorder
  • Prescription drugs
  • Rehabilitation services
  • Lab work
  • Preventative, wellness and chronic disease management
  • Pediatric services, including dental and vision

Catastrophic health insurance eligibility

Unlike other health plans, the ACA limits catastrophic health insurance to only two groups of people:

  • Under 30, which is the majority of catastrophic plan members
  • Those who are facing specific financial hardships

Possible reasons for hardship exemptions are:

  • Eviction
  • Homelessness
  • Facing eviction or foreclosure
  • Bankruptcy
  • Domestic violence
  • Damages to your home in a disaster
  • Death in the family causing you to care for a disabled or aging family member

Go to your state’s health insurance exchange to see if you qualify for a hardship exemption. Note: your state may only show that catastrophic plans are available for people under 30. However, you can request a hardship exemption if you have a qualifying incident. 

Catastrophic health insurance costs

The average monthly premium for a catastrophic health plan is $195. That’s much less than the premiums for individual health insurance and employer-sponsored health insurance. 

However, catastrophic plans have a much higher deductible. A deductible is what you have to pay for health care services before your health plan kicks in money to pay for care. 

Here’s the average for other types of plans and how they compare with a comprehensive medical plan: 

  • Employer-sponsored health plan -- $1,644
  • High-deductible health plan offered by an employer -- $2,303
  • High-deductible Silver plan in the ACA marketplace -- $4,879
  • High-deductible Bronze plan in the ACA marketplace -- $6,992
  • Catastrophic health plan -- $8,150

Unlike other health plans, catastrophic health insurance doesn't have coinsurance once you reach your deductible. In other plans, you have to pay a portion of costs for health care services after you get to your deductible. That’s called coinsurance. 

Catastrophic health insurance plans don’t have coinsurance. Instead, the plans cover the rest of your health care services’ costs for the year once you reach the deductible. You still have to pay the premiums, but the plan picks up the costs when you receive care. 

How do you get a catastrophic health plan?

If you qualify, you can get a catastrophic health plan through your state’s ACA marketplace, also called the exchanges. You can start by going to healthcare.gov and it will take you to the right page for your state.

You can fill out an application requesting a hardship exemption and submit it to your state. Your state’s exchange will notify you whether you qualify for a hardship exemption.

Should you get a catastrophic health plan? 

Catastrophic health insurance isn’t for everyone. They have limited eligibility and they might not be a good fit even if you’re eligible. 

Catastrophic health insurance offers preventive care and protects you in case of emergencies. However, if you have prescriptions or have a condition that requires regular doctor visits, catastrophic health insurance is likely not a good fit for you. 

Instead, you can see about getting other types of coverage. Here are other options:

  • Medicaid -- Medicaid is a federal/state health insurance program for low-income Americans. These plans offer comprehensive coverage at little to no costs for members. Some states have looser restrictions for certain circumstances, such as pregnant women. Check with your state to see if you’re eligible for Medicaid.
  • ACA plan -- Individual health insurance costs more than comprehensive health insurance. However, people who buy coverage through the ACA marketplace are eligible for subsidies. The subsidies help lower health care costs for people whose household income is below 400% of the federal poverty level. If you qualify, the insurance exchange website provides health plan cost estimates with subsidies. 
  • Short-term health insurance -- Short-term health plans have low premiums. However, they also have high out-of-pocket costs when you need health care services. The plans usually don’t cover health care services that are standard in ACA and catastrophic plans, such as prescription drugs, maternity and mental health care. Most Americans can have a short-term plan for a year and request two extensions, but some states banned the plans, while others limit their length. 
  • COBRA -- If you recently lost your job, you may be eligible for COBRA. COBRA allows you to keep your former employer’s health insurance, but you have to pay for all the costs. Your former employer no longer chips in money for care. COBRA is often expensive, but it may interest you if you want to keep a former employer’s insurance. 

Find ways to get affordable health insurance. 

Whether catastrophic health insurance is for you depends on whether you qualify and your health care situation. If you’re eligible, make sure to weigh the pros (low premiums and comprehensive coverage) with the cons (hefty out-of-pocket costs and possibly few plans options).