Finding adequate health insurance coverage can be a challenge, especially if you’re strapped for cash. If an Obamacare “metal level” health plan — bronze, silver, gold or platinum — busts your budget, you might consider a “catastrophic” plan.
The catastrophic option under the health care law allows Americans to enroll in a plan “with relatively cheap premiums, that is going to protect them in the worst-case scenarios,” says Cheryl Fish-Parcham, deputy director of health policy at Families USA, a Washington, D.C.-based consumer group.
Slim coverage, fat deductibles
Primarily reserved for people younger than 30, the Affordable Care Act’s catastrophic plans cover three annual primary care visits and preventive services at no cost, including disease screenings and vaccinations. Beyond that, the patient pays all medical expenses out of pocket up to a steep deductible, generally $6,350 for individuals and $12,700 for families.
People older than 30 who shop for health insurance in the Obamacare exchanges are usually required to choose a more comprehensive plan but may buy a catastrophic plan under one of the law’s many exemptions.
For example, if the health coverage options available to you would cost more than 8 percent of your income or if your insurance plan was canceled because it didn’t meet the law’s new standards, you may ask for a hardship exemption to apply for catastrophic coverage.
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Catastrophic plan pros and cons
Health Secretary Kathleen Sebelius told members of Congress that premiums for catastrophic plans are about 20 percent lower, on average, than prices for other health plans available in the Obamacare exchanges.
However, unlike the metallic plans, catastrophic plans don’t offer potential discounts through tax subsidies. If you enroll in a catastrophic plan — no matter how low your income is — you won’t qualify for a tax credit to lower your premium costs.
So, would the plan still give you enough bang for your buck? Maybe not.
Catastrophic vs. bronze
Consider how catastrophic plans compare with Obamacare bronze plans, which typically offer the lowest premiums but the skimpiest coverage of the four metallic plan levels.
In Missouri, the cheapest bronze plan would cost a 20-something consumer $157 per month, says Fish-Parcham, while the least expensive catastrophic plan would cost even less: $104. One insurer quotes a similar California bronze plan at $204 per month and a catastrophic plan at just $180 per month, says Craig Gussin, an insurance broker in San Diego.
But even though they seem more expensive, bronze plans may still be a better deal not only because of the potential financial assistance available through the subsidies, but also because those plans must cover “essential health benefits,” including emergency services and prescription drugs, which catastrophic plans may not cover until the deductible is met.
“There isn’t enough difference, in my opinion,” Gussin says, referring to the lower premiums for catastrophic plans. Consumers who pony up the extra $20 or $30 can have a metallic plan with more coverage, he adds.
Sample rates for catastrophic plans
Average countywide catastrophic plan premiums, in select markets.
|Market (city and surrounding county)||Average monthly premium for individuals under 30|
|Kansas City, Mo.||$97.70|
*Includes the city and surrounding Orleans Parish.
Slow start for catastrophic plans
When shopping in your state’s Obamacare marketplace, be sure to examine all your options. If you’d qualify for a catastrophic plan, don’t assume that it would offer the best deal because there is a chance you could snag a subsidy for one of the metal level health plans, especially if you’re in the under-30 crowd, says JoAnn Volk, a research professor at the Georgetown University Health Policy Institute.
“They might be leaving money on the table to opt for the lower premium with the catastrophic plan, when they could qualify for financial assistance for a plan that would provide them a lot more financial protection and cover more than three primary care visits in a year,” she says.
Only 1 percent of Americans who signed up for an exchange plan chose the catastrophic option during the first three months of open enrollment, according to the Department of Health and Human Services.
“The fact that the subsidies don’t apply to (catastrophic plans), I think, makes them considerably less attractive” to most people, says Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center in Washington.
When a catastrophic plan makes sense
But they’re called “catastrophic” plans for a reason, says Fish-Parcham of Families USA.
“When you compare (the $6,350 deductible for individuals) with the cost of hospital care and follow-up care for an accident or a big illness, you could easily be racking up $20,000 or $50,000 in hospital bills,” she says. “This is a way to limit your exposure to medical expenses.”
She advises consumers who are considering purchasing catastrophic coverage to first establish exactly how they will meet their deductibles if they fall ill.
“Do you have a way to set that money aside?” she asks.