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    Is Catastrophic Health Insurance Worth It?

    6 mins

    Catastrophic health insurance offers protection from large medical expenses that could otherwise lead to significant financial losses. But is catastrophic health insurance worth it for the average person?

    This article explains what catastrophic health insurance is and how it works so you can make an informed decision about whether it’s the right choice for you.

    What Is Catastrophic Health Insurance?

    Catastrophic health insurance is a type of insurance policy designed to provide coverage during catastrophic events like accidents or serious illnesses that often require extensive and costly medical treatment.

    These plans are low-cost, high-deductible policies meant for individuals under the age of 30. Essentially, they’re intended for people who wouldn’t expect to have high medical expenses outside of an unforeseen accident.

    If you’re over 30 and are interested in catastrophic health insurance, you’d need to qualify for a hardship exemption. A hardship exemption essentially states that you’ve experienced a hardship that prevents you from securing a traditional health insurance policy.

    Some of the events covered under a hardship exemption include:

    • Homelessness

    • Eviction

    • Bankruptcy

    • Domestic violence

    • Natural disasters

    If you think you might qualify for an exemption due to financial hardship, you can apply for an exemption through the Health Insurance Marketplace. If you qualify for an exemption, you would claim it on your income tax return and get money back.

    Catastrophic Health Insurance vs. Other Healthcare Insurance Options

    Below are some details to note as you compare catastrophic health insurance and other healthcare insurance options:

    • Catastrophic health insurance plans come with high deductibles, which means you have to pay more out of pocket for routine care like physicals and check-ups before the insurance plan begins to cover any costs

    • Even under a catastrophic plan, most preventive care is covered at 100% due to the Affordable Care Act. These include preventive services like health screenings, most vaccinations, annual checkups, and certain forms of birth control.

    • Catastrophic health insurance has low monthly premiums, which means they’re usually more affordable than other insurance options

    Catastrophic insurance plans are sometimes called “high-deductible health plans.

    Reasons to Consider Catastrophic Health Insurance

    There are many good reasons why you might consider purchasing a catastrophic health insurance plan. Here are a few common scenarios:

    • You can’t afford the cost of a traditional health insurance plan, or you’re looking for lower premiums

    • You don’t require a lot of medical care outside of preventive visits

    • The high out-of-pocket costs for occasional visits outweigh paying expensive monthly premiums

    • You have a savings fund for a serious medical issue (remember you have to pay out-of-pocket completely until you meet your deductible)

    • You either don’t qualify for subsidies or wish to forgo your right to them

    Each catastrophic health insurance plan has its own terms and limitations, so make it a point to investigate various plans fully to make sure you’re eligible for a particular plan and that it meets your needs.

    What Does Catastrophic Health Insurance Cover?

    While catastrophic health insurance doesn’t offer comprehensive coverage, it can cover the essential healthcare needs of certain people. Moreover, it covers all healthcare expenses after you meet your deductible.

    As mentioned, plans can vary greatly. That said, here’s a general estimate of what your catastrophic healthcare plan should cover:

    • Three primary care visits per year

    • Pregnancy and maternity care

    • Some preventive services

    • Some immunizations and vaccines

    • Some birth control methods

    • Other basic health benefits

    Since every plan differs, you should ensure that your needs are covered before committing to one.

    What Catastrophic Health Insurance Doesn’t Cover

    Until you meet your deductible, there’s quite a bit that isn’t covered by catastrophic health insurance. That means if you have unexpected circumstances, you’ll have to pay for many treatments, services, and medications out of pocket.

    Some of the things not covered under catastrophic health insurance include:

    • Emergency care (this is notable, as you’ll be responsible for any costs until your deductible is met following an accident)

    • Sudden illness

    • Unexpected injuries

    Again, once you’ve hit your deductible, the plan will cover any further expenses for covered services.

    Costs for Catastrophic Health Insurance

    There’s no one-size-fits-all answer to the costs of catastrophic health insurance since plans vary and many contain multiple tiers. Generally, however, they’re a low-cost option, especially compared to traditional health insurance plans.

    In 2024, the catastrophic policy annual deductible and out-of-pocket maximum are $9,450 for individuals and double that for families.

    If you qualify for and purchase a catastrophic health plan, you’ll pay a monthly premium to keep the insurance policy active. You’ll pay $9,450 out of pocket in a single year before the insurance covers anything.

    Pros of Catastrophic Health Insurance

    The key benefit of catastrophic health insurance coverage is its affordability. If you’re young, healthy, and experiencing financial struggles or simply don’t want to pay for more comprehensive coverage, a catastrophic health plan might be right for you.

    These plans keep your monthly payments low while offering some level of security in the event that you experience a medical emergency resulting in high costs.

    Cons of Catastrophic Health Insurance

    While these plans may benefit certain types of people, there are many who wouldn’t get sufficient coverage under catastrophic health insurance.

    If your health requires regular doctor or specialist visits, catastrophic health insurance won’t cover those costs until you meet your deductible. It also doesn’t meet the requirements for subsidies or tax breaks like traditional health plans do.

    Who May Benefit from Catastrophic Health Insurance

    There’s no way to determine which plan works best without considering your individual situation. While no one can predict the future, catastrophic health plans, as a rule, are best for people who don’t anticipate many medical costs in the year ahead.

    Is Catastrophic Insurance Worth It?

    Catastrophic health insurance plans are useful for certain individuals in certain situations, but they don’t work for everyone. For some, the higher monthly costs of traditional health insurance are worth it when you take into account your personal healthcare needs.

    Catastrophic health insurance might be a good option if you’re young, in sound physical health, and have no reason to expect any major medical complications in the coming year. They can also be a saving grace if you’re currently dealing with financial hardship but aren’t comfortable going without insurance entirely.

    Before making a decision about catastrophic health insurance, it’s a good idea to do some research, take stock of your personal health circumstances, and select a plan that you feel provides the right amount of coverage.

    Kara Thesing
    Kara Thesing
    Senior Consultant, Team Lead at Bennie
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