Catastrophic Health Insurance
Also known as Hospital Health Insurance or High Deductible Health Plan (HDHP), Catastrophic Health Insurance is an affordable option when buying a medical plan. Catastrophic plans are designed to cover major medical expenses while leaving minor health care costs to insureds. It covers hospital care including stays, treatments, emergency room services, and surgeries related to accidents and serious illness such as stroke, heart attack, or cancer.
Typical Catastrophic Health Insurance Features:
- high deductible ($2,000 - $5,000)
- high coinsurance (80/20 - 60/40)
- high out-of-pocket limit ($1,000 - $4,000)
- no copayment for office visits – you pay for the expenses from your own pocket
- no coverage for preventive care services – you pay for common tests, immunizations, or gynecological care
- no coverage for prescription drugs
However, there are catastrophic health plans that may include some of the above health insurance coverage. For instance, the plans may cover some of the routine care services such as Pap smear for women. It is also common to find a plan with co-payments for prescriptions or doctor visits.
High Deductible Health Plan Pros and Cons
- Lower premium. More people can afford a catastrophic plan in contrary to traditional health insurance.
- Lower premium increases. Health insurance companies increases their premiums almost every year mainly dueto sky-rocking health care costs. Since catastrophic health plans are cheaper so are the premium rate-ups.
- You have to pay for all medical expenses until your out-of-pocket limit is met. With high deductibles and coinsurances, the medical bills you may be responsible for in a given year can reach thousands of dollars.
- People with high-deductible plans tents to give up on preventive care services. Since the routine care is not usually covered under HDHP plans, people try to avoid additional costs and don't check their health regularly.
How much is Catastrophic Health Insurance?
Catastrophic plans' cost as most health insurance plans’ depends on many factors such as your age, zip code, gender, the plan’s deductible, coinsurance, and out-of-pocket limit. The younger you are the more affordable you health insurance can be. The higher your out-of-pocket maximum the less expensive your medical plan is. All the variables affect health premiums.
Choosing a catastrophic plan is just one of many ways to reduce health insurance costs. Usually you can save you between 20 and 40%. A young person can pay as low as $70 monthly for a plan with $2,500 deductible, 70/30 coinsurance, and $3,000 out-of-pocket maximum. Catastrophic plans usually have the same lifetime benefit as other medical insurance plans. Lifetime benefit usually ranges between $3,000,000 and $5,000,000.
Who should buy HDHP Plans?
Catastrophic plans are for everyone who can afford to pay for minor medical expenses but can't afford comprehensive health insurance. High-deductible plan is better then no plan. Most people can afford to pay for office visits but will not be able to cover expensive surgeries or hospital stay costs. Sometimes it just makes no sense to buy a low-deductible plan or plan with co-pays for office visits and never use them. High-deductible plans are health insurance plans for large medical expenses to cover serious illnesses or injuries resulting from accidents.
How do Catastrophic Health Insurance Plans work?
By choosing a high deductible insurance plan, you decide to cover all medical bills up to your deductible plus coinsurance if any. When medical expenses in a calendar year exceed your deductible, then your insurer covers 100% of the remaining costs or a percentage of it. If your company covers a percentage of the costs after deductible, it means that the plan has a coinsurance option which rate usually is between 80/20 and 90/10. Coinsurance is healthcare cost sharing between you and your insurer. It stops after out-of-pocket limit is met. For instance 80/20 means that your insurer pays 80% and you the remaining 20%.
Let's assume that you have a plan with $2000 deductible, 80/20 coinsurance, and $1,000 out-of-pocket limit (deductible excluded*). If the cost of medical care in the given year is $100,000, you pay only $3,000, and your insurer pays the rest - $97,000. Where did that come from? Your deductible is $2,000 so you pay it in full. Next, you share the remaining costs with your insurer (coinsurance) up to your out-of-pocket limit, which is $1,000. This means that you pay 20% of the remaining costs until you spend another $1,000.
*some health insurance plans include deductible in out-of-pocket limit
The above example is only a simple illustration on how catastrophic plans work. It is not to be considered as a rule to all plans of this type. For details on your plan please talked to your agent.
Catastrophic Health Insurance Alternative
If your catastrophic plan has a deductible high enough to qualify for Health Saving Account HSA plan, you may even save more money. HSA plans allow you to put aside money into an HSA account on tax-preferred basis. Any money withdrawn from this account to pay for eligible medical expenses are tax-free. Learn more about Health Saving Accounts.
Your Health in your Hands
Choosing the right health plan can save you a lot of money and protect your assents in case of high medical expenses. Choosing to cover preventive care costs, doctor visits, and prescription drugs will reduce your insurer's financial responsibility; however, in return, you will pay lower insurance premium. If you can afford to cover these costs, you may want to buy catastrophic insurance. The first step is to fill out our quote form to compare health insurance quotes from multiple providers.
In order to help cover the high costs of health insurance, Obamacare introduced subsidized insurance. Read more.
In order to facilitate comparison of health insurance plans, the Reform introduced new health plans: Platinum, Gold, Silver, Bronze, and Catastrophic. Read more.