Affordable Care Act: Catastrophic Plan vs Full Coverage
Are you eligible for a catastrophic plan? Is it right for you?
Under the Affordable Care Act (ACA), there are basically five levels of available health insurance plans: Platinum, Gold, Silver, Bronze . . . and Catastrophic.
Catastrophic is a minimal plan and has a number of limitations. It is therefore considered a separate plan from the other four plans.
What is a Catastrophic Plan?
A Catastrophic plan offers the same ten essential benefits as the other insurance plans available through the Marketplace.
However, a Catastrophic plan includes a high deductible paid by the patient before the insurance starts covering costs.
On the other hand, your monthly premium is typically low.
Catastrophic plans also fully cover three annual primary care visits and preventative care. Those visits are included outside of your annual deductible.
That means the plan pays for up to three general doctor visits per year and covers preventive measures, such as flu shots and screenings for certain health conditions.
The key difference is the deductible.
If you are healthy and young the Catastrophic plan might make sense. For instance, if you’re rarely sick and want to gamble on not having an accident, then you balance the risks and rewards of the plan.
However, it’s important to remember, if you break a leg, get in a car accident, or are diagnosed with a major illness, the Catastrophic insurance plan will not cover any costs until you reach $6,350 in healthcare costs ($12,700 for families). That number is your deductible.
Are You Eligible for the Catastrophic Plan?
This type of plan is designed for single, low-income individuals who do not have health insurance through an employer. If you are unable to find coverage for less than 8 percent of your income, you may be eligible.
However, there’s also a chance you may not qualify for the Catastrophic plan. These plans are only available to people under 30 years of age and can’t afford other health insurance coverage. They also are available to those who qualify for a “hardship exemption”, which includes a situation that prevents the individual from affording coverage.
When it comes to families, all members must meet the requirements.
What to Consider
It is possible, if your income is low, to receive premium tax credits and cost-sharing reductions for other plans covered by the ACA. These credits are not available with the Catastrophic plans.
If you do not qualify for a Catastrophic Plan but can’t afford the other options, you may qualify for a hardship exemption. There are twelve hardship exemptions, ranging from homelessness to being a victim of domestic violence.
If you qualify for the hardship exemption, you may decline insurance coverage without paying a fine.
Another consideration is your age and your relationship with your parents. Under the ACA, you can stay on your parents’ health insurance plan until you are 26 years old.
The primary factor to consider, however, is your health and your tolerance for financial risk. People who are very healthy and confident they will not get sick or injured may feel a Catastrophic plan is the best option.
Catastrophic vs. Bronze
The primary difference between Catastrophic and Bronze plans is the coverage for chronic illnesses or any type situation that requires more than three doctor visits annually.
If you are healthy with no chronic conditions and are not on medications, the Catastrophic plans are less expensive. That is as long as you do not get sick or injured.
There is not a huge difference between the Catastrophic and Bronze plans, except the cost of monthly premiums. Some analysts say the difference between Catastrophic and Bronze plans are only $5 or $10 per month. However, a quick review of one state (Michigan; Oakland County) shows the lowest estimated monthly premium for a Catastrophic plan is about $256 and the lowest estimated monthly premium for a Bronze plan is $337.
That difference is $972 per year. It’s not an insignificant difference when the resulting plans are very similar.
Whenever you start looking at health insurance plans, simply remember to take the time to shop and compare. Thinking about what your probable healthcare needs are and how much financial risk you can tolerate before making a decision.