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What is catastrophic health insurance under Obamacare?

Everyone wants coverage in a “catastrophe,” right? Let’s say you’re in a car accident and break your leg, or you’re enjoying an adventure on a mountain trail and fall. Chances are you’d want health coverage that would help with the medical care you might need.

“Catastrophic” insurance sounds like something everyone should have, but is it? What are we talking about when we talk about “catastrophic” health insurance, and what does it mean under Obamacare in particular?

Catastrophic health insurance has been around long before Obamacare

In the old days before the health insurance reform known as Obamacare (signed into law in 2010), catastrophic coverage was just a loose term with no official definition. Catastrophic coverage generally meant a health insurance plan that DID NOT provide you much in the way of certain benefits like regular checkups, preventive care visits or health services for pre-existing medical condition. Catastrophic insurance typically kicked in only if you found yourself suddenly facing serious medical bills. Catastrophic health insurance was coverage in case of a serious injury or hospitalization.

In the old days, catastrophic health insurance plans tended to have very high annual deductibles – that is, the insurance company wanted you to pay a lot out of your own pocket toward covered medical care before the insurance company began paying for your services. But low monthly health insurance premiums made these plans appealing for many people, especially for those who didn’t expect to use the doctor often and couldn’t afford more expensive plans.

Catastrophic plans in the old days tended to appeal most to young adults or to lower-income persons of any age who didn’t qualify for Medicaid or employer-based coverage but who wanted a layer of protection “just in case.” And anyone could buy catastrophic health insurance plans.

Catastrophic health insurance has changed under Obamacare

Under Obamacare, catastrophic coverage has a more specific definition, though it still retains some of the characteristics of catastrophic coverage in the old days.

“Catastrophic” is an official term applied to a specific category of Obamacare health insurance plans. Obamacare categorized health coverage into five different benefit levels:

  • Catastrophic
  • Bronze
  • Silver
  • Gold
  • Platinum

Today’s bronze, silver, gold and platinum plans are required to include all of Obamacare’s 10 essential benefits. Catastrophic plans do too, but not at the same level (meaning you could be required to pay more for care out of pocket).This is why catastrophic plans under Obamacare typically come with lower monthly premium payments.

Obamacare’s 10 essential health benefits include coverage for:

  1. Laboratory services
  2. Emergency services
  3. Prescription drugs
  4. Mental health & substance use disorder services
  5. Maternity & newborn care
  6. Pediatric services, including oral & vision care
  7. Rehabilitative & habilitative services & devices
  8. Ambulatory patient services
  9. Preventative & wellness services & chronic disease management
  10. Hospitalization

Here are some ways that today’s Obamacare catastrophic plans are similar to those from the old, pre-Obamacare days:

Before Obamacare, the term “catastrophic health insurance” didn’t have a fixed meaning. It generally referred to any plan with a higher annual deductible or one that limited coverage for things like preventive care. Today’s catastrophic plans under Obamacare also tend to come with higher annual deductibles.

Like catastrophic plans in the pre-Obamacare era, today’s catastrophic plans are often marketed to younger consumers who don’t visit the doctor often.

Here are some ways that today’s Obamacare catastrophic plans are different today:

Today’s catastrophic plans provide more coverage. They provide certain preventive medical services at no out-of-pocket cost to you. Most other covered medical services will be paid by you until you reach your annual deductible, after which the insurance company will begin to pay for your covered care.

Today’s catastrophic plans also differ from the old ones when it comes to who’s eligible to buy one. Obamacare limits who can buy catastrophic health insurance plans. In order to qualify for a catastrophic plan under Obamacare, you must be under age 30 or qualify for a hardship exemption under the law.

Is an Obamacare catastrophic plan right for me?

The answer will vary based on your circumstances, but here are a few things to consider:

Can you afford more robust coverage?

  • Other Obamacare plans will typically provide you with richer medical benefits and fewer out-of-pocket costs when you get medical care. Remember, if you qualify for government subsidies based on your income, you cannot use them to help you pay for a catastrophic plan. If you see the doctor regularly, you may actually save money in the long run by enrolling with another plan with richer benefits and lower out-of-pocket costs.

Are you under age 30?

  • These plans are primarily designed for healthier young people or those who qualify for a special hardship exemption from the coverage requirements of the Obamacare law.

Do you see the doctor often or use prescription drugs on a regular basis?

  • If so, a catastrophic plan may not be the best option since it involves a lot of out-of-pocket expense on your part until you reach your annual deductible.

Can you afford the deductible when faced with a medical emergency?

  • If you have a bad accident or get a serious diagnosis or are hospitalized, you will have to pay that full deductible – $6,850 in 2016 – before the insurance company begins to pay.

Catastrophic health coverage is an option for some people looking for affordable health insurance. Obamacare has made a few changes to this type of plan by including some primary care and preventive health services but has also puts limits on the number of people who can buy it. If you can afford the deductible in a pinch and you’re young, healthy, and rarely see the doctor or use prescription drugs, an Obamacare catastrophic plan may be right for you.