Catastrophic Plan – Affordable Care Act (Obamacare)
A catastrophic plan, otherwise known as catastrophic insurance, is a type of health insurance coverage created by the Affordable Care Act. It is only available to people under age 30 or people who cannot afford other health insurance coverage. Individuals as well as families may purchase catastrophic plans, but every family member on the plan must be eligible for enrollment in a catastrophic plan. In order to enroll in a catastrophic plan, an individual under the age of 30 must obtain certification from an exchange that he or she does not have an affordable coverage option and qualifies for a “hardship exemption.” The following circumstances can qualify people for hardship exemptions:1
- Eviction in past 6 months or facing eviction or foreclosure
- Shut-off notice from a utility company
- Domestic violence
- Recent death of close family member
- Fire, flood, or other disaster that caused substantial property damage
- Filed for bankruptcy in past 6 months
- Unable to pay medical expenses in last 24 months
- Unexpected increases in necessary expenses due to caring for ill, disabled, or aging family member
- Expect to claim a child who was denied Medicaid and Children's Health Insurance Program (CHIP) coverage as a dependent when filing taxes, and another person is legally required to support the child medically
- Eligible for marketplace enrollment in a qualified health plan, lower monthly premium costs, or cost-sharing reductions for a time period when not enrolled in a marketplace qualified health plan, because of an eligibility appeals decision
- Ineligible for Medicaid because state did not expand eligibility under the ACA
- Individual insurance cancelled and other marketplace plans unaffordable
A catastrophic plan provides the same essential benefits as the other health insurance plans created by the Affordable Care Act but requires a high deductible to be met before the plan pays for health care costs. However, the deductible does not have to be paid for the following:
- 3 annual primary care visits
- Preventive care
Primary care visits are visits to the enrollee’s doctor, or other healthcare provider, who serves as the principal point of consultation for healthcare services. Preventive care includes services provided to prevent illness or disease from occurring, but does not include care related to existing health problems or new issues. Most insurers will cover one preventive visit per year with no charge.2
Catastrophic plans should typically cost less than the entry-level Bronze plans within the Affordable Care Act. However, catastrophic plans do not qualify for premium tax credits or cost-sharing reductions.3 Before enrolling in a catastrophic plan, an individual should confirm that he or she would not pay less for another qualified health plan that is eligible for premium tax credits and cost-sharing reductions.
Catastrophic Plan Enrollment Numbers
The Department of Health and Human Services (HHS) released a report in May 2014 on marketplace enrollment covering the start of open enrollment for Obamacare, October 1, 2013 to April 19, 2014. Although March 31, 2014 was the original enrollment deadline, some individuals qualified for a special enrollment period and selected plans after March 31st. Only 2% of individuals who selected a marketplace plan either on the Federally-facilitated marketplace (FFM) or a state-based marketplace (SBM) chose a catastrophic plan. Fewer individuals selected a catastrophic plan than any other metal level, which is to be expected due to the age and/or income restrictions of the plan discussed earlier. By gender, 1% of women and 2% of men selected a catastrophic plan on the FFM. The table below provides information on the age distribution of individuals who chose a catastrophic marketplace plan. For each age group the percent of catastrophic total represents the proportion of individuals who selected a catastrophic plan that were in the age group. The percent of age group total represents the proportion of individuals in the age group who selected a catastrophic plan.
|Age Group||Number of Individuals that Selected a Catastrophic Plan on FFM||% of Catastrophic Total||% of Age Group Total|
|Age Under 18||2,287||3%||1%|
|Age 65 or Over||N/A||N/A||N/A|
*Due to few individuals ages 45-64 selecting a catastrophic plan and rounding
Catastrophic Plans On-Exchange vs. Off-Exchange
Like other metal plans, catastrophic plans can be obtained through the Federally-facilitated marketplace or a state-based marketplace (also referred to as on-exchange) or through a private insurance company (also referred to as off-exchange). The exchange status of a plan does not affect whether or not it covers the ACA’s minimum essential health benefit requirements, and all metal plans sold on- or off-exchange must meet these standards. Typically the benefits and cost-sharing for the same catastrophic plan (plan with same name for the same individual and rating area) purchased on- or off-exchange are the same. Premiums for the same catastrophic plan offered by the same insurer on- or off-exchange are also generally similar, if not the same.
Catastrophic Plan Frequently Asked Questions (FAQ)
How are Catastrophic Plans different than other Obamacare health plans?
The fundamental difference among the new Obamacare health plans is the percentage of covered medical costs paid by the health plan. There is no actuarial value associated with catastrophic plans but other Obamacare metal plans pay a higher percentage of these costs.
How much does a Catastrophic Plan cost?
The monthly premium for a Catastrophic Plan depends on the insurer from whom you purchase the plan, the number of people to be insured by the plan, your age, whether you smoke, and the region in which you live. You can use HealthPocket’s comparison tool to compare Catastrophic Plan premiums in your area.
When Can I Enroll in a Catastrophic Plan?
The first Open Enrollment period for the new Affordable Care Act health plans began October 1, 2013 and ended March 31, 2014. However, some individuals who qualified for a special enrollment period were allowed to enroll past the March 31st deadline. The 2015 open enrollment period will be from November 15, 2014 to February 15, 2015. See our Open Enrollment article for more information.
I am over the age of 30 but would like to enroll in a Catastrophic Plan. How would I qualify for a hardship exemption?
Heath insurance coverage is considered unaffordable if the cost exceeds 8% of your annual household income. If you are eligible for employer-sponsored health insurance, affordability is determined by comparing how much you must pay (also known as employee share) for the cheapest option your employer offers with your annual household income. If you are not eligible for employee-sponsored health insurance, affordability is determined by comparing the cost of the lowest bronze plan offered on-exchange in your state of residence with your annual household income.