What Is Catastrophic Health Insurance?

Catastrophic health insurance is a type of coverage designed to protect individuals from the substantial financial impact of severe medical events. These plans serve as a financial safeguard against major illnesses, serious injuries, or unexpected medical emergencies. While they offer a safety net for high-cost medical situations, their structure differs considerably from traditional health insurance policies.

Defining Catastrophic Plans

Catastrophic health insurance plans are characterized by very high deductibles, which policyholders must satisfy before coverage begins for most medical services. For example, the deductible for these plans in 2025 is $9,450 for an individual and $18,900 for a family. This substantial deductible means the policyholder is responsible for a significant amount of medical costs out-of-pocket before the plan’s benefits activate. Catastrophic plans typically feature lower monthly premiums compared to other health insurance options available through the Health Insurance Marketplace.

These plans cover major medical events, such as serious accidents, life-threatening illnesses, or significant medical emergencies requiring hospitalization. They are not intended for routine medical care, regular doctor visits, or most prescription drug costs before the deductible is met. Catastrophic plans are still mandated to cover essential health benefits as outlined by federal law, including preventive services. This means that certain preventive care services, like immunizations and screenings, are covered at no cost to the policyholder, even before the deductible is satisfied.

Eligibility for Enrollment

Enrollment in a catastrophic health insurance plan is subject to specific criteria, primarily focusing on age or financial circumstances. Generally, individuals must be under 30 years old to qualify for these plans.

However, individuals of any age may also be eligible if they obtain a hardship exemption or an affordability exemption. These exemptions are granted to those facing certain financial difficulties or other challenging life circumstances. Examples of qualifying hardships include experiences such as homelessness, eviction, bankruptcy, or facing a shut-off notice from a utility company. Additionally, eligibility may extend to those who demonstrate an inability to afford other health coverage options based on specific income thresholds.

Financial Mechanics of Catastrophic Plans

The financial operation of a catastrophic health plan centers on its high deductible, which dictates when the insurance coverage begins to pay for services. Policyholders are responsible for 100% of the costs for most covered medical services until this deductible amount is fully met. For instance, if an individual’s deductible is $9,450, they would pay for all medical expenses up to that amount within a plan year before the insurance company contributes to the costs.

Beyond the deductible, these plans also incorporate an out-of-pocket maximum (OOPM), which represents the absolute limit a policyholder will pay for covered medical services in a plan year. For 2025, the out-of-pocket maximum is $9,450 for an individual and $18,900 for a family. Once both the deductible and the out-of-pocket maximum are satisfied, the health plan then covers 100% of all additional covered medical services for the remainder of that plan year. Certain preventive services, such as annual physicals and specific screenings, are covered without any cost-sharing, even before the deductible is met.

How to Enroll

Individuals interested in enrolling in a catastrophic health insurance plan can primarily do so through the Health Insurance Marketplace, accessible via Healthcare.gov or state-specific marketplaces. The most common period for enrollment is during the annual Open Enrollment Period, which typically occurs in the fall for coverage beginning the following year.

Outside of the Open Enrollment Period, individuals may qualify for a Special Enrollment Period if they experience a qualifying life event. These events can include marriage, the birth of a child, loss of other health coverage, or a permanent move to a new area. During a Special Enrollment Period, eligible individuals have a limited time, usually 60 days from the event, to enroll in a new plan. Catastrophic plans are generally not eligible for premium tax credits, also known as subsidies, which help lower monthly premium costs for other types of Marketplace plans.