Who Is a Good Candidate for a Catastrophic Health Plan?

Health insurance offers various plans to suit diverse needs and financial situations. Among these, catastrophic health plans are a specific type of coverage designed to provide a financial safety net against major, unforeseen medical events that could lead to substantial expenses. These plans prioritize protection from high medical bills rather than covering routine healthcare.

Understanding Catastrophic Health Plans

A catastrophic health plan is a type of health insurance characterized by low monthly premiums and a very high deductible. These plans protect individuals from overwhelming costs associated with severe illnesses or injuries. While offering a financial shield for major events, they require individuals to pay for most routine medical expenses out-of-pocket until the high deductible is met.

These plans cover the same essential health benefits as other Qualified Health Plans available through the Health Insurance Marketplace. Benefits include emergency care, hospitalization, prescription drugs, mental health services, and preventive care. Preventive services like screenings and check-ups are covered at no additional cost, even before the deductible is met. Catastrophic plans cover at least three primary care visits per year before the deductible is satisfied. For 2025, the annual deductible for individual coverage under a catastrophic policy is $9,200, which also serves as the maximum out-of-pocket limit for covered services.

Eligibility for Catastrophic Plans

Access to catastrophic health plans is restricted to specific eligibility criteria, which are regulatory requirements. Individuals must be under 30 years old to purchase these plans. This age restriction is a key determinant for enrollment.

For individuals aged 30 or older, enrollment in a catastrophic plan is possible only if they qualify for a hardship exemption or an affordability exemption. A hardship exemption is granted for difficult life situations, such as homelessness, eviction, utility shut-off notices, domestic violence, the death of a family member, or significant property damage from a disaster. An affordability exemption may be granted if the lowest-priced health coverage available, either through the Marketplace or an employer, costs more than a specific percentage of the household income, which is 7.97% for 2024 and 7.28% for 2025. Obtaining these exemptions involves an application process through the Health Insurance Marketplace.

Characteristics of a Good Candidate

A catastrophic health plan is a suitable choice for individuals who are young and healthy, with minimal or infrequent medical needs. These individuals do not anticipate needing regular doctor visits, ongoing prescription medications, or frequent specialist care. Their primary healthcare concern is protection against unexpected, high-cost medical emergencies.

This type of plan appeals to those with limited income who prioritize low monthly premiums over comprehensive routine care coverage. They understand they will be responsible for most day-to-day medical expenses, such as routine check-ups beyond the initial few covered visits, until the substantial deductible is met. Catastrophic plans serve as a financial safety net against major medical events, such as a severe accident or a sudden, serious illness. A young adult not offered health insurance through an employer and seeking basic protection for major medical incidents may find this plan appropriate.

Situations Where Catastrophic Plans May Not Align with Needs

Catastrophic health plans are not the most appropriate choice for everyone, particularly for individuals with ongoing healthcare requirements. Those with chronic health conditions that necessitate regular doctor visits, continuous prescription medications, or specialized care would find these plans financially burdensome. The high deductible means substantial out-of-pocket costs for routine and ongoing treatments before the plan begins to cover expenses.

Individuals who prefer lower out-of-pocket costs for everyday medical services, such as co-pays for doctor visits or prescription co-pays, would benefit more from plans with lower deductibles and more comprehensive coverage. Catastrophic plans are not eligible for premium tax credits or cost-sharing reductions, which can make other Marketplace plans, like Bronze or Silver plans, more affordable for many individuals, especially those with lower incomes. A different type of plan may offer better financial alignment and access to desired healthcare services.