With the passage of the Affordable Care Act (ACA), also known as ObamaCare, most health insurance plans are required to offer certain essential benefits. They also cannot limit annual or lifetime payouts. As a result, these comprehensive plans may have a substantial monthly premium. This is especially true of plans that have low cost-sharing, such as deductibles and copayments.
However, some younger Americans who are of general good health may bee less in need of more comprehensive plans and prefer to have a “bare-minimum,” lower cost plan. For certain Americans, these plans are available even after the ACA. These plans are sometimes referred to as “catastrophic coverage.”
Understanding Catastrophic Coverage Plans
A catastrophic plan requires you to pay a very large deductible up-front before any coverage is given. The deductible of a catastrophic plan in the Marketplace cannot be more than $6,350 per person. Because of this very high deductible, the monthly payment is much lower. These plans are available for Americans under 30 years old or those with a hardship exemption from the federal mandate. Hardship exemptions are available for those who cannot find affordable coverage, who were homeless, received a utility shutoff notice, experienced domestic violence, were denied Medicaid in a non-expansion state, and other circumstances. In addition, if your individual insurance was cancelled in 2013 and you feel Marketplace plans are unaffordable, you can also obtain a hardship exemption.
The deductible for a catastrophic plan is usually several thousand dollars. This means that the plan really only provides coverage for very serious accidents or illnesses. However, there are a few benefits provided outside the deductible. The plans cover three primary care visits per year at no cost, and also cover free preventive services.
One important difference about catastrophic plans is that they are not eligible for financial assistance based on income in the Marketplace. This means that no matter where you are on the poverty level scale, you will pay the standard rate for a catastrophic plan.
Controversy Surrounding Catastrophic Plans
With some of the ACA provisions still affecting catastrophic plans, some Americans are upset because they really aren’t saving much in monthly premiums. Add to this the fact that you cannot receive a financial subsidy, and you may be better off with a bronze-level plan that is more comprehensive. Unfortunately, this leaves some Americans without an option that they consider appropriate and affordable.
On the other side, there are those who argue that the existence of catastrophic plans hurts the health insurance Marketplace and the economy overall. With some healthier Americans choosing cheaper catastrophic coverage, the cost of payouts for insurance companies offering more comprehensive policies remains high compared to premiums. This causes the comprehensive plans to become more expensive and insurance becomes less affordable and competitive for average Americans.
Finally, offering hardship exemptions to those who believed that the Marketplace plans were unaffordable after their insurance was cancelled left insurance companies scrambling. Rates had been determined based on an entirely different set of circumstances. Even companies who wanted to compete in the newly-expanded catastrophic plan market didn’t have time to create a plan, determine coverage, and set a price.
The ACA places limits on who can purchase a catastrophic plan, and offers no financial assistance in the Marketplace for these plans. By doing this, Americans are encouraged to enroll in more comprehensive plans instead. However, there is controversy around catastrophic plans because of changes in who is allowed to enroll as well as the effect these enrollments have on the Marketplace. Only time will tell how these changes will balance out, impact health insurance prices, and affect the economy.