What Is Catastrophic Insurance and How Much Does It Cost?

Are you overpaying for car, home, or renters insurance? Compare to find out in 45 seconds.
Quotes from up to 45 companies · No long forms · No phone calls
Medical office (Photo: @musiena via Twenty20)
When it comes to purchasing health insurance, there are a lot of options, and it can quickly become overwhelming. Unfortunately, health insurance is very often expensive, and very often doesn’t cover everything you need. That doesn’t make the process of finding the right plan any easier.
Many people who don’t have insurance for work, and who are struggling to cover the costs of exorbitantly priced private health care, turn to the Affordable Care Act (also known as Obamacare, because it was instituted by President Barack Obama). One of the policies offered under the Affordable Care Act is known as catastrophic insurance.
Don’t worry, catastrophic insurance is not as intense as it sounds. Here’s everything you need to know about this specific type of health insurance.

What is catastrophic insurance?

Catastrophic insurance is part of the Affordable Care Act, and is designed for young people who can’t afford a standard health insurance plan. The concept of catastrophic insurance is that it can help protect a person from drowning under a large pile of debt should they suffer a medical emergency.
Catastrophic insurance has low premiums and high deductibles. As a result, it’s not very helpful for someone with regular, low, or even moderate health bills. But it can save a person with minimal health bills who suffers a large health catastrophe.

What does it cover?

Catastrophic insurance covers the same things as a standard health insurance policy from the Affordable Care Act. Everything from vaccines, to annual checkups, to prescription drugs, to emergency services, to lab work is covered by catastrophic insurance. However, because the deductible is so high, you’ll likely have to pay for all of these things unless they occur post-catastrophe.

Why is it called catastrophic insurance?

It gets the name because it’s designed to help people who suffer health catastrophes. Oftentimes people who have a hard time paying for health insurance go uninsured, banking on maintaining good health. But if something catastrophic happens (such as a bad car accident, or developing cancer) they’re left with hundreds of thousands, or even millions of dollars in health care bills.
In the event of such a catastrophe, catastrophic insurance kicks in to protect you.

Who can get catastrophic insurance?

Catastrophic insurance is limited to only specific people. In order to qualify for catastrophic insurance through the Affordable Care Act, you need to be either under the age of 30, or qualify for the Affordable Care Act hardship exception.
Some examples of the hardship exception include people who are without homes, people experiencing a recent death in the family to a person they were financially dependent on, people who have been evicted, people whose property has been damaged, and people who have filed for bankruptcy.
If you fit in any of these categories, then you are eligible to sign up for catastrophic insurance in place of a more traditional form of health insurance offered by the Affordable Care Act.

What does catastrophic insurance cost?

The cost of catastrophic insurance changes based on where you live, your age, and your income. However, you can expect catastrophic insurance to be a bit cheaper (often a few hundred dollars per month cheaper) than a standard health insurance plan.

What are the catastrophic insurance deductibles?

The catastrophic insurance deductibles can vary a little bit year by year, but in general you can expect the deductible to be in the range of $8,000. That means you would have to pay about $8,000 in medical expenses in one year before the catastrophic insurance started to cover you.

What is the benefit of catastrophic insurance?

The benefit of catastrophic insurance is simple. If you can’t afford to buy a standard health insurance plan, but don’t want to risk going into the type of debt that could ruin your life if you suffer a health catastrophe, catastrophic insurance can be perfect for you. You’ll have to pay a high deductible (likely no problem if you’re healthy) but it caps how much money you might owe in a worst case scenario.
Catastrophic insurance isn’t as scary as the name suggests. For many people, it’s the right health insurance option.