What Is Catastrophic Heath Insurance?

Anyone attempting to purchase health insurance may quickly discover that health insurance plans can be very expensive. One way to keep premium costs low is to purchase a catastrophic health insurance plan. While a catastrophic plan may not cover all medical expenses, they can provide an affordable as well as effective solution for certain categories of people.

Purpose

• As its name indicates, catastrophic health insurance is designed to cover serious medical events that may require hospital stays as well as larger medical expenses. Some plans may provide $5 million or more of coverage. Catastrophic plans are relatively inexpensive because they require the policyholder to pay a high deductible before coverage begins, often $1,000 or more. Policyholders also bear more of the costs of smaller expenses like prescription drugs and doctor visits. With health insurance, the higher the out-of-pocket costs the lower the premium for the policyholder.

Suitability

• Catastrophic health plans often appeal to young, healthy people who don't visit the doctor often and don't use prescription drugs often because of the low premiums. Self-employed individuals may find that a catastrophic plan is their most affordable health insurance option. People who are between jobs can purchase a short-term catastrophic plan that provides one to six months of coverage to fill the void until they can find new employment that offers group health insurance coverage.

Types

• Catastrophic plans may either be comprehensive or supplemental. Individuals who have no other health insurance will typically purchase a comprehensive plan to obtain the most coverage possible. In other cases, individuals may already have a limited benefit plan through a source such as an employer. In this situation, a supplemental catastrophic plan can provide secondary coverage or fill any gaps in coverage that exist in the primary plan.

Availability

• Small employers may offer catastrophic plans to their employees as it may often be the only type of coverage they can afford to provide. Larger employers may include catastrophic plans among their choices of health care plan alternatives. Individuals without access to health care coverage through an employer may purchase a catastrophic plan on the individual health insurance market from a health insurance broker who may offer a number of plans from which to choose.