About Catastrophic Health Insurance Plans

As health insurance premiums continue to rise, individuals seek new options for affordable health care coverage. For some, a catastrophic health insurance plan that covers worst-case scenarios may be a viable choice.

Features

• Catastrophic health insurance is intended to cover only major medical events, such as those requiring extended hospital stays. They feature a high deductible, which is the amount an individual pays out of pocket before coverage begins. This keeps the premium relatively low, although the policy owner must pay for smaller medical expenses.

Considerations

• A catastrophic health plan may be a good choice for relatively young and healthy people. Because they are less likely to need to go to the doctor or take prescriptions drugs, they may only need health insurance coverage for an unexpected major medical event.

Solution

• One potential problem with catastrophic plans is that a policy owner may have to pay a large amount out of her own pocket due to the high deductible limit. A Health Savings Account, which combine a savings plan with a high-deductible catastrophic insurance plan, addresses this issue. An HSA participant can withdraw funds from the savings plan on a tax-free basis to pay for medical expenses until the deductible is reached.