Pros & Cons of Catastrophic Health Insurance

As the cost of health care rises, the burden that a sudden illness or accident can place on someone without health insurance can grow to a disastrous level. Medical-care costs are among the leading causes of personal bankruptcy, but a high-monthly health insurance premium can cut into a household budget even if it provides coverage for someone with minimal health-care needs.

Definition

• Catastrophic health insurance, also known as a high-deductible health plan, is a form of insurance with very low-monthly rates. It is not subsidized by the government, but instead relies on high deductibles. This means that a patient with catastrophic health insurance may be liable for several thousand dollars of expenses before the insurance kicks in and begins to pay for care.

Costs

• One of the key benefits of catastrophic health insurance is its low-monthly cost. This makes it ideal for low-income individuals and families who may not qualify for a government health program like Medicaid. However, catastrophic health insurance makes it very expensive to receive basic treatment. Policyholders who use prescription drugs regularly or need minor medical care may find themselves paying the full cost of these treatments, since they never reach the deductible amount in a given year.

Coverage

• Catastrophic health insurance offers a full range of basic coverage options. Most plans will pay for everything from x-rays, to hospital stays and doctor visits, provided that the policyholder surpasses the deductible. This makes catastrophic health insurance more complete than community clinics, which may only offer certain services. But catastrophic health insurance does not cover everything. Most catastrophic health insurance plans omit maternity care and mental-health care.

Eligibility

• Patients with preexisting conditions such as cancer, diabetes or a mental-health disorder may not be able to qualify for a catastrophic health insurance policy. Rejecting patients with preexisting conditions that require costly treatment is one way insurance providers keep policy rates on catastrophic insurance low, but it also means that these policies don't offer even minimal coverage to everyone.

Age Considerations

• Whether or not a catastrophic health insurance policy is a good choice may depend on an individual's age and health status. Healthy young people whose employers offer inadequate or no medical plans may find catastrophic coverage appealing, since they are less likely to require regular treatment or testing. However, uninsured middle-aged patients, who need more regular check-ups and testing for disorders that afflict older people, generally need health insurance with a lower deductible. Someone who is reasonably healthy and retired, but not yet old enough to receive health care through the government-subsidized Medicare, can use catastrophic health insurance as a means of filling in the age gap.