What is a catastrophic plan under ACA?

Who qualifies for a catastrophic health plan, and how does it differ from standard ACA plans?

A catastrophic health plan is a specific type of plan available under the Affordable Care Act (ACA) that provides basic coverage with low monthly premiums but high deductibles. These plans are designed to protect you from worst-case scenarios, like serious accidents or major illnesses, and are often considered a more affordable option for younger individuals or those facing certain hardships. However, catastrophic plans differ significantly from standard ACA plans in terms of who qualifies and the type of coverage they offer. Here’s what you need to know:

1. Who Qualifies for a Catastrophic Health Plan?

You are eligible to purchase a catastrophic health plan if you meet one of the following criteria:

A. Under 30 Years Old:

• You qualify for a catastrophic plan if you are under the age of 30. This option is available regardless of your income level or health status, making it a potential choice for young, healthy individuals who want basic coverage at a lower monthly cost.

B. Hardship Exemption or Affordability Exemption:

• If you are 30 or older, you may still qualify for a catastrophic plan if you qualify for a hardship exemption or an affordability exemption. These exemptions are available if:

  • You have faced certain life circumstances that make it difficult to afford other health insurance plans (e.g., homelessness, bankruptcy, eviction, or the death of a close family member).

  • The cheapest available Marketplace plan would cost more than 8.5% of your household income, which makes it unaffordable.

To receive a hardship or affordability exemption, you must apply for the exemption through the Marketplace and get approval before enrolling in a catastrophic plan.

2. How Does a Catastrophic Plan Differ from Standard ACA Plans?

Catastrophic health plans differ from the Bronze, Silver, Gold, and Platinum plans in several key ways, including cost, coverage, and eligibility:

A. Premiums and Out-of-Pocket Costs:

• Lower premiums: Catastrophic plans generally have lower monthly premiums compared to Bronze, Silver, Gold, and Platinum plans. This makes them more affordable on a monthly basis, especially for younger individuals.

• Higher deductibles: The tradeoff for lower premiums is a very high deductible. In 2024, the deductible for catastrophic plans is $9,450 for an individual and $18,900 for a family. You must pay this amount out-of-pocket before the plan starts covering most services.

• Out-of-pocket maximum: The deductible for catastrophic plans is also the out-of-pocket maximum, meaning once you meet the deductible, the plan pays for all covered services for the rest of the year.

B. What Catastrophic Plans Cover:

• Catastrophic plans cover the same set of essential health benefits as other ACA plans, including:

  • Preventive services.

  • Emergency services.

  • Hospitalization.

  • Prescription drugs.

  • Mental health care.

• Preventive services are covered at no cost to you, even before meeting your deductible. For example, annual check-ups, immunizations, and certain screenings (such as cancer screenings) are fully covered.

• Other types of care, such as doctor visits or non-preventive prescriptions, require you to pay the full cost until you meet your high deductible.

C. Not Eligible for Subsidies:

• One key difference between catastrophic plans and standard ACA plans (Bronze, Silver, Gold, and Platinum) is that catastrophic plans do not qualify for premium tax credits or cost-sharing reductions. This means that if you’re eligible for financial assistance, you may find that a Silver plan with subsidies is actually more affordable in terms of both premiums and out-of-pocket costs.

D. Who Should Consider a Catastrophic Plan?

• Young, healthy individuals who don’t expect to need much medical care throughout the year and want coverage for emergencies and preventive care at a lower monthly cost.

• People who qualify for a hardship or affordability exemption and want protection from high medical bills without paying for higher premiums on a monthly basis.

• Those who can comfortably handle the high deductible and out-of-pocket costs if they need medical care, knowing that catastrophic coverage is primarily there for worst-case scenarios.

3. How to Enroll in a Catastrophic Health Plan

• You can apply for a catastrophic plan during the Open Enrollment Period, or you may qualify for a Special Enrollment Period (SEP) if you experience a qualifying life event (e.g., losing other coverage, moving, or aging out of your parents’ plan).

• If you are over 30 and applying for a hardship or affordability exemption, you’ll need to apply for and receive an exemption from the Marketplace before enrolling in a catastrophic plan. Once approved, you can enroll in the plan through tsunamihealth.com.

4. Comparing Catastrophic Plans and Standard ACA Plans

AspectCatastrophic PlansStandard ACA Plans (Bronze, Silver, Gold, Platinum)EligibilityUnder 30, or hardship/affordability exemptionAvailable to everyoneMonthly PremiumsLowerVaries by plan level (Bronze has the lowest premiums)DeductiblesVery high ($9,450 for an individual in 2024)Varies (lower in Gold and Platinum plans)Out-of-Pocket CostsHigh until deductible is metVaries by plan levelSubsidiesNot eligible for premium tax credits or CSRsEligible for premium tax credits and CSRs (Silver plans)CoverageCovers essential health benefits; no cost for preventive servicesCovers essential health benefits; preventive services also free

Key Takeaways:

• Catastrophic plans offer low premiums but high deductibles, making them ideal for young, healthy individuals or those with a hardship or affordability exemption who need protection against large medical bills.

• These plans cover essential health benefits and preventive services, but you’ll pay the full cost for most other care until you meet the high deductible.

• Catastrophic plans do not qualify for subsidies, so if you are eligible for premium tax credits, a Silver plan may offer more affordable coverage overall.

For help determining if a catastrophic plan is the right choice for you or exploring other ACA plan options, schedule an appointment with a Tsunami Advisor here: Schedule an Appointment.