Thursday
What Are Catastrophic Health Insurance Plans?
Formerly branded as High Deductible Health Plans (HDHPs), Catastrophic Health Insurance plans were initiated with the sole aim of providing overall medical costs at a reduced monthly premium in lieu of a higher annual health insurance deductible in the United States. These plans are the cheapest of all health insurance plans, and for a reason: a policy holder of a catastrophic health insurance plan would pay for all medical care until he reaches the annual deductible amount, which tends to be high or even very high. Only afterward, his health insurance coverage begins and his insurance would begin paying for his medical expenses.
What does a Catastrophic Health Insurance Plan covers?
Historically, these plans didn't cover routine medical care and that is why were called 'catastrophic'; they were truly intended for extreme scenarios. Consequently, they normally required lower monthly premiums and high annual deductibles. That being said, many modern catastrophic health insurance plans offer routine care and even prescriptions (in other words, non-catastrophic care); as a general guideline, the more the plan covers, the higher the premium - however, paying more out of pocket, results in lower monthly premium.
Note that these plans tend to have a lifetime maximum benefit, also called a 'cap' which is somewhere between $1,000,000 and $3,000,000. After reaching this cap, the insurance company no longer pays any additional costs.
When do you need a Catastrophic Health Insurance Plan?
As the name suggests, these plans were historically a targeted towards people who were not too concerned with routine care, or at the very least, could afford to pay it, but wanted to protect themselves from a situation where they would need a very expensive treatment (a 'catastrophic' scenario), which then their insurance would pay for. So for example, a man could pay for all his doctors' visits on his own, but still have the insurance pay for costs of the expensive surgery he needs after he reached his high deductible (which could be as a high as, say, $4,000 a year).
Consequently, if the goal is saving money, one really needs to carefully and responsibly consider the likelihood of needing routine care vs. the likelihood of needing a very expensive treatment. In a specific set of scenarios, it might prove to be cheaper, but in others, it would not. Either way, the policy holder takes on more risk since he essentially 'gambles' that the annual costs of his medical treatments would be significantly lower than his annual deductibles; otherwise, there would be no incentive for him to take this plan, since he'd end up both paying for his medical bills and paying monthly premiums (albeit cheap ones).
Is this plan for you?
This plan is probably suitable for people who don't believe they will require a lot of medical treatments, but want to insure themselves against the situation where an extreme situation occurs, and they will be faced with enormous bills. For some people, this might be a wise course of action. Either way, as stated, one needs to carefully weigh the pros and cons before selecting this plan; the worst case financial scenario is that one just reaches his annual deductible, meaning, he pays his entire medical bills on his own, and yet still has to pay the monthly premiums to the insurance company.
According to health statistics, the people who pick this plan tend to be split into two groups: a group of young people who tend not to incur a lot of medical expenses because they are healthy, and thus, can afford to carry on this risk; and conversely, a group of people close to retirement age - and yet still not eligible for Medicare benefits - that can easily afford to pay most medical costs, but would not be able to afford treatments for serious conditions (such as extremely expensive cancer treatments).
Note that some individuals aren't qualified to enroll on an individual catastrophic health insurance plan, for example, people with certain pre-existing conditions such as AIDS or diabetes. However, they can be covered under a group plan - though they may be subject to wait a certain period of time, depending on the policy.
Tom_Harkenshire
