- Enrollment in catastrophic plans is limited to specific populations
- Catastrophic plans are available in and out of ACA’s exchanges
- Catastrophic plans cover all of the ACA’s essential benefits
- Subsidies can’t be used with catastrophic plans
- Catastrophic plans are not HSA-qualified
- Less than 1% of exchange enrollees select catastrophic plans
Q. I’ve always had a high deductible plan, and I’m happy with my coverage. I’ve heard that the ACA allows for a catastrophic plan. Is that the best option for me?
A. Although the term “catastrophic plan” has long been used as a generic catch-all phrase to describe health plans with high deductibles and little coverage for routine care, the ACA assigned strict parameters to the term: Catastrophic plans have limited eligibility guidelines, cannot be purchased with premium subsidies, and must provide certain limited benefits to enrollees before the deductible is met. [Details are available in the text of the ACA, section 1303(e).]
And for the purposes of the ACA’s risk adjustment program, catastrophic plans are in a separate risk pool from the metal-level plans, although they’re in the same general shared risk pool. This means that within a state, catastrophic plans transfer risk adjustment funds with other catastrophic plans, but not with metal-level plans. This is the primary mechanism by which catastrophic plans have lower prices than bronze plans.
Only certain populations can purchase catastrophic plans
Catastrophic plans are only available to people under age 30, or people 30 and older who qualify for a hardship exemption (which means that due to economic hardship —or certain other hardships, like the death of a family member — the person would not be required pay a penalty for failing to maintain health insurance coverage). Regardless of age or income, catastrophic plans used to be available for people whose health insurance policies were canceled because they were not ACA compliant, but that exemption ceased to be available after the end of 2016.
Although the ACA’s individual mandate penalty will be eliminated after the end of 2018, the mandate itself will continue to exist — there just won’t be a penalty for noncompliance. So people will still be able to seek hardship exemptions from the mandate in order to gain access to catastrophic plans. And the Trump Administration expanded access to hardship exemptions in April 2018, allowing exemptions for people in areas where all plans cover abortions, areas where only one insurer (or zero insurers) offers plans in the exchange, or where a personal hardship is created due to the plan options available in the exchange.
In particular, the provision for people in areas where just one insurer offers plans in the exchange makes a hardship exemption available to far more people, allowing them to potentially purchase a catastrophic plan (albeit without premium subsidies, making this a realistic alternative only for people who aren’t otherwise eligible for subsidies).
If you’re eligible for a catastrophic plan and shopping for health insurance in your state’s exchange, you’ll see that option in addition to the Bronze, Silver, Gold and Platinum plans. If you’re not eligible, it won’t show up as an option.
Although the ACA places strict limits on who can purchase a catastrophic plan, Colorado lawmakers passed a bill in 2018 that calls for a study of how expanded access to catastrophic plans would affect Colorado’s insurance market, both in terms of total subsidies received by Colorado residents, and overall premiums. Depending on the outcome of the study, the state will seek a waiver from the federal government in order to allow anyone to purchase a catastrophic plan.
Catastrophic plans: High deductibles, plus primary care and preventive care
- Catastrophic plans cover all of the essential benefits defined by the ACA, but with very high deductibles, equal to the annual limit on out-of-pocket costs under the ACA (for 2018, this is $7,350 for an individual).
- They must still limit members’ out-of-pocket costs for in-network services to no more than the annual out-of-pocket maximum that applies to all plans (the cap is $7,350 for an individual in 2018).
- Catastrophic plans cover at least three primary care visits per year before the deductible is met (copays can apply for these visits, but at least part of the cost will be paid by the insurance company, even if you haven’t met your deductible).
- And like all ACA-compliant plans, catastrophic plans cover preventive care with no cost-sharing.
- Other services beyond preventive care and some primary care will be paid by the insured until the deductible is met.
Subsidies can’t be used to offset the cost of catastrophic plans
Premium subsidies are not available for catastrophic plans (nor are cost-sharing subsidies, which are only available on Silver plans). Depending on your income, you may be eligible for a subsidy that you could apply towards a metal-rated plan. This might make a Bronze or Silver plan even more affordable than a catastrophic plan.
Catastrophic plans are not HSA-qualified
Health savings accounts (HSAs) are a type of tax-advantaged account to which people can contribute pre-tax money as long as they’re covered by an HSA-qualified high deductible health plan (HDHP). In layman’s terms, “catastrophic” and “high-deductible” are often used interchangeably. But in health policy, they each have strict definitions:
- HDHPs that allow a member to contribute to an HSA are not allowed to cover any care before the deductible, with the exception of preventive care, and the maximum out-of-pocket amount for an HDHP in 2018 is $6,650 for an individual (here are the IRS rules that pertain to HSAs/HDHPs).
- Catastrophic plans are required to cover at least three primary care visits before the deductible, and they have deductibles that are higher than the allowable limits for HDHPs (in 2018, catastrophic plans have deductibles of $7,350).
So by definition, catastrophic plans cannot be HSA-qualified, and catastrophic plan enrollees cannot contribute to HSAs. If you want to be able to contribute to an HSA, you’ll need an HSA-qualified plan. These are typically either bronze or silver plans, but they cannot be catastrophic.
Very few people enroll in catastrophic plans
Because catastrophic plans are not subsidy-eligible and are only available to some enrollees, very few people tend to select these plans. In 2017, less than 1 percent of all exchange enrollees nationwide opted for catastrophic plans.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.