Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Catastrophic coverage is designed for only some people
  • Those under 30 and eligible for certain exemptions may qualify
  • Hardship exemption and affordability exemptions qualify for catastrophic plans
  • Catastrophic plans may be preferred to Bronze plans for some

Obamacare is the commonplace name for the Affordable Care Act, a healthcare reform championed by President Obama during his campaign and subsequent time in office. Catastrophic health insurance may be described as being plans designed as protection against the higher out-of-pocket medical expenses and bills that often result from an unexpected illness or accident. Consumers can benefit from learning more about the rules regulating catastrophic coverage under Obamacare.

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Catastrophic Coverage

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Catastrophic plans typically provide consumers with lower premiums each month and higher deductibles than you will find on most conventional comprehensive medical coverage plans for major insurers. With these types of plans, benefits are only paid by insurance carriers after the deductible has been satisfied.

Catastrophic plans associated with the ACA typically involve preventive care services as mandated by federal authorities and three primary care visits on an annual basis.

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Applying for Catastrophic Coverage

Deductible requirements don’t apply to catastrophic coverage because the benefits are available with no cost sharing required. Consumers are required to apply for and obtain a hardship exemption to enroll in catastrophic coverage plans. Initially, only consumers younger than 30 who suffer financial hardships were eligible to qualify for catastrophic coverage. Aside from filling out the necessary forms, applicants may also have to provide proof of their insurance being canceled.

Consumers should be aware that catastrophic plans make policyholders ineligible to receive cost-sharing subsidies, including premium tax credits. However, the applicants who are able to receive a hardship exemption may qualify for a penalty waiver by filling out the necessary forms. Qualifying for the hardship exemption allows policyholders to go on with no coverage, choose plans with illness and accidents benefits, but no coverage, or choose catastrophic coverage.

Qualifying for Catastrophic Coverage

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Catastrophic coverage is designed to provide eligible parties with an affordable way to protect themselves when faced with a worst-case scenario, like getting seriously injured or sick. Aside from the lower monthly premiums and higher deductibles, these policyholders are still required to pay for most of the routine medical costs themselves. People qualifying for an affordability exemption, meaning their occupation-based or Marketplace insurance is unaffordable, may also qualify for catastrophic coverage.

Because premium tax credits can’t be used to reduce the costs, so comparing Bronze or Silver plans may offer better value to consumers. The deductibles for catastrophic plans in 2017 is currently $7,150, beyond that, the insurer pays for all the services covered with no co-payments required. Catastrophic plans cover the essential health benefits and preventive services at no cost, just like other plans in the Marketplace.

Catastrophic Coverage or Other Options

People shopping for insurance in the Marketplace have the choice of four different metal options, bronze, silver, gold or platinum plans. With a Bronze plan, the policyholder pays approximately 40 percent of the medical costs, and the insurer pays 60 percent. With Silver plans, the policyholder pays around 30 percent of the costs. When the low-cost Bronze option is unaffordable for the consumer, catastrophic coverage is typically the next best option.

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Minimum Coverage with Catastrophic Plans

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Catastrophic plans are considered to be the lowest cost plan that qualifies as minimum essential coverage. Consumers on catastrophic plans are typically trading limited benefits and higher out of pocket expenses to receive lower premiums each month. Bare bones Bronze plans and short term health plans are often described as being forms of catastrophic coverage that prevent consumers from the federal fees for not having insurance coverage.

However, people who are not under 30 or illegible for the hardship or affordability exemptions will not be able to use catastrophic coverage to avoid the federal fees for not having insurance.

Catastrophic coverage is a very helpful option to have for policyholders that qualify for the exemption. In most circumstances, the federal government is the entity to decide whether or not policyholders qualify for catastrophic coverage.

Shopping for Catastrophic Coverage

Aside from income or age, catastrophic plans can help people who have had their insurance policy canceled because it was not compliant with the ACA. Catastrophic plans are actually available inside and outside of the health insurance exchanges. However, exemptions for people over 30 are required to come from the publicly-ran exchange. Catastrophic plans appear next to the other metal categories when the party shopping for health insurance is eligible for the bare-bones coverage.

Catastrophic coverage may be tough of as the last resort for people who cannot afford or qualify for most of the plans available under the ACA. These plans are a very effective strategy for young people and low-income individuals interested in saving money on their insurance premiums each month. However. it’s important tor remember that these low-cost insurance plans are only designed to help a small percentage of policyholders in the United States.

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