You’ve probably heard about catastrophic health insurance plans. And you’ve probably assumed that you can purchase one and be adequately covered for a short period.
It might not be as simple as that … read on.
While doing your homework on catastrophic health insurance plans, you got that “catastrophic” and High Deductible Health Plans (HDHP) are the same. Not so, and you’d do well to do some serious research on the two plans.
You can have an HDHP under bronze, silver, gold, or platinum plan, yet all these four plans don’t allow catastrophic incidents.
What’s the difference between Catastrophic Health Insurance and HDHP plans?
Let’s look closely:
You can’t have health savings accounts with catastrophic health plans
1) You can’t have health savings accounts with catastrophic health plans:
Let us say you got a high deductible plan and also bought an HSA (health savings account) with it. You now know your HSA will allow you to continue cost assistance even after reaching age 65.
Under HSA, you have many benefits like, discontinuing HSA for even a year or more, you can still reconsider adding to the account. All you need to do is let the account stay dormant with your plan.
Take a catastrophic plan which works similar to your high deductible health insurance plan, and you will not be entitled to HSA. In fact, no HSA is assisted with a catastrophic plan.
With catastrophic plans (which work similarly to your high deductible health insurance plan), you may not have HSA. In fact, no HSA assistance is available with a catastrophic plan.
Hence, your catastrophic plan is merely short-term assistance that helps you fill gaps between your actual plans. You cannot expect lifetime assistance from it.
2) Your catastrophic health plan does not allow for Insurance subsidies
If you earn enough not to be eligible for Medicaid, but you may have various subsidies (as you are marginally above FPL or Federal Poverty Level), you may have your subsidies as long as you buy high deductible health coverage.
If you choose the other option, catastrophic that is, you will get no subsidies like prescription drug discounts, preventive care for free, and other conditions assisted with subsidies.
3) To buy catastrophic plans, you must meet the eligibility requirements
You may purchase any HDHP during Open Enrollment or a Special Enrollment Period (SEP). But you’ll need to pass certain eligibility criteria.
With catastrophic insurance plans, you must be under 30 years old. Plus, your employer-based plan is getting discontinued due to a valid reason or two. Or else you wish to fill between two plans, only then will you be allowed to buy this plan. Else, you have no ways you can buy this plan.
4- Out-of-pocket limits are different
When the out-of-pocket limit gets calculated for HDHP, it is based on the consumer price index. How much the total amount consumers are spending on out-of-pocket is the basis point for the maximum limit.
In the case of catastrophic health coverage, you must check the average change in health insurance premiums in the year. Your out-of-pocket maximum can be between the average of the new amount and the previous amount you pay towards your premiums.
For instance, in 2021:
- HDHP maximum out-of-pocket at $7,000
- Catastrophic insurance maximum out-of-pocket is $8,550.
5- Deductibles come with different denominations
If you had a plan with higher out-of-pocket and lower deductibles, you will be ineligible with a catastrophic Health Insurance plan. Only when your out-of-pocket and your deductibles are the same can you get a catastrophic health plan.
A little research goes a long way to help you from committing unnecessary errors. When it is about the health insurance industry, it is about a lot of money involved. So, a lot of caution has to be maintained before taking the complex plans and their jargon for granted.
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