If you're shopping for health insurance on a shoestring, it's likely you've already come across "catastrophic health insurance." It sounds a bit intimidating at first, but no need to panic—this kind of plan is actually in place to safeguard you during medical crises without destroying your monthly budget. It's particularly favored among young adults and low-income individuals.
This blog will explain catastrophic health insurance, who is eligible to purchase it, and whether it is a good option for you.
Catastrophic medical insurance is one of those policies that insures you in the worst case, like spontaneous hospital visits, bad accidents, or dangerous diseases. It's actually a financial protection measure if something goes wrong with your health.
These plans will typically not have very much monthly cost (the amount you pay per month to have the plan), but they do have very high deductibles. A deductible is how much you have to pay yourself before your insurance kicks in and covers things. In 2025, it will cost a person around $9,450 to have a catastrophic health plan.
That would mean paying for all medical care yourself, except in the event of something actually serious occurring, and then your insurance kicks in after you've paid that deductible. Once you've hit that point, it generally covers 100% of your medical expenses for the rest of the year.
You might assume that catastrophic medical insurance only pays out in a crisis, but thanks to the Affordable Care Act (ACA), the plans have to provide some "essential benefits." They are:
The one major caveat: preventive care is free, but otherwise, you'll pay full copays for most other services until your deductible has been satisfied. So yes, you'll get your flu shot or your annual checkup free, but otherwise, likely everything else out of your own pocket unless it's an emergency.
This makes catastrophic plans a type of disaster coverage insurance—they're not designed for standard medical use but to keep you financially secure in case of calamity.
Not everyone can enroll in these plans. Catastrophic policy eligibility is reserved for two primary groups.
First, anyone under the age of 30 automatically qualifies. That’s why many people refer to these as health plans for young adults. If you’re 29 or younger and don’t have major health concerns, this can be an easy way to stay insured without paying a lot each month.
Second, people of any age can qualify if they receive a hardship or affordability exemption. This includes situations like:
You'll typically have to apply for an exemption from your state exchange or the ACA marketplace. After you've done so, you can purchase a catastrophic health insurance plan just like someone under age 30.
As noted earlier, high-deductible catastrophic plans charge you a lot of money out-of-pocket before your insurance covers anything. In 2025, that would be around $9,450 for an individual.
This is how it works in an example situation: you fall off a ladder and break your leg. The entire surgical bill, X-rays, medication, and follow-up visits would be $15,000. You would pay the initial $9,450 out of pocket with a catastrophe plan. The rest that your insurer would pay.
That may seem expensive, but put that into perspective against paying the full $15,000 out of pocket if you didn't have any insurance at all. They're not designed to cover routine medical expenses, but are built to protect against financial disaster.
And although they're not great for routine visits, they're great for surprise medical bills, so they're an affordable type of emergency coverage insurance.
If you’ve been browsing the ACA marketplace, you’ve probably seen other types of plans too—like Bronze, Silver, Gold, and Platinum plans. So, how does catastrophic medical insurance compare?
One big difference is who can enroll. Most ACA plans are open to everyone, but ACA catastrophic coverage is limited to younger adults or those with specific financial hardships.
Another significant distinction is the subsidization cost. Catastrophic plans are not eligible for government subsidies or tax credits on the premium. That means even when your income status is low enough for you to qualify for assistance, you can't apply those savings to a catastrophic plan. However, you can apply those credits to reduce the premium of a Bronze or Silver plan.
If you are eligible for a subsidy, a Bronze policy may be better value than a catastrophic policy because you will pay less and receive more services earlier.
While catastrophic high deductible policies will be the lowest cost option, they are not always the best buy when subsidized and anticipated healthcare expenses are taken into consideration.
For others, this will be the kind of plan that works for them. Here are some scenarios when it can be the best option:
Young adult health plans tend to have catastrophic options since these people hardly require much medical care. If you are in your twenties and rarely visit your doctor, a cheap plan with a high deductible could be perfect.
If you don't mind multiple visits and you only need protection from costly medical expenses from accidents or serious illness, this plan is good emergency coverage insurance.
If you can't afford to pay for other plans and can't manage to meet the hardship exemption conditions, catastrophic coverage can provide you with a little relief while maintaining affordable monthly payments.
At other times, individuals use catastrophic plans as a temporary measure when in the process of job switching or awaiting employer coverage.
Well, obviously, catastrophic medical insurance isn't for everyone. You might opt not to carry this plan if:
In both of these situations, even a Bronze-level plan could be cheaper overall, even though the monthly premium is a bit higher.
If you are eligible for the age rule or hardship exemption, enrolling in a catastrophic health insurance plan is relatively easy:
Be sure to take other plans that are offered into account as well, most specifically Bronze and Silver levels, since those may very well end up costing less with subsidies included.
No, unfortunately, catastrophic plans are not federally qualified high-deductible health plans. That is, you can't put pre-tax dollars away in a Health Savings Account (HSA) for qualified medical expenses if you're in a catastrophic plan.
You'll need to select a qualified Bronze or Silver plan that is an HSA-compatible medical plan as defined by government regulations to use an HSA.
Catastrophic health insurance is designed to protect young adults, low-income individuals, or those from runaway medical bills if they become seriously ill or injured. With low monthly premiums but high out-of-pocket costs, it is not for doctor's visits or management of chronic illness. It is emergency coverage insurance that will rescue you from poverty when life takes an unexpected turn.
Before choosing such a plan, make sure you understand how much they cost and whether or not you are eligible based on your age or state of financial distress.
This content was created by AI