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Consumers Look to “Catastrophic Plans” for Alternative to Canceled Policies

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Adam Swanson

Senior Policy Associate, National Council for Behavioral Health

Consumers Look to “Catastrophic Plans” for Alternative to Canceled Policies

November 20, 2013 | Health Insurance Exchanges | Comments
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The Obama Administration continues to weather a storm of public criticism for the insurance plan cancelation notices that millions of Americans have received in recent weeks. Insurance companies have informed these policy holders that their plans are being canceled because the plans do not meet the minimum requirements of the Affordable Care Act (ACA). Although many of these Americans will be able to turn to the Marketplace to receive more comprehensive coverage, polling shows many are not aware of their new options. One type of Marketplace plan may be particularly attractive to Americans with canceled bare-bones insurance policies: the catastrophic plan. This option provides for comprehensive coverage with substantially higher levels of cost sharing – and thus lower premiums – than other Marketplace options.

Marketplaces offer several tiers of coverage

The healthcare Marketplaces offer four tiers of coverage with different levels of cost sharing for consumers: platinum, gold, silver, and bronze. All Marketplace insurance plans cover prevention benefits and primary care visits, in addition to the 10 categories of minimum essential benefits such as mental health and addiction treatment, emergency care, and prescription drug coverage. However, the four coverage tiers differ in terms of the financial risk borne by consumers. For example, individuals purchasing a platinum level of coverage will have significantly smaller yearly deductibles compared to gold, silver or bronze plan buyers.

Catastrophic coverage for younger Americans

The ACA’s minimum standards of coverage were designed to ensure consumers with bare-bones plans would not find themselves without coverage in a healthcare crisis. Yet, the drafters of the ACA realized the importance of insurance Marketplace buy-in from young, predominantly healthy demographics. In an effort to attract consumers who might otherwise opt out of being covered, the law includes a fifth type of plan known as catastrophic coverage. These catastrophic coverage plans are directly offered only to Americans under the age of 30. However, older consumers can obtain a catastrophic-level plan if they do not qualify for an alternative affordable coverage option—such as the bronze or silver plans. Marketplace plans are considered unaffordable if the cost of coverage exceeds 8 percent of a household’s annual income. Individuals may also buy catastrophic plans if they qualify for one of the 12 hardship exemptions such as homelessness, or incidences of domestic violence.

What makes the catastrophic plans different?

Catastrophic plans are required to cover the same benefits as any other Marketplace plan. The catastrophic option automatically exempts from consumer’s annual deductible three primary care visits per year and coverage of specific prevention benefits such as immunizations or depression screenings. However, for consumers that chose to buy a catastrophic plan, none of the essential health benefits or other medical costs are covered by insurance until the deductible is met—usually totaling several thousand dollars. According to Healthcare.gov, the maximum out-of-pocket cost for any Marketplace plan deductible in 2014 is $6,350 for an individual plan and $12,700 for a family plan.

Learn more about the healthcare marketplace insurance plans

Interested in learning more about catastrophic plans or the Marketplace in general? Visit Healthcare.gov and explore how the health insurance marketplace works, the kinds of plans available, and the categories of coverage.