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Catastrophic Health Insurance

Catastrophic Health Insurance Family Picture

It may be more familiar under it's other name, "major medical," but whatever you call it catastrophic health insurance exists to provide coverage in case of serious health issues, when you either don't have health coverage offered through your employer, or don't need full coverage.

Unlike standard health insurance, catastrophic plans require that you pay out-of-pocket for routine doctor's visits and prescription drugs, but major hospital and medical expenses above your deductible are generally covered, as are hospital stays, surgery, intensive care, x-rays, lab tests, and other diagnostic procedures. Pregnancy, however is not covered, and maternity care usually requires a one-year waiting period before it is offered.

These plans generally have deductibles that begin at $500, and go up from there, much higher than typical health insurance, but the caps - maximum lifetime benefits - are higher as well - often between $1 and $3 million. As with standard policies, once the cap is reached, your policy becomes void, and the insurance company will not pay any more benefits.

Be aware that high-deductible plans - those with deductibles as high as $15,000 - are available, and can greatly reduce your premiums, but if you have to have a procedure, even if it is surgery, that costs less than your deductible, you have to cover the cost. Think very carefully before you limit your health insurance to major medical only.

Who Buys Catastrophic Health Insurance?
There are, in general, two kinds of people who buy catastrophic health insurance: people between the ages of fifty and sixty-five, and people in their mid twenties. The older buyers choose major medical insurance if they are trying to prevent financial losses if they should have a heart attack, develop cancer, or have to deal with other serious illnesses. They tend to be healthy for their age, and not on a regular regime of prescription medications. As well, they want to save money on premiums, and they have the money to spend on out-of-pocket fees for doctor visits if they need to.

 

In addition, retirees who don't yet qualify for Medicare buy these policies to save money on premiums. The younger people who choose this type of insurance tend to be right out of college, in their first jobs, and don't yet have regular health benefits offered by their employers. As well, these younger buyers are often self-employed, or work for small businesses.

Coverage and Sources
Catastrophic health insurance is available from a wide variety of insurance companies, though one of the most popular is Blue Cross Blue Shield. Comparison shopping to analyze cost, benefits, and coverage limitations is essential when considering this high-deductible insurance. It can be purchased directly, or is often available through your employer, or through another group plan (a professional organization, club, or union).

Typically, major medical insurance is not available if you have a chronic condition or serious pre-existing illness, like AIDS, diabetes, emphysema, heart disease, multiple sclerosis, and schizophrenia.

Before you opt to buy catastrophic health insurance, you need to consider the following points:

  • How extensive do you want your coverage to be?
  • Do you regularly require prescription medications?
  • What is the deductible, and how much can you afford?
  • What are the premium payments, and what is the billing cycle?
  • Do you get sick very often?
  • Can you afford to pay out-of-pocket for doctor fees?
  • Do you have any pre-existing conditions?

If you answered "yes" to questions 2, 5, 6 or 7, you may find that having only catastrophic health insurance is not your wisest course, and you should consider standard health insurance instead. However, if you answered "no" to those questions, and can afford to pay for doctor's visits, major medical insurance may be a smart alternative to health insurance you are unlikely to ever use.

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