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What is catastrophic health insurance?

family of four health insurance Catastrophic health insurance, despite its awe-inspiring name, is actually a very basic form of health insurance. Catastrophic health insurance is insurance that protects you in the event of a major medical event, such as a heart attack or stroke. It is not for routine medical coverage, such as reimbursement for annual exams and immunizations.

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Catastrophic health insurance may be a good coverage for you if you’re in relatively good health and have a family history of good health. If you don’t tend to visit the doctor a lot, or just would rather pay out of your own pocket for routine exams and office visits, but be protected in case of a massive health change, then this policy might work perfectly for you. Some types of catastrophic health insurance, but not all, do cover “qualified” preventative medical care.

What is the advantage of catastrophic health insurance?

The main advantage of this type of health insurance, also known as a high deductible health plan, is the low premium payments that it offers. The premiums are kept low because the deductible is high–in fact; catastrophic health insurance is also sometimes called a high deductible health plan.

Catastrophic health insurance is a type of pay-as-you-go service whereby you pay more out-of-pocket for routine checkups and even sick visits to your doctor. The advantage is that you pay lower premiums for health insurance that covers you if something major happens to your health. Once you meet your deductible, your policy will allow for a set percentage of reimbursement, regardless of what type of medical specialist you see or treatment you seek.

Is a catastrophic health insurance policy right for me?

Whether a catastrophic health insurance policy is the right coverage for you and any family members depends on quite a few factors. If you are a relatively healthy person, this could work for you. If you need to save money on health insurance because you’re currently between jobs or are retired and without medical coverage, catastrophic health insurance could also be right for you.

If, however, you need to take monthly prescriptions, have a condition that requires daily maintenance such as diabetes, or get sick quite often, then this type of policy is probably not a good one for you. Keep in mind that you also need to have the finances to afford the relatively high deductible associated with this type of health insurance, in case a catastrophic health event does occur. Lastly, even after you meet your annual deductible, the insurance company will still only help pay for any medical treatment that it deems necessary.

Check with your insurance company for its list of exclusions before you purchase this policy, so you know whether it is the right one for you.

If I get a catastrophic health insurance policy, should I add an HSA?

HSAs, or Health Savings Accounts, are add-ons for high deductible health plans like catastrophic health insurance policies. HSAs allow you to set aside pre-tax dollars into a medical savings account whose funds roll over from year to year. With an HSA, you don’t lose your money at the end of a fiscal year, as you do with other flexible spending accounts. Instead, it accrues and, with most plans, earns interest.

HSAs work well with catastrophic health insurance because they can be used to pay for much of the medical care that catastrophic health insurance doesn’t cover, including prescriptions, lab tests, and specialists like chiropractors. You can use the money in your HSA towards medical costs for any of your dependents as well.

While catastrophic health insurance can be the basic, bare-bones type of policy, having an HSA with it will also enable you to pay for:

  • Dental services such as cleanings and x-rays
  • Vision expenses such as checkups, glasses, and laser eye surgery

Where can I get catastrophic health insurance?

Check with your employer to see if a high deductible health plans is a choice in your benefits package. Otherwise, your best bet is probably to just purchase catastrophic health insurance on your own from a health insurance company. You’ll need to do some research to find out what companies in your area off this type of policy. You can search online or talk to a local independent insurance agent.

Make sure that this type of policy is a good fit for you and your family’s coverage needs. As the New York Times reported a few years ago in “The Many Hidden Costs of High-Deductible Health Insurance“, the downside of this type of insurance is that policyholders tend to ignore what they perceive as minor aches and pains so that they don’t have to fit the bill for these type of doctor visits.

If purchasing catastrophic health insurance will cause you to skimp on healthcare, you should instead talk to your employer or insurance agent about enrolling in a more comprehensive insurance plan.

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