What Is a Catastrophic Health Plan?

As an HR professional, you’re responsible for helping employees navigate their health insurance options—especially during open enrollment. While most employers don’t typically offer catastrophic health plans, employees may still ask about them, particularly when researching individual coverage through the Health Insurance Marketplace.

Understanding how catastrophic plans work can help you guide employees toward making informed benefits decisions.

What Is a Catastrophic Health Plan?

A catastrophic health plan is a type of health insurance that offers low monthly premiums and very high deductibles. It’s primarily designed for:

• Adults under the age of 30
• Individuals of any age who qualify for a hardship exemption

A hardship exemption applies when a person has experienced serious life circumstances, such as:

• Eviction or foreclosure
• Homelessness
• Domestic violence
• Bankruptcy
• Death of a close family member
• Natural disasters

Catastrophic plans act as a financial safety net for worst-case scenarios rather than a comprehensive solution for regular care. They typically cover 100% of preventive services, but all other healthcare costs must be paid out of pocket until the high deductible is met. After the deductible, the plan covers in-network services in full.

When Can Someone Enroll in a Catastrophic Plan?

Catastrophic plans are only available through the Health Insurance Marketplace and can be selected during:

• Open enrollment periods
• Special enrollment periods triggered by qualifying life events, such as job loss, marriage, or relocation

Eligibility must be verified either by age or hardship exemption, so employees interested in these plans should be directed to confirm their eligibility on the Marketplace website before enrolling.

What Do Catastrophic Health Plans Cover?

Even with their limited scope, catastrophic plans include:

• Three primary care visits per year at no extra cost
• Preventive care services (e.g., immunizations, screenings, annual wellness checks)
• The 10 essential health benefits required under the Affordable Care Act (ACA), including:
  1. Outpatient services
  2. Emergency services
  3. Hospitalization
  4. Pregnancy and newborn care
  5. Mental health and substance use treatment
  6. Prescription drugs
  7. Rehabilitative and habilitative services
  8. Laboratory services
  9. Preventive and wellness services
  10. Pediatric services (including dental and vision)

These features make catastrophic plans valuable in case of an unexpected, serious illness or injury.

How Do Catastrophic Plans Compare to Other Health Plans?

Employees often want to know how catastrophic plans stack up against other insurance options. Here’s a simple comparison to help illustrate key differences:

Pros and Cons of Catastrophic Health Plans

Like any insurance plan, catastrophic coverage comes with advantages and limitations.

Pros:

• Very low monthly premiums
• Full coverage of preventive care
• Protection from major medical expenses after deductible
• Access to ACA-required essential health benefits

Cons:

• High out-of-pocket costs until deductible is met
• No access to premium tax credits or cost-sharing reductions
• Not ideal for people with frequent medical needs
• Limited eligibility based on age or hardship status

Understanding these trade-offs can help employees choose a plan that fits their specific health and financial situation.

Are Catastrophic Plans a Practical Choice?

Catastrophic plans can be a good fit for individuals who:

• Are young and healthy
• Rarely need medical care
• Want coverage for worst-case scenarios
• Don’t qualify for ACA subsidies

On the other hand, individuals with chronic conditions, ongoing prescriptions, or higher healthcare usage may find that the high deductible negates the savings from low premiums. In those cases, a bronze or silver plan—or employer-sponsored high-deductible plan paired with a Health Savings Account (HSA)—might be a better option.

What Should Employees Ask Before Choosing a Catastrophic Plan?

Encourage employees to evaluate their personal situation by asking:

• Do I qualify based on age or hardship?
• How often do I visit the doctor?
• Do I have regular prescriptions or recurring treatments?
• Could I qualify for subsidies with a standard ACA plan?
• Am I financially prepared to meet a high deductible if an emergency arises?

Providing a list of these questions and answers can help employees make smarter, more confident healthcare choices.

Additional Resources

You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources:

• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• BerniePortal Blog—a one-stop shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• Resource Library—essential guides covering a comprehensive list of HR topics
• HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics
• Community—the HR Party of One Community forum, a place devoted to HR professionals to ask questions, learn more, and help others