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Catastrophic health plans: Not for everyone

Today's catastrophic health plans are not the stripped-down plans that budget-minded consumers bought in previous years.

The old versions, also known as major medical plans, featured relatively low premiums and high deductibles and were designed as safety nets in case you got really sick or suffered a terrible injury. Because the plans generally didn't pay for anything until your medical expenses reached the deductible -- some as high as $10,000 -- you paid out of pocket for all your basic care, like doctors visits, routine lab tests and minor procedures.

Now under the Affordable Care Act, catastrophic plans offer broader coverage and are limited in how much they can make you pay out of pocket. They also are available only to certain consumers, and even for those eligible to buy them, may not be the most affordable option.

Who can buy a catastrophic health plan

hospitalizationMost Americans are required to have health insurance or pay a tax penalty. Health plans that count as sufficient coverage to meet that requirement are standardized into five categories, according to the portion of health care costs they pay for the average person. Those plans are:

  • Platinum: The health plan pays about 90 percent of your health care costs. You pay 10 percent for medical care out of pocket.
  • Gold: Health plan pays 80 percent; you pay 20 percent.
  • Silver: Health plan pays 70 percent; you pay 30 percent.
  • Bronze: Health plan pays 60 percent you pay 40 percent.
  • Catastrophic: Health plan pays less than 60 percent. You pay more than 40 percent.

You can't buy a catastrophic plan unless you're under age 30 or you have what's known as a "hardship exemption," which exempts you from paying the tax penalty if you don't have coverage. There are 14 kinds of hardship exemptions based on income and other factors.

Today's catastrophic plans generally have higher deductibles and on average pay a smaller percentage of your health care costs than the metal plans on the market. But they include more protection than the catastrophic plans of yesteryear.

Now catastrophic plans must cover:

  • All the essential benefits, including pregnancy and maternity care, that the traditional plans cover after you meet the deductible.
  • Three primary-care visits a year at no cost to you. So even if you haven't met the deductible you don't have to pay for those three visits.
  • Preventive services at no cost to you. Those services include a variety of health screenings and immunizations.

And like the metal plans, catastrophic plans can't put an annual or lifetime dollar limit on the benefits you receive, and they must cap the amount you pay out of pocket for health care. The cap for 2014 health plans is $6,350.

No tax break

Theoretically, catastrophic health plans should have lower premiums than the other plans because of their high deductibles. But catastrophic plans are not eligible for tax credits to lower the premium, so you could end up paying a lot more for a catastrophic plan than for one of the metal plans with a subsidy. And even without a subsidy, some bronze plans have lower premiums than some catastrophic plans.

When you buy a platinum, gold, silver or bronze plan in the health insurance marketplace, you qualify for a premium discount if your annual household income falls under 400 percent of the federal poverty level. (For 2014 health plans the 400 percent threshold is $45,960 for a single person.) You qualify for reduced out-of-pocket costs if your income falls below 250 percent of the federal poverty level ($28,725 for a single person for 2014 plans).

Check whether you qualify for a subsidy for one of the metal plans before settling for a catastrophic plan, and dig into the details about coverage before buying. Check the plan's provider network -- are the doctors and hospitals you want to use included?

If you're under 30 or have a hardship exemption, you can buy a catastrophic health plan during open enrollment from the health insurance marketplace, directly from an insurer, through a health insurance broker or from an insurance website selling plans from different carriers.

Open enrollment for 2015 plans is Nov. 15, 2014, to Feb. 15, 2015.

You can buy a plan outside the open enrollment period if you have a special circumstance, such as losing coverage at work or having a baby. Visit Healthcare.gov for details.

More from Barbara Marquand here

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