Catastrophic insurance is most popular with the self-employed, those whose jobs do not offer health plans, people with a lower income who are looking for a health care safety net, and healthy adults with low medical needs. The ideal customer for this type of insurance would be a healthy person with few or no monthly prescriptions who doesn't visit a doctor on a regular basis. The older generation that purchases catastrophic insurance does so to limit their financial liability should they have a serious event like a stroke or a heart attack. Also, traditional health insurance is often unaffordable for older people -- if they even qualify for it.
However, trying to minimize health care costs by buying a catastrophic plan could work against you. If you have monthly medical expenses, like prescription drugs or supplies for a chronic condition, this kind of plan won't be of much use to you. There are several conditions that might get you excluded from any health insurance policy, but the list of conditions that would make you ineligible for a catastrophic policy is much longer. In addition, many catastrophic policies contain a clause that suspends coverage for maternity care until after a year of membership.
If you do fit the profile, though, this kind of plan could be perfect for you. That is why it is vitally important to be careful, thoughtful and deliberate when shopping for your health insurance.
Health Savings Accounts and Catastrophic Insurance
A Health Savings Account, or HSA, is an account into which you can make tax-deferred deposits to be used for qualified medical expenses. To get one of these tax-friendly accounts, you must be enrolled in a catastrophic insurance plan. There are several benefits to having a HSA: The funds stay with you even if you leave your employer or end participation in the catastrophic insurance plan, and you can invest the money accrued in your HSA, with all earnings sheltered from taxation.
For more information about catastrophic insurance, take a look at the links on the next page.