What is Catastrophic Health Insurance
Catastrophic health insurance is also known as major medical insurance. Buyers of catastrophic health insurance self-insure the lower cost medical expenses that fall below the deductible of their plan. Yet they are protected from catastrophic loss by the maximum-out-of-pocket feature of their high deductible plan. Why pay the health insurance company a high premium when you could save the difference? Health savings accounts (HSA) enable individuals to use a tax-advantaged savings account to put money away in case it's needed to pay the deductible.
Consider a High Deductible Health Insurance Plan
There's nothing wrong with buying an catastrophic health insurance plan with a high deductible, say $5,000, to make your monthly premium affordable. As long as you stay healthy, the low cost of the high-deductible health insurance will save you lots of money. So, let's say that you are willing to bet that you are not going to get really sick or have an expensive accident this year, so you opt for a catastrophic health insurance plan. Then you loose the bet. You break your back skiing and rack up $100,000 in medical bills. Your catastrophic health insurance plan will work like this - you will pay your $5000 deductible portion of the bill first, leaving a $95,000 balance. Stay with me, this will take a minute...
How the Coinsurance Percentage Works
The coinsurance amount of the typical catastrophic health insurance plans is 20%. That means you pay 20% and the insurance pays 80% of the medical expenses. Let's go back to our skiing accident scenario and assume that your catastrophic health insurance plan has a 20% coinsurance. You have a $95,000 balance so your portion of the bill is 20%, or $19,000.
The Maximum Out-of -Pocket Benefit Saves Your Bacon
Yikes, It looks like you're stuck for $24,000 of that $100,000 medical expense. Not really, because the maximum out-of-pocket provision in your catastrophic health insurance policy says that no matter what happens, the insurance company will cover all but $10,000 in covered medical expenses including your deductible. Ah, so there it is! In any given catastrophic health insurance policy, you'll never pay more than the maximum out-of-pocket expense. So your affordable health insurance plan paid $90,000 of the $100,000 major medical expense for your skiing accident. Now, I'm not saying that $10,000 is chump change. It's still a big number, but after you subtract what you've saved in lower premiums by buying an affordable health plan, it just might be chump change.
Get Started with Your Health Insurance Quote
Feel free to browse through our site for more health insurance information. When you are ready, you can get your quote online for free. If you would like help, or have questions about health insurance coverage or rates, call us at 800-557-5693. We are here to help 8 AM to 8 PM Pacific time.
