Monday, June 18, 2007

Pros and Cons of Catastrophic Health Insurance

"Catastrophic" or "major medical" plans are sometimes offered in the event an employer doesn't offer health insurance or if you simply don't want to pay for coverage that you do not need. It is characterized by high health insurance deductibles and low monthly premiums. Under catastrophic health insurance plans, you tend to pay out-of-pocket for doctor's visits and prescription drugs, but major hospital and medical expenses above a certain deductible are covered. Most catastrophic health insurance plans cover hospital stays, surgery, intensive care, diagnostic, X-ray and lab tests.

Basic Highlights of High-Deductible Health Insurance Plans

Catastrophic health insurance plans typically have deductibles starting at $500 and going up. Many have high lifetime maximum benefit payments, also referred to as "caps," between $1 million and $3 million. Once the cap is reached, your insurance company will not pay for any medical expenses and your health insurance policy will become void. Also, it should be noted that most catastrophic health insurance plans do not cover pregnancy, and other plans do not cover maternity care for a full year after your effective date.

Under a high-deductible plan, you are expected to pay your medical needs until the expenses reach the cost of your deductible. If you eliminate your coverage to reduce your monthly premiums, you are taking a gamble on how much money you'll have to spend on self-health care. For example, if your deductible is $15,000 and you have surgery that costs under that amount, you are required to pay for the surgery out-of-pocket.

Do You Fit The Profile?

On the average, people who buy catastrophic health plans are either in their 20's, or between the ages of 50 to 65. Young adults tend to buy the coverage if they are self-employed or don't get coverage through work. On the other end of the spectrum, older adults purchase a catastrophic health insurance plan when they are concerned with financial losses in the event of a heart attack, cancer or other serious illness. They tend to be healthier, on few or no prescription medicines, and are more concerned with saving on their premiums, and would rather pay out-of-pocket for doctor's visits.

Frank McArdle, spokesperson for Hewitt Associates, said, "Companies with 1,000 or more employees typically offer higher health insurance deductible plans. Retirees who aren't yet eligible for Medicare select these plans in order to keep premiums down."

High deductible health insurance can be purchased either as a single plan or through an employer in a group plan. If you have certain pre-existing conditions, you often won't be eligible for a catastrophic health plan. Examples of such conditions are AIDS, diabetes, emphysema, heart disease, multiple sclerosis, schizophrenia, and many more.

What Does It Dover?

The types of coverage vary depending on what type of high-deductible health insurance plan you choose. Blue Cross Blue Shield of Florida offers a catastrophic health insurance plan in most counties that is called "Essential." It has deductible of $250 and an out-of-pocket limit of $2,500 after you've exceeded your deductible. The lifetime maximum is $1 million. The plan covers hospital, surgical, and X-ray expenses, but not other services, like doctor's visits, maternity care, prescription drugs, and mental health visits. An online quote showed that the monthly premium for a 21-year old, nonsmoking female to be $29.

A similar plan to Florida's Essential health plan is offered by Golden Rule Insurance Co. Its "Basic Plan" offers a high deductible health insurance plan, with deductible prices ranging from $500-$5000. It covers the same elements that the Essential plan does, but mental health and substance abuse are not covered. The Basic Plan does, however, cover hospital and surgical expenses, MRIs, CAT scans, and more, as well as having a lifetime maximum of $3 million.

Shopping Tips

  • Before buying a catastrophic health insurance plan, consider:

  • What is the cost of the premium per month, quarter, and year?

  • What is the cost of the deductible and how much can you afford?

  • How extensive do you want the coverage to be?

  • Do you require prescription medications?

  • Can you afford to pay for doctor visits out-of-pocket?

  • Do you have any pre-existing conditions?

  • Do you get sick often?

  • What is the lifetime annual benefit?

If you are interested in getting a health insurance coverage quote, log on to Here you will be able to evaluate multiple rates from best-in-class health insurance providers - helping find the best health insurance coverage for you.

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