Under Obamacare (the Patient Protection and Affordable Care Act), everyone is required to have health insurance coverage. But there is a wide range of variation when it comes to the insurance policies and options you may elect to pay for. One option that you might want to look into is catastrophic health insurance. If you plan to use this type of insurance as your primary health coverage, you will need to be under the age of 31 or qualify for a hardship exemption under Obamacare (this will be the case if the system has determined that you are incapable of paying for a higher-priced policy due to financial hardship) in order to avoid a penalty on your taxes.
There are two main factors that separate catastrophic health insurance from other types of coverage: the cost and the services covered. Generally speaking, this type of policy is less expensive than other health insurance options. But the reason for this reduced cost is that the coverage is somewhat limited. Whereas bronze, silver, gold, and platinum health insurance packages often offer coverage with low co-pays for a wide variety of possible medical expenses, including screenings, surgery, hospital stays, and more, the fifth category of coverage, catastrophic, usually only offers co-pays at primary care doctors and in-network discounts on all other services.
In addition, these policies usually include low premiums, which are offset by a high deductible. With a catastrophic insurance policy, preventative care services will still be free, but you’ll likely find yourself on the hook for several thousand dollars in deductibles each year, if something major happens to you, before your insurance company pays 100%. The idea here is to provide low-cost coverage for low-income individuals or families facing the prospect of major medical bills that they can’t pay for.
So why would you choose such a policy? If you’re young, in relatively good health, and you don’t find yourself in particularly risky situations (due to work, lifestyle, etc.), you may rarely find yourself utilizing the benefits offered by a metallic (bronze, silver, gold or platinum) insurance policy. So why would you want to pay for one? Since many young adults are saddled with student loan debt, they’re trying to buy their first homes, and they’re at the bottom of their earning potential, it makes sense to pay less for a policy.
However, this type of policy, as well as any short term policy, could also work great for an older adult that is out of work and unable to afford insurance for a short time (say, between jobs). If you think you’ll find gainful employment within a few months or a year, you might not want to waste your precious rainy day fund on pricey insurance that you’re unlikely to need in the short-term. In this case, a low-cost policy that accounts for major, unexpected medical costs due to accident, injury, or illness makes more sense. You just have to check in with a licensed agent and make sure you qualify. If you don’t do your due diligence, you could end up facing fines for failure to obtain adequate coverage under Obamacare.
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