Health Insurance Articles
The Benefits Of Catastrophic Health Insurance Coverage
2010-07-29
The health insurance options for individuals can be difficult to understand, especially with respect to both the insurance coverage and the costs. With the costs of some individual plans beyond the financial reach of many people, it is a common mistake to think that having no insurance coverage may be the only option. One viable alternative, however, may be a catastrophic health insurance plan.
Catastrophic health insurance, sometimes known as high deductible health insurance, is designed to provide benefits only after the insured person has paid a substantial sum of his or her yearly medical expenses out-of-pocket. For instance, a catastrophic plan with a $5,000 annual deductible means that the insurance coverage will not begin until the insured person has paid $5,000 in medical expenses during the calendar year. However, beyond the first $5,000, the catastrophic plan will cover all other necessary medical expenses until any lifetime cap on the policy is reached. (Many catastrophic plans will place a maximum lifetime benefit, such as $1 million, on the insurance coverage.)
The premium costs of catastrophic plans are substantially less than other types of plans because of the high deductible amounts. This means that most people, at the very least, should be able to afford a catastrophic plan and have the peace of mind that they will have insurance coverage if they develop a serious illness, need expensive surgery or end up having a costly hospital stay. Without catastrophic health insurance, a person may either go bankrupt trying to pay his or her medical bills out-of-pocket or face the prospect of foregoing necessary medical treatment.
Catastrophic health insurance is a viable option for many people, including those who do not have the financial resources for more extensive insurance coverage and those who do not anticipate many routine trips to the doctor but need coverage for emergency situations. Even some wealthier people may choose catastrophic coverage because they have adequate resources to pay for their routine medical needs themselves but do not want to sacrifice all of their savings if they need expensive treatments.
To cover the out-of-pocket costs before the deductible has been met, many people take advantage of a Health Savings Account, or HSA, in conjunction with a catastrophic health insurance plan. HSAs allow a person to save money each year, tax free, for the purposes of paying for medical and other health-related services, treatments and products. The IRS establishes the rules for HSAs, including the maximum amounts that can be set aside annually and the range of services that HSA funds can be used to cover. For many people, a catastrophic plan, together with an HSA, can be a viable solution to maintaining adequate insurance coverage.
