The answer depends on who you are.
Thanks genius, real helpful advice.
But wait, before you click the “Back” button on your browser, take a moment to recognize that buying or not buying catastrophic health coverage could be one of the most important financial decisions you ever make. Ask yourself, if I were to have a heart attack, or blow out a knee playing pick-up basketball, or if I were to get in a wreck on the way to the supermarket, how would I pay for the $30,000+ in medical care needed to make me better? Would you lose your home? Your savings? Maybe have to declare bankruptcy?
Catastrophic (or “major medical”) health coverage is designed to protect you and your family’s financial future should something terrible happen. But whether you should plunk down the premium needed to buy this coverage, really does depend on who you are.
So who should not buy catastrophic health coverage?
At the risk of losing a few readers, I will start by identifying people who should not buy catastrophic health coverage:
First, let’s cross off people who already have health insurance through their employer or the government. If you fall into this group, congratulations! There are more than 46 million of us who do not. That’s right, the most recent estimates show that more than 46 million Americans have no health coverage whatsoever . . . none.
Second, if you have some awful preexisting condition, like cancer, HIV, diabetes, heart disease, MS, etc., forget about catastrophic health coverage. Most plans specifically exclude coverage for care relating to these preexisting conditions. Your best bet is to find a reputable insurance agent who can help identify the least costly coverage options.
Third, if you a woman planning on having a child during the next few years, catastrophic health insurance probably is not for you. Virtually all catastrophic plans exclude coverage for maternity care.
Who should buy cat strophic health coverage?
Healthy people in their 20s or between the ages of 50-65 (i.e. before Medicare kicks in) are, by far, the most common groups who buy catastrophic health coverage. Why?
Because catastrophic health plans generally have high deductibles and low monthly premiums, they appeal to people who are healthy, and don’t want to pay for coverage they don’t need, or those who are just trying to bridge the gap before they are eligible for Medicare and either can’t afford or don’t want to pay for a more expensive plan.
The cost of these plans is surprisingly low. Depending on your age, health, and the deductible you choose, monthly premiums range from about $30-$125 month for an individual. But with the low costs come limits on what is covered.
Catastrophic health plans typically cover only major hospital and medical expenses above the deductible, while you pay out-of-pocket for everything else. The majority of these plans cover expenses for hospital stays, surgery, intensive care, diagnostic X-ray, and lab tests above the deductible. For other medical expenses, such as check-ups, routine doctors visits, prescription drugs, etc., you pay out of your own pocket. Note: some plans do offer coverage for prescription drugs for additional premium.
Here’s an example. Let’s say you have a heart attack and need bypass surgery, costing you about $75,000. After the surgery, you are going to need prescription blood thinners and cholesterol medication, costing $200.00 per month, or $2,400/year. You also will need semi-annual doctors visits, costing $250.00 per visit, or $500/year. You have a catastrophic health plan with a $5,000 deductible and $1 million lifetime cap.
The good news? Your plan is going to cover the cost of the hospital stay and surgery, above the deductible of $5,000. In other words, your health plan is going to pay $70,000 and you only owe the $5,000 deductible. Although this hurts, your financial future is not going to be destroyed by a medical bill that you have no ability to pay.
The bad news? Your plan probably is not going to cover the doctors visits or the prescription meds, so you will need to shell out $2,900/year to stay healthy.
Catastrophic health plans are not for everyone. They offer more limited coverage than traditional health care plans, but also offer substantially lower premiums. By buying one of these plans, you essentially are betting that you will not have a major health issue in the short term that will require ongoing care, but you are protecting yourself just in case something awful does happen.
If you are interested in a catastrophic health plan, you might be interested in this recent article about the top health plans across the country: http://insuranceonyourterms.com/blog/2007/03/31/who-is-the-best-health-insurer/