Jesse Smedley is a Principal of Oakbridge Insurance and the founder of iHealthBrokers. He founded iHealthBrokers in 2007, and Oakbridge acquired iHealthBrokers in 2025. He has spent nearly two decades teaching people how to save money on their health insurance and navigate Medicare, and he is the author of Medicare A to Z: Your Roadmap to Medicare.
Catastrophic coverage health plans may sound scary but they can be a decent option both on and off the marketplace.
What Are Catastrophic Coverage Plans?
Health insurance works in a few ways. Usually it will provide preventative services at no cost, cost share to offer basic services at reduced costs and impose out of pocket maximums. The OOP maximums prevent you form incurring major medical debt. Once you’ve reached a certain financial threshold in yearly medical spending, your insurance is supposed to take over for the remainder of the bills.
Catastrophic coverage plans share some similarities, but there are also some fundamental differences.
Marketplace
You can purchase catastrophic coverage plans both on and off the marketplace. Eligibility depends upon a few factors. For marketplace plans, if catastrophic plans are available in your area you must usually be under 30. However, you can apply for a hardship exemption based on your financial circumstances.
Catastrophic coverage plans are basically designed to protect you from “the worst”. For marketplace plans, the will cover your some of your basic preventative services at no cost. They will also cover three primary care visits per year before you’ve met your deductible. Additionally, you will still have an OOP max to protect you from major medical bills. However, deductibles and copays can be quite high. These plans are really designed for the most basic of care and protection against the worst.
They can be ideal for young healthy people, especially those who are ineligible for premium tax credits. Premiums for catastrophic plans are rather inexpensive. However, if you are eligible for a premium tax credit, you will not be able to use that towards a catastrophic coverage plan. Based on the size of your premium tax credit, you may be better served with a more traditional marketplace plan.
Private Insurance
Catastrophic coverage plans are available off the marketplace as well. Sometimes people refer to short term medical plans as catastrophic coverage. There can be significant overlap, but STM can offer more benefits based on your needs.
Private insurance plans are not beholden to the same rules as marketplace insurance plans. So you may be subject to medical underwriting.
Remember, although premiums for catastrophic coverage plans can be quite low, if you need more regular or extensive medical care, you will have to pay a lot more out of pocket. However, for a younger, healthy person, they can be a great way to maintain coverage and have protections while keeping monthly costs at a low.
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