What Does Catastrophic Health Insurance Cover?

Written by Ron Wadley | Oct 18, 2019 9:45:11 PM

When the phone rings and someone is looking for individual health insurance, there is a good chance that they are going to ask us about a catastrophic health plan. This was true of Sheila when she called in recently. Sheila had started her own business a year prior and her COBRA benefits were about to run out. She told us that she wanted to explore all of her options since she had recently discovered a primary care physician that worked strictly off of cash payments rather than insurance. In her mind, if she was paying cash for those primary care visits already, why did she need to make big giant health insurance payments as well. That made complete sense to us!

As medical expenses have soared, so have health insurance premiums. It makes sense, right? But what Sheila and other Texans are discovering is that there is a vast doctor network in Texas that doesn't want to be part of that system of "in-network" care. They prefer to have direct relationships with their patients where they can provide great care without the need to submit claims for medical bills to be reimbursed. it has resulted in substantial savings for Texans and great care for their patients, while not worrying about whether or not it will qualify as an "essential health benefit". But what happens to Sheila if a worst-case scenario arises and she needs to be in the hospital for anything ranging from a short period to an extended period. Those bills can become astronomical and create a financial hardship or worse!

This is where a catastrophic health plan can really shine. Catastrophic plans, much to the dismay of rule followers, are available in Texas and they do not have to be a part of the ACA Exchange with some crazy rules. Catastrophic Health Insurance plans are one of the most misunderstood of the currently available health insurance policies in Texas today. In today's Health Insurance Tip, we will explore what the Catastrophic Coverage does and does not cover.

What Is A Catastrophic Health Insurance Plan?

At its core definition level, the word catastrophic implies that this health insurance plan is only there to protect you against major, or catastrophic events. It is not going to be involved in the day to day interactions that you have with your Primary Care Physician. A visit for a cold is not a catastrophic event. Nor is an annual wellness check. Texans have been convinced over the last two decades that these preventive services should be covered by their health insurance, which is just not true. You do not need to involve an intermediary in your routine visits to a Primary Care Physician to maintain great healthcare. However, as the name implies, the Catastrophic Insurance Plan is there to make sure that if you go to the hospital, have a surgery, or are diagnosed with a major disease like cancer that you have predictable and dependable care that does not sink you financially. And most importantly, it doesn't require a hardship exemption or high deductible. Still interested? Then keep reading.

How Does a Catastrophic Health Insurance Plan Work?

How a Catastrophic Plan is implemented and works is dependent upon your preferences in some respects. One of the largest misconceptions is that a Catastrophic Health Insurance plan must have a large deductible. While it might make sense that these plans MUST have a large deductible, it is simply not true. There is a much better way to implement this coverage without a high annual deductible or massive out of pocket limits. Let's take a closer look at how this is possible today.

Generally speaking when we look at a Catastrophic policy, we are attempting to cover either a hospitalization and/or treatment for a long term condition or diagnosis. Think cancer or stroke rehabilitation. Remember, we are not covering your annual check up with your Primary Care Physician or a visit for the flu. So how can we cover these items efficiently without a large out of pocket cost to you and your family? We do that with a three pronged approach.

Three Pieces Of A Catastrophic Plan

Many times Texans look at limited benefit policies as junk. But they are missing out on what they are capable of doing for them with a slight change in the way that they look at them. To put together a Catastrophic Health Plan that can work for you without restriction, you can use three different policies in tandem to cover up the worries that come from the medical costs associated with a large health event like a heart attack, cancer diagnosis, or sports injury. We use specific versions of these limited benefit policies to provide major medical coverage, lower deductibles, and limit your out of pocket maximums. Here are the three specific health insurance policies that we use, but you are not limited to since we are trying to keep your monthly premium payments down.

Critical Illness Plans

A Critical Illness insurance policy is a type of health insurance that will take care of the major illnesses, diagnosis, or condition that often results in a hospitalization or long term treatment plan. This policy will take care the expenses associated with cancer, circulatory issues (stroke, heart attack, or blood clots), Gastro-intestinal issues, or other major events. This means that those big scary hospital bills can be covered at multiple deductible options.

Accident Policy

Accident policy will take care of the bills that come with an accidental injury such as a sports injury, falling off a ladder, or even a car wreck. We all know that an ambulance ride, an ER visit, and a potential corresponding surgery and hospital stay can cost an arm and a leg. No pun intended. So this policy covers those expenses for you with a range of deductible amounts as well.

Indemnity Policy

A Hospital Indemnity policy allows for you to have a defined amount of cash to cover things like small outpatient procedures, hospital stays, or other required treatments. The dollars that you receive from this portion can be used to offset out of pocket medical costs or even deductible amounts. The amount of money that you receive is defined by the services rendered and your contract. Not what a hospital bill stipulates.

The three plans work in tandem to provide a safety net to cover those major items that can cost you a lot of money out of pocket in today's current healthcare environment. The plans that are present on the ACA Exchange are typically put together with large deductibles and other out of pocket costs up to an extremely high amount. Our goal with these plans is to lower both the out of pockets costs AND monthly payments.

With the Critical Illness and Accident policies listed above, the plan options allow for deductibles to be kept much lower and the Hospital indemnity plan allows for you to offset any out of pocket costs which limits how much you can be on the hook for with your medical care.

What's The Catch?

Texans like Sheila always ask us what the catch is if this type of plan is so great. And we think that is a great question because as with anything, there are pros and cons. The first thing we will focus on is what is not covered by these non-traditional health insurance plans. You need to understand that your preventive care and other essential health benefits are typically not covered by these plans. That means that you will have to pay out of pocket for that wonderful colonoscopy that we all love so much. For some with a history of medical issues, this can be a deal breaker. However, if you have become accustomed to a high-deductible health plan these expenses will not be much of a shock.

The next piece that is not covered is maternity care. While these plans are very popular with younger Texans that "never go to the doctor", making sure that your forms of birth control are up to date and used is important. Unexpected pregnancies are not viewed like unexpected injuries within the confines of you these policies. Therefore younger families looking to expand, need to tread very carefully.

Somewhat related is the fact that mental health care is not considered a critical illness or accident. Many of the healthcare professionals involved with mental health in Texas are now only taking cash, so you may not need to worry about it. But we would be remiss to not mention this fact.

Finally, we have to mention that these types of plans do not meet the ACA mandate penalty if it ever comes back. Since they are not involved in your day to day healthcare or preventive services, they cannot be defined as ACA-Compliant plans. As a result, you will not receive a premium subsidy not be considered compliant if the penalty ever returns.

So Give Me The Good News On Catastrophic Health Insurance Coverage

The great news is that these catastrophic health insurance policies do not have an enrollment period. They can be put into place at any time during the year as Texans need. Sheila loved this aspect as she didn't want to deal with a special open enrollment on the health insurance exchange. She was ok with paying for her own health screenings and primary care physician visits because she was already doing it. So it then became a function of the monthly costs and the coverage options available to her.

Along with lowering the out of pocket costs for those major events with very broad network coverage, these types of plans also can be very cost effective on a monthly premium basis. This is a direct result of the insurance company not having to process claims for that annual wellness visit or the $15 blood draw that goes with that visit. Even though you will pay for a doctor visit out of pocket, the total annual cost for your family is typically greatly reduced from the total cost of an standard health plan available from the larger market sources.

If you would like to learn more about these policies and how they work, schedule a time to talk to an agent at Insurance For Texans. We work with multiple carriers who can give you options to craft a plan that can meet your needs while focusing on keeping your costs under control.

Call us at 469.789.0220 or click that button below to get started working with Insurance For Texans today!

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