Catastrophic health insurance is designed to protect an individual in the case of a severe or life-threatening event, such as a car accident. This type of health insurance plan, while protecting a consumer from potentially hundreds of thousands of dollars in medical care costs, can be expensive in terms of out-of-pocket expenses. Premiums for catastrophic insurance, however, are often less expensive than for comprehensive plans.
Con: High Deductible
A person who chooses a catastrophic health insurance policy may have plenty of coverage, but yearly deductibles will be high. They can sometimes be as much as $5,000 or $10,000, according to literature from the U.S. Department of the Treasury and major health care providers offering what are also known as High-Deductible Health Plans. These deductibles need to be met before insurance payments to providers kick in.
Con: Benefits Cap
Many catastrophic health insurance policies have a maximum payout over the lifetime of the policy. For example, this type of plan may offer a maximum $1 million in coverage. According to Insurance.com, after lifetime maximum benefits have paid out, the insurer ceases to pay medical costs and the policy is canceled. An older individual diagnosed with a chronic illness may find such a plan acceptable, but a younger person may determine that benefits and payouts will cap too soon, leaving him without insurance coverage for his later years.
Pro: Coverage
A catastrophic health insurance plan covers more than just accidents. Most policies can be customized, including covering routine medical care and prescriptions, though the policyholder may need to submit co-pays until the annual deductible is reached.
Pro: Security
For a healthy person who does not engage in risky behaviors, catastrophic health insurance may provide security and peace of mind. Such policies are designed mainly for someone who worries that a car accident or major trauma may leave her debt-ridden for life.
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