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Catastrophic Health Insurance: Pros and Cons In Today’s Economy

Posted Sep 05 2012 3:56pm

During these tough economic times, many people are choosing to go without any health insurance coverage to save money.  According to Money.CNN.com, about 16.3% of the US population is uninsured as of 2010 and that number is growing.  The main groups going without coverage include foreign born residents who are not US Citizens, young adults ages 19 to 25 and families with an annual household income under $25,000.

While a comprehensive health insurance policy may be out of reach for these groups of people, one thing that should be considered is catastrophic health insurance .  Catastrophic health insurance is not all encompassing, and typically has a high deductible, but one thing it can do is save someone from devastating financial ruin if they were to become sick or get into a serious accident.

High-deductible health insurance plans offer lower monthly premiums in exchange for higher deductibles and less benefit coverage.  Typically, under a plan like this, you would pay for all of your medical care, except for some qualified preventative care, up to the annual deductible which can be thousands of dollars.  Under health care reform, these plans do cover preventative care even before your deductible is fully paid.  Once the deductible is reached, catastrophic health insurance plans may cover all of your medical care costs, or a portion such as 80% of costs up to an out-of-pocket maximum.

One pro associated with these types of accounts is that they are often connected to a Health Savings Account (HSA).  This was made possible through a federal law that allows consumers to set aside pre-tax money to use for medical care.  Not only does this save the consumer taxes, but it forces a savings account upon them to be used for medical expenses only.  It can help make catastrophic coverage more affordable when health care is necessary.  Originally, this was a plan that appealed to people shopping for individual health insurance or businesses with a small number of employees.  But as economic times get tougher, larger businesses are turning to these types of plans for their employer-sponsored health insurance programs.

While monthly premiums are lower, consumers can be blind-sided when medical costs start to add up and they are paying the majority or all of the allowed out-of-pocket costs.  Many young people assume they will never need medical care so they don’t take these costs seriously until they receive the bill.  While catastrophic coverage is better than no coverage at all in most cases, it can be safer for planning purposes and over all savings to go with a more expensive and comprehensive health insurance policy.  It really depends on the individual’s unique situation and it can be a challenging decision for some to say the least.

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