Catastrophic Health Plan

A catastrophic health plan is a health plan sold in the individual market that covers the essential health benefits but pays nothing toward them until the enrollee has incurred cost sharing equal to the year's federal ceiling, with narrow exceptions for preventive care and at least three primary care visits. It is defined by statute at 42 USC 18022(e), which treats a plan "not providing a bronze, silver, gold, or platinum level of coverage" as meeting the coverage requirements if only eligible individuals may enroll and the plan provides those benefits. Because the deductible is set equal to the annual limitation on cost sharing, the same figure that caps what any Marketplace enrollee can be asked to pay in a year, the plan's deductible and its out-of-pocket maximum are currently one number: reaching the deductible means the plan pays the whole of the covered in-network bill for the rest of the year.

It is a category, not a tier, and the distinction has consequences. The metal levels describe actuarial value, and a catastrophic plan is not one of them. 42 USC 18022(e) works by exception: a plan that provides none of the four levels is nonetheless treated as meeting the coverage requirement if it restricts enrollment to the eligible group and delivers the benefits described. 45 CFR 156.155(a)(1) adds that the plan must meet all applicable individual market requirements and be offered only in the individual market, so it cannot be sold as employer coverage, and 18022(e)(3) says the same thing at statute.

Two doors lead in, and the second is the one described wrongly. Under 45 CFR 156.155(a)(5), the plan covers only individuals who have not attained the age of 30 before the first day of the plan or policy year, or who have received a certificate of exemption for the reasons in section 1302(e)(2)(B)(i) or (ii) of the Affordable Care Act, which are the affordability and hardship exemptions from the individual mandate at IRC 5000A(e)(1) and 5000A(e)(5). HealthCare.gov's consumer summary compresses this into "you must be under 30 years old OR qualify for a 'hardship' or 'affordability' exemption if you're over 30." The statute and the regulation put no age condition on the exemption route. A 45-year-old holding the certificate is eligible on the same terms as a 22-year-old, and the certificate is what the rule turns on.

An exemption from a penalty of zero is still a gateway. The individual mandate's applicable dollar amount has been $0 since 2019, under IRC 5000A(c)(3)(A). The exemption certificates survived the penalty, and their remaining function is exactly this: the affordability and hardship certifications are how someone over 30 becomes eligible to buy a catastrophic plan. They are obtained through the Marketplace rather than on a tax return.

Household coverage is tested person by person. 45 CFR 156.155(d) provides that for other than self-only coverage, each individual enrolled must meet the eligibility conditions. A family cannot enroll on one member's eligibility, so a 28-year-old and a 33-year-old without an exemption cannot share the policy.

What it still covers before the deductible. The plan must provide the essential health benefits (18022(e)(1)(B)(i)), coverage for at least three primary care visits per year before the deductible is reached (45 CFR 156.155(a)(4)), and preventive services with no cost sharing at all, since 45 CFR 156.155(b) bars any copayment, coinsurance or deductible on them. Benefits delivered under the federal surprise-billing protections before the deductible do not break the design either (156.155(c)). Those requirements are what make a catastrophic plan real Affordable Care Act coverage rather than a limited product that resembles it.

The premium tax credit rule is the one to know before shopping. IRC 36B(c)(3)(A)(i) defines "qualified health plan" for premium tax credit purposes as the term is defined in the Affordable Care Act, "except that such term shall not include a qualified health plan which is a catastrophic plan described in section 1302(e) of such Act." So no premium tax credit can be applied to a catastrophic plan, at any income. That reverses the usual arithmetic: the lowest sticker premium on the Marketplace can be the highest net premium for someone eligible for a subsidy, because the subsidy attaches to the plans they did not look at. The comparison that matters is the net premium after the credit, not the gross.

Two dated changes are already in the regulation, from a rule published May 20, 2026 (91 FR 29874). For plan years beginning on or after January 1, 2027, 45 CFR 156.155(a)(6) permits a catastrophic plan to run a term of one plan year or of multiple consecutive plan years not exceeding 10 plan years, and a plan with a term of at least two consecutive years may use value-based insurance designs to provide some benefits before the deductible. For plan years beginning on or after January 1, 2028, 45 CFR 156.155(a)(3)(ii) raises the no-benefits threshold from the annual limitation on cost sharing to 130 percent of it, rounded down to the next lowest multiple of 50 dollars. That second change breaks the identity described above, and the regulation says so expressly: 45 CFR 156.130(a)(2) already carries an exception for §156.155(a)(3)(ii), so from that date a catastrophic plan's deductible is permitted to sit above the ceiling that otherwise caps cost sharing.

1. You establish eligibility. Either you have not turned 30 before the plan year starts, or you hold a Marketplace certificate of exemption for unaffordable coverage or hardship.

2. You buy in the individual market, on or off the Marketplace. No employer plan is a catastrophic plan, because the statute restricts the design to the individual market.

3. You get preventive care and at least three primary care visits before the deductible, with no cost sharing at all on the preventive services.

4. Everything else waits for the deductible, which is set equal to the year's annual limitation on cost sharing rather than chosen by the insurer.

5. Once you reach it, the plan pays the covered in-network bill, because the deductible and the cost-sharing ceiling are the same figure today.

6. You pay the full premium. No premium tax credit can be applied, so the monthly cost is the sticker price rather than a subsidized one.

A hypothetical, with round numbers standing in for the indexed ceiling. Suppose the year's annual limitation on cost sharing were $10,000. Rosalind's catastrophic plan therefore pays nothing toward covered care until she has spent $10,000, apart from preventive services and three primary care visits. In March she has an in-network procedure with an allowed amount of $14,000. She pays the first $10,000, the plan pays the remaining $4,000, and every covered in-network service for the rest of the year is paid in full, because the deductible she has just satisfied is also the ceiling on what she can be asked to pay. Under the 2028 change the same plan would pay nothing until she had spent 130 percent of that figure, or $13,000, so on the same $14,000 claim she would pay $13,000 and the plan $1,000. The dollar amounts here are illustrative; the real limitation is published annually by the Department of Health and Human Services.

Pros

• It is genuine Affordable Care Act coverage: the essential health benefits, free preventive care, no exclusion for pre-existing conditions, and a hard ceiling on what the enrollee can pay for covered in-network care.
• Reaching the deductible currently means the plan pays everything covered for the rest of the year, because the deductible equals the cost-sharing ceiling.
• Three primary care visits a year come before the deductible, so routine care is not entirely a cash proposition.
• Since 2026 a catastrophic plan available as individual coverage through an Exchange counts as a high deductible health plan, which opens a health savings account.

Cons

• No premium tax credit can be applied to it, so a subsidized bronze or silver plan is often cheaper in net terms for anyone eligible for the credit.
• Cost-sharing reductions, which attach only to silver plans, are unavailable for the same reason.
• Almost all care is paid in cash until the deductible is met, and that deductible is the largest number federal rules permit.
• Eligibility is checked for every person on the policy, so a household can be ineligible because of one member.
• From plan years beginning in 2028 the deductible rises to 130 percent of the cost-sharing ceiling, which ends the equality between the two and raises the amount an enrollee spends before any benefit is paid.