Is Catastrophic Health Insurance Good for Young Adults

If you are new to the world of insurance, it can be overwhelming to try and decide which health care coverage is best for you.  Should you pay a higher premium for a plan design with low deductibles and out of pocket limits, or you should you take a chance at high out of pocket expenses in return of lower monthly insurance premiums?  When you are looking at your options, you may have run across catastrophic health insurance.  But what does that mean, and is it right for a young person?

What is Catastrophic Health Insurance?

Catastrophic health insurance is an insurance policy which pays benefits only after the policyholder has paid a significant out of pocket expense.  Many times, a catastrophic medical insurance plan does not cover smaller, less urgent claims such as doctors visits.

There is not a dollar definition of catastrophic, but many times, people think of deductibles of around $10,000 as a catastrophic health insurance plan.  So basically, it would require a catastrophe for the plan to pay any benefits.

What is the Allure of a Catastrophic Health Insurance?

Every insurance plan, whether home, auto, medical, etc. is priced according to expected financial loss.  The more an insurance company expects to pay out in claims, the larger the premium for the policy.  Hence, a medical plan with a low deductible is going to cost more than a medical plan with a large deductible.

What that means is that, all else being equal, a health insurance plan with a very large deductible will cost much less than a plan with a low deductible.  If someone is looking for an inexpensive medical insurance plan and is willing to take on the risk of significant out of pocket cost, then a catastrophic health insurance plan is something to think about.

Should a Young Adult Consider Catastrophic Health Insurance?

Whether to buy a catastrophic plan depends on the risk the individual is willing to take.  With a lower deductible, you are guaranteed to pay higher monthly premiums for your plan, while the amount of out of pocket expense is unknown, but will not be extremely large.  With a very high deductible, however, the premiums are guaranteed to be low, but the out of pocket exposure is very large.

You have to think about your own risk tolerance and what you would be able to afford in the event of a major illness or accident.

Is Catastrophic Health Insurance Available Through Work?

Beginning in 2014, the Patient Protection and Affordable Care Act (PPACA), or Obamacare as many people know it, requires that employer offer coverage with a maximum amount of out of pocket expense or else pay a fine.  Therefore, while the limits are still high for many people, it would be hard to classify the plans as catastrophic.

Don’t Forget PPACA Requirements

PPACA requires that individuals have a suitable amount of medical insurance coverage or else pay a tax.  If you are considering a catastrophic health insurance plan, make sure that your plan meets the minimum benefit coverage requirements.

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How to Find the Best Health Insurance for Young People

When you are looking for a medical insurance plan for the first time, something that will be top of mind is how to find the best health insurance available.  There are so many companies and benefits available, how do you know which are good and which are bad.  Fortunately, there are several ways to go about finding the right plan for you.  Some methods have been around for a long time, while some are new to the insurance market.

Visit Insurance Company Websites

The first place many people look when trying to find the best health insurance are the websites of the various insurance companies that offer individual plans.  On the websites, you can fill out an application and look for medical plans with benefit designs that fit your needs.  Once you do this on the websites of several companies you can compare the benefits and premiums that are available to you.

The downside of looking for health insurance this way is that it can be complicated to do your own comparison, especially if you are new to the world of insurance.  By the time you combine all the plans from different companies, you are going to have a whole lot of plans to look at.

However, by doing your own research to find the best health insurance you will have the full scope of options available to you.

Visit Your State’s Health Insurance Exchange

The Patient Protection and Affordable Care Act (PPACA), or Obamacare as many people know it, created insurance exchanges, or marketplaces, run by each state, where people can go online and easily compare plans and premiums available to them.  If questions arise, there are customer service associates, called navigators, ready to assist.

If the exchanges are running efficiently, they can be a terrific way to find the best health insurance available to you.  The process is simple and more user friendly since everything is at a one stop shop.

Insurance companies are not required to participate in the exchanges.  In addition, if they participate, they are not required to participate in every state.  So if you look for medical insurance on the exchanges, your options of insurance companies will be more limited than if you did the work on your own.

If your state does not have an online marketplace, you can use the federal exchange.

Consult a Health Insurance Broker

A health insurance broker can bring a lot of value to your search for the best health insurance around.  Brokers know the local insurance market and can do all the legwork for you.  They can help you assess your needs, both financially and medically, and suggest plans that best fit your lifestyle and budget.

Brokers will do the plan comparison, but are much more efficient than an insurance beginner.  The commission a broker receives is built into the premium, so there is no direct payment from you.

Check Your Employer’s Health Insurance Plan

If your employer has a health insurance plan, then the best health insurance might be under your nose.  PPACA sets limits on the out of pocket expenses that a group plan can have, and since most employers subsidize the insurance premium, you can usually find your best options at work.

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Best Ways for Young Adults to Buy Health Insurance

With the Patient Protection and Affordable Care Act’s (PPACA or Obamacare as many know it) requirement that all Americans purchase medical insurance or face a tax, there are many people that are looking to buy health insurance for the first time ever.  But where to start, and how to get a good plan that fits your needs and financial budget?  Fortunately, there are several places to look, and before long you will find a plan that is close to what you are looking for.

Employer Plans

If your employer allows you to buy health insurance, it can be very advantageous to be covered by that plan.  Employers usually subsidize a portion of the employee’s premium.  Because of this, you can usually purchase a plan cheaper through your employer than on your own in the individual market.

Of course, you have less control over the plans offered by your employer.  You must accept the insurance company and medical plan chosen by the company, and you are stuck with the premiums that the group is charged.

However, there is less hassle with just signing up for an employer plan.  If you are happy with the plan and the cost, go ahead and get covered through your job.

Health Insurance Exchanges

If you are not offered coverage through work, you can buy health insurance through the exchanges set up through PPACA.  The exchanges are online marketplaces that display plans available to you and the premiums for the plans.  Not all insurance companies participate in the exchanges, and there are a limited amount of plan designs available, but the marketplaces help you to easily compare plans.

In addition, if you buy health insurance through an exchange, you might be eligible for a tax credit to help offset the cost of the plan.  The exchange will calculate your subsidy when you buy the plan, but as a guide, you can receive assistance if you earn less than 400% of the poverty level, which is adjusted each year.

The Individual Marketplaces

The online marketplaces are not the only way you can buy health insurance outside of your employer.  If the exchanges do not offer you good options, you can always go look for a good medical plan on your own.  There are many insurance companies that offer all sorts of plan designs.  Shopping on your own requires some work and research, but if you have a few hours available, you can get the job done.

If you want to go this route to buy health insurance, but don’t have the time to commit to the project, you can hire a broker to do the work for you.  They will charge a small commission, but they are generally worth the money.

Medicaid

If affordable health insurance is difficult for you to come across, Medicaid may be the answer.  Medicaid is a way for low income earners to receive assistance in paying for health care services.  Medicaid is administered by the states, and eligibility varies by state, so if you think you may fall in this bucket, contact your state’s Medicaid office.

Only you know the goals that you have when you buy health insurance.  If you have an idea of how much you would like to spend on monthly premiums and how much risk you are willing to take in out of pocket expenses, you can find the right plan for you.

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