Late yesterday the Obama administration announced that the millions of Americans who had their previous health insurance policies cancelled because they didn’t offer all the benefits required under Obamacare would be exempt from having to pay the tax for being uninsured, and would also be eligible to purchase what are known as ‘catastrophic’ health insurance plans.
Fans and foes of Obamacare are both weighing in with their take on this, and if you’re interested in hearing these opinions a quick glance at any news site will provide no shortage of commentary. I thought I’d offer something a little different, and talk about these catastrophic plans and how most people in them will be self-pay patients for most of their care.
Catastrophic health insurance plans were designed primarily for young people, with the idea being that the premiums would be more affordable but they would offer less coverage than the Bronze, Silver, Gold, and Platinum plans available on Obamacare’ exchanges. In fact, except for people given ‘hardship’ exemptions from Obamacare’s mandate to purchase insurance, only people who are under age 30 are able to purchase these plans.
The key feature of catastrophic plans is that they have a $6,350 deductible, pay for three primary care visits each year, and cover a variety of ‘preventive’ care such as immunizations. Other than that, people with catastrophic plans have to pay out of pocket for all other medical care until they meet the deductible, meaning most of them will be self-pay patients for all of their healthcare treatments.
In some regards the catastrophic plans aren’t all that different than the Bronze level plans available under Obamacare, most of which have deductibles in the $5,000 to $6,000 range and also cover three primary care visits and preventive care. Bronze plans may also have co-pays or co-insurance for some other services under the deductible.
The key difference is that because catastrophic plans were intended primarily to be filed with relatively young, healthy people, the premiums are fairly low compared to other options. I went to Healthcare.gov and checked out what premiums would be for a 29-year old seeking coverage in Fairfax, Virginia. The two least expensive options were both catastrophic plans, for $133 and $138 a month. The least expensive Bronze plan was $154 a month, with a $6,000 deductible.
I also checked out a few other areas where I’ve lived in the past. In Madison County, Iowa, catastrophic plans for a 29-year old start at $89 a month, compared to $131 a month for the least expensive Bronze plan with a $6,300 deductible. In Lincoln County, Oregon, catastrophic coverage is available for $131.86 compared to $145 a month for a Bronze plan with a $5,000 deductible.
So if you’re eligible for catastrophic coverage and aren’t sold on the idea of opting out of Obamacare and getting some alternative form of coverage, a catastrophic plan might be your best option. A few things to keep in mind, however:
- Normally, pairing a health savings account (HSA) with a high-deductible, catastrophic-type of health plan is a great idea. Unfortunately, I didn’t see any catastrophic plans that are compatible with HSAs. I checked several states and did not find a single catastrophic plan that would allow people to put money into an HSA.
- If you were counting on tax credits through the Obamacare exchanges to help pay premiums, there are no credits available to those purchasing catastrophic coverage, only Bronze, Silver, Gold, and Platinum plans.
- Many, but not all, of the catastrophic plans I saw were HMOs, which tend to have the narrowest networks of all, meaning finding a provider who will take your insurance in the event you go through the deductible can be a problem.
Finally, two pieces of advice for the people who may be going from relatively generous comprehensive coverage to a catastrophic coverage plan.
First, while The Self-Pay Patient blog and book (available in e-book format on Amazon.com and Barnes & Noble at the moment, in paperback soon) most often describes and discusses things in the context of those without conventional health insurance, most of the providers, companies, web sites, and organizations featured here and in the book are just as beneficial to people with high-deductible or catastrophic plans. Bookmark the blog, and buy the book! It will be well worth your time and money.
Second, when seeing a doctor or having a procedure done, consider NOT letting the provider know that you have insurance. It can save you money.
This might seem odd, given that one of the benefits of insurance is supposed to be access to ‘negotiated’ rates that are typically lower than the ‘list’ price that is usually given to self-pay patients. But as readers of The Self-Pay Patient know, paying cash for treatment can often mean lower prices, at least if you shop for care.
Suppose someone with a catastrophic health plan needs a hernia repair surgery. I went to the web site Healthcare Blue Book to see what insurers are paying for laparoscopic hernia repair, and found that nationally the average is about $5,500. This is what someone giving their insurance card would pay for the procedure, because once you give a doctor or facility your insurance card, they are required to charge you that price.
However, if you go to the web site of the Surgery Center of Oklahoma, you’ll find that they offer hernia repair surgery for prices between $3,060 and $4,500. Depending on how friendly the local surgeon and hospital are to self-pay patients, it’s entirely possible that simply telling the doctor and hospital that you’ll be paying cash for your procedure and asking for a discount will get you a better price than if you give them your insurance card! If they don’t, plane fare to Oklahoma is probably less than the difference between the ‘negotiated’ rate and the cash price at Surgery Center of Oklahoma, or you might find a closer surgeon and facility using a web site like MediBid.
The drawback is that all or some of the cash price paid by you might not count towards the deductible. For most people that isn’t going to be too much of a problem, because they’re not going to get anywhere near their deductible.
The decision by the Obama administration to give ‘hardship’ exemptions to people having their existing plans cancelled, allowing them to purchase catastrophic health plans or avoid having to pay the tax for being uninsured, will almost certainly increase the number of Americans that are self-pay for some or all of their healthcare. This could lead to significant savings for many of them, especially if they understand how to get the most value for their healthcare dollars as a self-pay patient.