Typical Consumers

As noted before, catastrophic plans are not for everyone. The general category of user tends to be someone

watching their costs and who has limited financial resources.

However, don’t trust trends to tell you what health coverage to use. Considering a catastrophic insurance plan

requires you to be honest with yourself about your own health. Do you require certain prescriptions regularly? Do

you visit the doctor a lot or every time you have a fever? Are you prone to injuries and broken bones or pulled

muscles? Do you participate in an activity that is injury-prone such as motorcycle racing or playing rugby? If you’re

finding yourself saying “yes” then a catastrophic plan is probably not going to be the right approach for your

situation.

Should I Still Use a Health Savings Account (HSA)?

In a word, yes. The HSA is a government authorized, pre-tax account in which you can take pre-tax dollars and

spend them on health needs. It generally involves paying the cost up front on a cash flow basis and then being

reimbursed by the account. For those with a catastrophic insurance plan, the HSA account comes in very handy in

terms of addressing deductibles and up-front costs before coverage kicks in. And you get the benefit of using

dollars that would otherwise be lost to income taxes before being deposited in your regular bank account.

HSA account funds are allowed to be carried over from year to year. If not used at the end of the tax year, you can

continue to use the funds in following years for eligible out-of-pocket medical expenses only. There are allowances

for those over 65 for other expenses, but you will still owe income tax on funds removed for non-medical

expenses.

There are certain requirements to have coverage if you open an HSA account. The

Internal Revenue Service requires that the account holder have at least a catastrophic

health insurance plan in place with a deductible no lower than $1,150 for a single person

and $2,300 for an entire family. Account withdrawals are capped as well. The total

allowed to be taken out per year is $5,800 per person and $11,600 per family.  Those

who are 55 and older can take advantage of a catch-up provision in the HSA rules

allowing an additional $1,000 per year to be deposited. (source: U.S. Department of

Treasury, 2009. http://www.treas.gov/press/releases/hp975.htm ).

Who Offers Catastrophic Insurance that Works with HSAs?

Better known as high deductible health insurance plans, HSA-linked catastrophic plans can be obtained like other

insurance from most health insurance companies. Depending on the company, some may limit enrollment of those

applicants with specific pre-existing conditions or the coverage would limited to not address the pre-existing

condition.

Who is best suited for a Catastrophic Health Plan?