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
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
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