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The Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) have revealed that access to catastrophic health coverage will be expanded from November 1 this year.
The announcement comes ahead of the projected soar in health insurance premiums for the 2026 plan year, as enhanced tax credits for Affordable Care Act (ACA)-compliant plans are set to expire.
Newsweek has contacted HHS and CMS via email for comment.
Why It Matters
Catastrophic health coverage plans are designed to protect consumers from very high medical costs in the event of serious illness or injury while having lower monthly premiums.
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What To Know
Those who qualify for catastrophic health coverage are those facing “hardship,” such as when “an individual becomes ineligible for taxpayer-subsidized low premiums due to the expiration of these subsidies at the end of this year,” Ge Bai, a professor of health policy and management at Johns Hopkins Bloomberg School of Public Health, Maryland, told Newsweek.
Hardships are usually evaluated based on an individual’s projected annual household income, Bai added.
These hardship exemptions may also recognize circumstances like “homelessness, eviction or foreclosure, natural disasters, bankruptcy, medical debt, or job-based coverage being unaffordable,” Kosali Simon, a professor and associate vice provost for health sciences at Indiana University Bloomington, told Newsweek.
Previously, those under 30 were eligible for these catastrophe plans, but now those who are no longer eligible for advance payments of the premium tax credit (APTC) or cost-sharing reductions (CSRs) due to their projected annual income being either below 100 percent or above 400 percent of the federal poverty level will be eligible for a hardship exemption and can enroll in catastrophic coverage.
In a press release, CMS said it also “plans to begin streamlining this process for consumers ineligible for APTC due to income and expand to consumers who are over 250 percent of the [federal poverty level] and are only ineligible for CSRs.”
The policy likely means it “will become easier as a process and the what qualifies you for an exemption will be broadened,” Simon added.
The new guidance applies to consumers in Federally-facilitated Exchange (FFE) states and those participating State-based Exchanges (SBEs). States participating in SBEs include: California, Colorado, Connecticut, Georgia, Idaho, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Vermont, Virginia and Washington. States participating in SBE’s on the Federal platform include: Arkansas, Illinois and Oregon.
In terms of how effective the policy will be, Mark Pauly, a professor of health care management at Wharton School of the University of Pennsylvania, told Newsweek that “it depends on how strictly the rules are enforced.”
He said this is “really a string and tape solution to covering people who fall below the income threshold for exchange subsidies.”
Catastrophic coverage only begins after a very large deductible, meaning it is “really designed for someone who has access to a large amount of financial assets or credit, and could cover about $9,000 in healthcare spending as an individual or $18,000 as a family,” Keith Ericson, professor and department chair of markets, public policy and law at Boston University Questrom School of Business, told Newsweek.
“This is not an effective strategy for getting low-income Americans access to healthcare because low-income families will have a lot of trouble coming up with an $18,000 deductible,” he added.
What People Are Saying
Secretary of HHS Robert F. Kennedy, Jr. said in a statement: “Catastrophic coverage offers affordable health insurance for younger Americans and those facing hardship to have security when they need it most. Expanding access to catastrophic coverage is another step in making health insurance more affordable, building on the progress made since the passage of President Trump’s One Big Beautiful Bill.”
CMS Administrator Dr. Mehmet Oz said in a statement: “President Trump promised to give Americans real choices in health care, and today we are delivering on that promise. By expanding access to catastrophic plans, we are making sure hardworking people who face unexpected hardships can get affordable coverage that protects them from devastating medical costs. This change reflects our commitment to lowering costs, strengthening program integrity, and ensuring every American has a pathway to coverage that fits their needs without burdening taxpayers.”
Ge Bai, a professor of health policy and management at Johns Hopkins Bloomberg School of Public Health, told Newsweek: “This policy expands access to affordable insurance coverage for low-income Americans and represents a paradigm shift in federal insurance regulation, that is, allowing a variety of plans to meet diversified patient needs. Since most non-senior Americans use relatively little healthcare each year, many will find these plans suitable: low monthly premiums combined with the ability to save directly on out-of-pocket costs by choosing low-cost care options and engaging in health-enhancing activities.”
Kosali Simon, a professor and associate vice provost for health sciences at Indiana University Bloomington, told Newsweek: “This expansion may increase access and reduce the number of completely uninsured people, since catastrophic plans offer lower premiums and protect against worst-case medical bills. However, catastrophic plans do not qualify for subsidies or cost-sharing reductions, and premiums are still going to seem affordable to many. This means they are better suited to protecting against catastrophic costs than meeting the ongoing health needs of middle-income individuals.”
Keith Ericson, professor and department chair of markets, public policy and law at Boston University Questrom School of Business, also told Newsweek: “This policy might contribute to the destabilization of the health insurance exchange market. Risk adjustment is an important stabilizer for the insurance market. Catastrophic health plans, however, don’t contribute to the standard risk adjustment pool. As a result, if healthier people move into catastrophic plans, leaving the sicker people behind, premiums could rise in the rest of the market. In this case, the policy would harm affordability for the metal tier plans purchased by the typical individual.”
Coleman Drake, a professor in the Department of Health Policy and Management at the University of Pittsburgh, told Newsweek: “Those that do switch to catastrophic plans will do so because those plans have lower premiums and, in that sense, they will have access to more affordable coverage, though not more protection from healthcare costs nor affordable access to healthcare. Aside from their annual check-ups, enrollees in catastrophic plans have to pay for all of their healthcare until they hit their deductibles. Prior research has shown that when people are faced with large out-of-pocket costs, they broadly cut back on all forms of healthcare, regardless of how important it is for their health. In that sense, I worry that transitioning people to catastrophic coverage will worsen their health.”
What Happens Next
Starting from November 1, Americans in FFE states, or those participating in SBEs, can apply for health coverage with financial assistance through HealthCare.gov.
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