New regulatory changes to catastrophic plans can make insurance more affordable for employers and employees, but there are important considerations.
There are two notable changes ahead for the ACA Marketplace: Catastrophic health plans will no longer have an age limit, and Health Savings Accounts (HSAs) can be used with catastrophic plans. This makes catastrophic plans an option that was previously out of reach for most employees, and it opens up new strategies for employers.
For employees buying coverage through an ICHRA, a modest employer allowance could cover 100% of their monthly premium and give them a worst-case medical safety net. However, while these ultra low premiums are tempting, the steep trade-off in deductibles means they aren't a universal fix.
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Jack's corner: CMS finalizes 2027 ACA changes
What is a catastrophic health plan
Low monthly payment, high deductible
A catastrophic plan is often thought of as emergency health insurance. It’s an alternative coverage that is designed for major medical events such as a serious accident or unexpected illness, but it doesn’t cover comprehensive day-to-day needs.
The hallmark of a catastrophic plan is low monthly payments and a high deductible. Before we dig into details of catastrophic plans, there are important things to know about changes for 2027.
Jump to catastrophic health plan affordability or pros and cons of catastrophic plans.
2027 ACA catastrophic plan changes affect age limit, HSAs
Age limit is removed for catastrophic plans
Modern-day catastrophic health plans were introduced as part of the Affordable Care Act and were first offered to consumers in 2014. A well-known component of the plans was the age limit: the plans were only available to adults under the age of 30.
In newly released regulations for 2027, CMS (which oversees state and federal insurance marketplaces) removed the 30-year-old age cap, so any adult can choose a catastrophic health plan.
This means adults older than 30 who are healthy, have relatively few medical appointments, and/or financially risk-tolerant have a new healthcare option.
HSAs will be allowed with a catastrophic plan
A Health Savings Account is a way for consumers to use pre-tax dollars to pay for qualified medical expenses such as doctor visits, prescriptions, and dental care.
When catastrophic plans were created, the IRS did not allow consumers to use them with an HSA. But the new legislation removed that restriction, and employees enrolled in a Marketplace catastrophic plan can now use it in conjunction with an HSA.
This creates an additional layer of benefit because employees can choose to use the money they save on low monthly premiums to fund their HSA, lowering their overall taxable income.
What has not changed with catastrophic plans
Some regulations for catastrophic plans have remained the same. These plans are still only available off-exchange, ineligible for premium tax credits, and carry lower premiums with higher deductibles and out-of-pocket costs.
Catastrophic health plan affordability and cost comparison
Preventative and primary care are always covered
There is one thing in particular that makes catastrophic plans an affordable option for people who only need minor medical care. With a catastrophic plan, insurance carriers are required to cover preventative care and primary care visits regardless of deductible payments:
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Preventive care: Annual check-ups, routine immunizations, and screenings are 100% free
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Primary care visits: Patients are allowed at least three primary care visits per year with just a copay
Marketplace plan cost comparison
People in qualifying income brackets can get health insurance tax credits for Bronze or Silver plans, reducing their out-of-pocket monthly premium. However, subsidies cannot be applied to catastrophic plans. The costs shown below are national averages of unsubsidized costs for an individual.
| Plan Tier | Average Monthly Premium | Average Individual Deductible |
| Catastrophic | ~$350-$380 | $10,600 (the legal limit) |
| Bronze | ~$456 | $7,476 |
| Silver | ~$625 | $5,304 |
| Gold | ~$510-$650+ | $1,500–$1,700 |
Pros and cons of a catastrophic health plan
There are benefits to unconventional health insurance, but the downside is a much higher deductible.
The headline of a catastrophic plan is this: You pay very little month-to-month, but you take on significant financial risk.
| Pros of a catastrophic health plan | Cons of a catastrophic health plan |
| Low monthly premium | High deductible |
| A less expensive option for people who are healthy and rarely have medical needs | A costly option for people with a chronic illness or who go to the doctor frequently |
| Once the deductible is reached, all costs shift to the insurance company | Subsidies cannot be used |
| An appealing choice if someone only wants coverage for a major, unexpected medical event | A potentially hazardous option if someone is planning a major medical event such as having a baby |
| Could be a good option if someone has enough savings to cover the deductible | Could cause great financial hardship if someone doesn’t have enough to cover the deductible |
| A good fit for people who have high risk tolerance (they’re comfortable with the possibility of having to meet the deductible) | A poor fit for those who have low risk tolerance (the thought of having to meet a deductible worries them) |
How catastrophic plans work with ICHRA
The structure of an ICHRA can be broken down into three parts: 1) an employer determines a monthly contribution amount for employee health benefits, 2) the employees buy their health plan from the ACA or state marketplace, and 3) the employer reimburses the employee for qualified medical expenses. Essentially, ICHRA is the channel through which employees buy their Marketplace health plan.
ICHRA is the channel through which employees buy their Marketplace health plan.
Step two is where catastrophic plans come in. When employees buy a Marketplace plan through ICHRA, their options are defined by federal and state regulations. Since the new regulations open up catastrophic plans to any adult, that eligibility applies to all Marketplace plans, including those purchased through ICHRA.
Who is a good fit for a catastrophic plan under ICHRA
Take Command is an ICHRA administrator, not an employee health plan advisor. However, there is general agreement on the type of person that could benefit from a catastrophic plan. Since ICHRA is a channel and the plan itself still comes from the Marketplace, there is no change in fit depending on where the employee gets the plan.
A catastrophic plan could be good for someone who is:
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Healthy and needs minor healthcare or doctor visits
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Has enough savings to cover the deductible should it be needed
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Comfortable with financial risk
- Wants to leverage the tax advantages of an HSA
How to get a catastrophic health plan
Employees enroll in a catastrophic plan the same way that they enroll in a Bronze, Silver, or Gold plan. Once their employer implements ICHRA, the employee buys their plan through the Marketplace. The enrollment deadline for an employee depends on where they live. ACA open enrollment timelines differ by state, so it’s important to check the dates.
When selecting business insurance, it’s helpful for employers to start evaluating the pros and cons early. It can take time to learn about ICHRA as a health benefit, and getting ahead of the learning curve yields results that are well worth the effort.
For brokers
As open enrollment gets closer, brokers will need to understand the changes to catastrophic plan regulations. At Take Command, we're here to guide you and help you understand when a catastrophic plan is a great fit for your clients.
Want to brush up on ICHRA? Read ICHRA for brokers and what brokers wish they knew before their first ICHRA.
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I wrote this blog to help people make smart health insurance decisions. I am a small business owner, a husband, and a dad to three boys, so I've seen firsthand how important understanding insurance decisions can be. As a co-founder of Take Command Health and a licensed health professional, I've been recognized as a leading expert on healthcare transparency and defined contribution arrangements (QSEHRA). I've been featured in the New York Times, Wall Street Journal, Dallas Morning News, Forbes and others. Learn more about me and connect with me on our about us page. Thanks!
