Reform Alert - News from the Blues' Office of National Health Reform

CMS Issues Proposed Rule: Catastrophic Plans

December 21, 2012

On November 20, 2012, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule regarding catastrophic plans. Comments are due December 26.  

What is a catastrophic health plan?

As defined in the ACA, a catastrophic plan covers essential health benefits, but only after out-of-pocket cost sharing reaches a high deductible that will match the level of the ACA’s required out-of-pocket maximum. In 2014, it is anticipated that threshold will be $6,400 for self-only coverage and $12,800 for family coverage.

What are health reform requirements for catastrophic health plans?

In 2014 catastrophic plans can be offered both on and off the Exchange in 2014.  Actuarial value metal level requirements do not apply to catastrophic plans. 

Who is eligible for catastrophic plans?

Catastrophic plans may only be offered to individuals who:

  • are under age 30 before the plan year begins, OR
  • Have received a certification from an Exchange that they are exempt from the individual mandate because they do not have an affordable coverage option or because they qualify for a hardship exemption

How is affordable coverage defined?

Coverage is considered unaffordable for individuals if their cost of coverage exceeds 8 percent of annual household income.

  • If an individual is eligible for employer coverage, affordability is determined by comparing the “employee share” of the premium cost of self-only coverage for the employer’s cheapest coverage option that achieves minimum value (i.e., 60% actuarial value) to the taxpayer’s household income.
  • If the individual is not eligible for employer coverage, affordability is determined by comparing to household income the lowest cost bronze plan (taking into consideration any applicable federal premium subsidies) offered in the Exchange where the individual would purchase coverage.

Can families purchase catastrophic plans?

Yes, but only if each individual enrolled in the coverage meets the eligibility requirements for enrollment in a catastrophic plan.

Will deductibles apply to catastrophic plans?

Catastrophic plans will have a deductible equal to the ACA’s required maximum out-of-pocket levels, as described above.

However, deductibles will not apply to required preventive services or to at least three primary care visits.

Are catastrophic plans eligible for premium tax credits?

No, individuals purchasing catastrophic plans are not eligible for premium tax credits.

What will catastrophic plans cover?

Catastrophic plans will provide coverage for essential health benefits after the member pays for cost sharing equal to  maximum out-of-pocket limits.  

Where can I find more information?

More information can be found in the  Health Insurance Market Rules proposed rule (as published in Federal Register on November 26, 2012).

The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.

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