CMS broadens access to catastrophic plans

Enrollees of any age will be able to purchase catastrophic individual healthcare coverage, under new guidance from CMS, provided they meet certain income criteria.

The plans, which feature the lowest premiums and highest out-of-pocket cost, were previously limited to enrollees younger than 30. Now they will be available to consumers of any age who are ineligible for advance payments of the premium tax credit (APTC) and cost-sharing reductions (CSRs), if they receive a hardship exemption.

“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 [OBBBA],” HHS Secretary Robert F. Kennedy, Jr. said in a press release.

CMS said catastrophic plans provide comprehensive coverage designed to provide financial protection against serious illness or injury that could result in devastating medical expenses. The plans cover standard ACA coverage for preventive services without cost-sharing requirements. 

“Catastrophic coverage may present an affordable coverage option for consumers who are ineligible for APTC or CSRs due to their projected annual household income, and may protect against worst-case scenarios, like getting seriously sick or injured,” said a fact sheet.

Streamlined process

The rule changes for individual coverage were positive, according to some advocates for individual coverage options.

“It acknowledges the need to create more pathways for people to have access to good quality, affordable health insurance,” said Robin Paoli, executive director of The HRA Council, which represents employers and vendors offering health reimbursement arrangements (HRAs).

An estimated one million workers have used HRAs to buy ACA coverage but, so far, relatively few have selected catastrophic coverage, she said.

During the open enrollment period for 2025 coverage, only 54,109 enrolled in catastrophic plans, out of more than 24 million exchange enrollees nationwide, according to a healthinsurance.org analysis of CMS files.

Their unpopularity was due to the age restriction, the plans’ ineligibility for subsidies, and the fact that they don’t appear as options for enrollees older than 30, according to the analysis. A previous hardship exemption process for older enrollees to buy the plans “isn’t necessarily easy or seamless even with assistance,” the analysis said.

The CMS factsheet said it is “simplifying the [hardship exemption] process by streamlining the review of paper applications to reduce the administrative burden on consumers. This change will make it easier for individuals experiencing hardship and seeking a catastrophic plan to access the full range of catastrophic coverage options available to them.”

If COVID-era subsidies expire as scheduled at the end of 2025 “affordability exemptions from the coverage mandate will be important in 2026 and future years,” said the analysis.

Molly Smith, a vice president for the American Hospital Association, said in an email that her organization welcomed the “effort to expand more affordable access to catastrophic coverage to address those individuals who may not qualify for assistance. We continue to urge Congress to extend the enhanced premium tax credits to alleviate disruptions in coverage should they expire.”

AHIP was more cautious on the expansion of access to catastrophic plans.

“While catastrophic plans can provide important coverage for specific needs, they are not a replacement for affordable comprehensive coverage,” an AHIP spokesperson said in an email. “Enhanced premium tax credits have helped millions of Americans access affordable, high-quality health coverage through the individual market. Congress must act as quickly as possible to extend the tax credits before they expire and protect these Americans from skyrocketing cost increases that will cause many to lose coverage altogether.”

Ge Bai, a professor at the Johns Hopkins Bloomberg School of Public Health, who studies health coverage and who Trump administration officials have praised for policy ideas, anticipated more uptake of the plans.

“ACA regulatory constraints have made health plans inherently unaffordable,” Bai said in an email. “The expiration of taxpayer subsidies will end the illusion of perceived affordability. As a result, more people will adopt affordable catastrophic plans or non-ACA plans.”

How they stack up

Catastrophic plans have lower premiums than other types of ACA-compliant coverage. Average 2025 premiums for ACA plans for a 40-year-old man, according to a ValuePenguin analysis include:

• $361 for catastrophic coverage
• $488 for Bronze coverage
• $621 for Silver coverage
• $676 for Gold coverage
• $913 for Platinum coverage

The catch is catastrophic plans have higher deductibles.

Average deductibles for ACA-compliant 2025 coverage, according to an eHealth analysis, were:

• $9,450 for catastrophic coverage
• $7,400 for Bronze coverage
• $5,300 for Silver coverage
• $1,500 For Gold coverage
• $500-$1,000 for Platinum coverage

However, the recently enacted OBBBA allows buyers of catastrophic coverage to qualify for a health savings account (HSA), which may allow enrollees to cover some or all of their deductible with pre-tax dollars.

The HSA approach may especially appeal to older, higher income buyers, who long complained coverage was too expensive to afford.

For instance, a MoneyGeek analysis found of average ACA coverage costs for pre-Medicare-age seniors (monthly premiums/out of pocket maximums) included:

• $726/$9,450 for Catastrophic
• $946/$9,356 for Bronze
• $1,231/$5,186 for Silver
• $1,304/$7,576 for Gold
• $1.925/$,2441 for Platinum

For instance, that means Bronze plans were 14% more expensive than catastrophic plans, based on 12 months of premiums and total out-of-pocket costs.

Bai anticipated that the catastrophic plan rule change would make more employers open to offering workers low-premium plans paired with HSA contributions.  

Subsidy cliff

The new coverage option for ACA enrollees comes ahead of the expected expiration at the end of 2025 of COVID-era extra subsidies for ACA enrollees.

In response to the COVID-19 pandemic, in 2021, Congress passed additional subsidies for ACA marketplace enrollees for two years and then extended them until the end of 2025. Republican congressional leaders have indicated they do not plan to extend them.

Extending the subsidies would cost $23 billion next year and $335 billion for the next 10 years, according to Congressional Budget Office (CBO) projections. CBO estimated 2.2 million of the current 25 million enrollees could droptheir health insurance in 2026 if the subsidies expire and go as high as 3.8 million without insurance in later years.

Republican leaders’ general opposition to extending the extra subsidies has led many to assume they would expire at the end of the year. However, hospital advocates remain optimistic Congress will choose to extend extra individual marketplace subsidies.

The latest regulatory change to the individual market may aim to create more coverage options and lessen political pressure on Congress to renew the subsidies.

Brian Blase, president of Paragon Health Institute and a healthcare policy adviser in the first Trump administration, criticized the COVID-era ACA marketplace subsidies for driving enrollment fraud. However, he said in an interview that he was not certain Congress would reject them.