Under new federal guidance released in early September, starting with the 2026 plan year, more Americans will be eligible to buy catastrophic health insurance that features ultra-low premiums in exchange for ultra-high deductibles.
The Centers for Medicare and Medicaid Services (CMS) announced that it will loosen the rules that govern who qualifies for these low-premium, high-deductible plans ahead of the expiration of enhanced Affordable Care Act (ACA) subsidies at the end of 2025. Those subsidies have significantly reduced premiums for millions of people who buy coverage through HealthCare.gov and state marketplaces.
While many are expected to face much higher premiums in 2026, this change could soften the blow for people who are young with few health issues.
What the changes mean
Until now, catastrophic plans were only available to people under age 30 or those who qualified for a narrow set of hardship or affordability exemptions, such as homelessness, bankruptcy or being unable to afford the lowest-cost plan.
Beginning Nov. 1, 2025, when open enrollment starts, CMS will expand the hardship exemptions to cover more situations, including income-based affordability issues.
For example, people whose household income is too high to qualify for subsidies but who still find standard ACA plans unaffordable will now be able to apply for catastrophic coverage. Rising premiums can also be counted as a hardship under the new guidance.
In addition, adults 30 and older who are ineligible for subsidies due to income will also qualify more easily. This expands the hardship exemption without removing the age cap entirely.
Eligibility will be assessed directly through HealthCare.gov or state exchanges, which will review income and hardship criteria as part of the enrollment process. Consumers can also submit a paper application by mail.
Key features of catastrophic plans
Catastrophic plans are designed as financial protection against very high medical costs from accidents or serious illness. They come with lower monthly premiums than standard ACA plans but much higher deductibles.
Despite their limited scope, these plans still must comply with ACA requirements, including covering:
- All 10 essential health benefits, such as hospitalization, maternity care and prescription drugs.
- Three primary care visits per year before the deductible applies.
- Preventive services at no cost to the enrollee.
Enrollees should be aware that routine doctor visits, specialist care and most non-preventive services will be paid out of pocket until the deductible is met.
Also, buying a catastrophic plan satisfies the ACA’s individual mandate, which requires most Americans to have health coverage. While the federal tax penalty for not having insurance was eliminated in 2019, catastrophic coverage still counts as ACA-compliant insurance.
What consumers should consider
These low-premium catastrophic plans may be attractive to those who are generally healthy, want protection against major medical expenses and face steep costs for unsubsidized standard ACA plans in 2026.
However, these plans leave policyholders exposed to large out-of-pocket bills for anything short of a major medical event. For example, if you suffer a broken arm and treatment costs $4,500, most if not all of that would come out of your pocket.
Consumers weighing this option should carefully compare the premiums, deductibles and potential risks before deciding if catastrophic coverage is the right fit.
