US Expands Access to High-Deductible Health Plans

The U.S. government is expanding eligibility for high-deductible catastrophic health plans on the Affordable Care Act (ACA) marketplaces. This policy change is a response to the potential for significant insurance premium increases next year, as enhanced federal subsidies are scheduled to expire.

The move aims to offer a lower-premium option for individuals who may no longer qualify for financial assistance. However, these plans come with substantial out-of-pocket costs before most medical services are covered.

Addressing Potential Premium Spikes

Federal officials are taking steps to mitigate the impact of rising health insurance costs for millions of Americans. The core issue is the scheduled expiration of enhanced tax credits at the end of this year, which were implemented during the COVID-19 public health emergency to make ACA plans more affordable.

According to analysis from KFF, a health information nonprofit, the end of these subsidies could lead to an average 75% increase in the amount consumers pay for their monthly premiums. This has raised concerns among policymakers about affordability and coverage continuity.

In response, the Centers for Medicare & Medicaid Services (CMS) announced it will allow more people to enroll in catastrophic health plans. These plans are designed as a safety net against major medical events rather than for routine care.

"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," CMS Administrator Mehmet Oz stated.

What Are Catastrophic Health Plans?

Catastrophic plans are a specific tier of health insurance available on the ACA marketplace, historically limited to individuals under the age of 30 or those with specific hardship exemptions. They are characterized by low monthly premiums and extremely high deductibles.

Despite the high deductible, these plans do offer some first-dollar coverage. They cover three primary care visits per year and all federally mandated preventive services, such as certain cancer screenings and vaccinations, without the need to meet the deductible first.

Expanding Eligibility Criteria

Under the new guidance, CMS will grant a "hardship" designation to individuals who lose eligibility for ACA tax credits next year. This primarily affects people with household incomes above 400% of the federal poverty level, which is $62,600 for an individual or $106,600 for a family of three in the current year.

These individuals will automatically see catastrophic plans as an option on healthcare.gov. Another group—those who qualify for premium tax credits but not for cost-sharing reduction subsidies—may also be eligible, though they might need to submit additional paperwork.

Consumer Interest and Market Availability

Despite the administration's push, it remains uncertain whether these plans will attract a significant number of new enrollees. The high deductibles have historically made them an unpopular choice.

Government data shows that only about 54,000 of the 24 million people enrolled in ACA plans currently have catastrophic coverage. Louise Norris, a health insurance analyst, described the deductible as "a ton of money," which can be a major barrier for consumers.

"Uptake has always been quite low," said Katie Keith, director of the O'Neill Institute’s Center for Health Policy and the Law at Georgetown University. "It’s not a bad option if it is the only option you have. I question whether consumers are looking for this kind of coverage."

For example, a 25-year-old in Orlando, Florida, could choose from 61 different "bronze" plans this year but only three catastrophic plans. Bronze plans represent the next lowest-cost tier, with an average deductible of $7,186—still high, but significantly less than that of a catastrophic plan.

Legislative and Legal Challenges

The policy shift comes as Congress debates the future of ACA subsidies. A bipartisan group of House lawmakers has introduced a bill to extend the enhanced tax credits for one more year, pushing the issue past the 2026 midterm elections. However, the legislation's future is uncertain due to opposition from some Republicans concerned about the long-term cost, estimated at $335 billion over 10 years for a permanent extension.

AHIP, the health insurance industry's primary lobbying group, has strongly advocated for extending the subsidies. While not commenting directly on the catastrophic plan expansion, AHIP spokesperson Chris Bond said, "while catastrophic plans can provide important coverage for specific needs, they are not a replacement for affordable comprehensive coverage."

Separately, the administration is facing a legal challenge on other ACA rule changes. In late August, a federal judge in Maryland temporarily blocked new regulations that would have required additional verification paperwork for some enrollees. Opponents of the rule cited government estimates that the changes could cause up to 1.8 million people to lose their insurance in 2026. The administration is appealing the ruling, but the temporary pause is expected to remain in effect for the upcoming open enrollment period, which begins November 1.