Should You Have Catastrophic Health Insurance?

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Catastrophic coverage is a good add-on or alternative to traditional health insurance. It can protect you and your family so that medical emergencies don’t become financial emergencies.

Protection against the unexpected

It is a surprise to some Canadians that a sudden accident, catastrophic illness or rare and chronic condition can result in out-of-pocket drug treatment costs that can be difficult to overcome. Not all medically necessary drugs are paid for by provincial healthcare plans or offset by assistance programs.

Furthermore, only some of the costs may be tax deductible. Consider these examples:

  • Special cancer treatment drugs can cost more than $25,000 a year and a treatment plan may prescribe oral medication instead of therapy delivered via IV in hospital, which is not covered in all provinces
  • Anti-rejection drugs for organ transplant procedures may not be covered
  • A car accident can result in six months of physiotherapy and registered nursing services, which can easily cost $40,000
  • Medications for chronic conditions like rheumatoid arthritis, Crohn’s Disease or emphysema can be expensive and ongoing for years

Today, treatment for patients is increasingly moving to the home rather than the hospital and as a result even more of the costs of prescription drugs used to treat illnesses are shifting to individual Canadians.

Unfortunately, serious health issues can result in a huge financial burden. It is possible to get into financial trouble due to drug or support costs that must be paid for out of pocket.

What if you already have health insurance?

The costs of catastrophic healthcare and prescription drugs can be more than traditional health insurance plan maximums. That’s why Catastrophic Health Insurance can make sense as cost-effective protection.

If a serious accident or illness strikes you or a member of your family, the last thing you will want is for your financial well-being to be threatened too. Dealing with illness can be an emotional and psychological strain which would be compounded if there is also a strain on your bank account to pay thousands of dollars for medication.

Where would you find the money? Would you be willing to remortgage your home to free up some cash? Use your retirement savings for a drug that could save a life? Max out your credit card to buy more treatments? Or even worse, decline treatment to protect your family’s finances?

How does Catastrophic Health Insurance work?

Catastrophic Health Insurance is an emergency back-up fund for when prescription drug costs get out of hand. It provides protection against expenses that may not be covered by your government health insurance plan and it may extend the protection of an existing health plan to cover you more completely in a medical crisis.


For example, if you choose the $4,500 threshold option, once you’ve paid $4,500 for qualifying prescription drugs in a single year, you’ll receive 100% coverage for any subsequent claims made that year above and beyond that amount. You can reach your threshold by claiming expenses you’ve paid for out of pocket, as well as expenses claimed under an existing health plan.

Catastrophic coverage is a health insurance product available from Manulife. It can be added to a core health insurance plan or it can be purchased as a standalone benefit. The cost of Catastrophic Health Insurance is typically less than a dollar a day.

There are also two levels of deductibles: $4,500 and $10,200. Once your coverage is in force, all you have to do is regularly submit any receipts that qualify for coverage. These costs are paid by you or by your existing health insurance plan before the catastrophic benefits start. Once the total of your claims reaches the deductible threshold of your chosen plan, you will start to receive benefits under your catastrophic coverage.

Once the drug deductible is satisfied each year, the plan provides unlimited 100% coverage for all qualifying annual prescription drug expenses for an insured person.  And, when a $7,500 per person per year deductible is met for homecare and nursing, prosthetic appliances, and durable medical equipment, the plan will reimburse an additional $25,000 in coverage for those expenses up to a lifetime maximum of $100,000.

If an insured person ends up in the hospital for more than 24 hours as a result of an accident, catastrophic coverage will provide unlimited chiropractor and physiotherapist benefits for one full year following that accident.

Is catastrophic coverage right for you?

The primary factor to consider is your health and your tolerance for financial risk. People who are very healthy and confident they will not get sick or injured may feel a catastrophic plan is the best option.

For instance, if you’re rarely sick and can easily manage the ‘high deductible,’ then you may want to balance the risks and rewards of this plan over traditional health insurance that covers day-to-day costs of the regular, routine types of medical expenses, such as teeth cleaning, prescription drugs and new eyeglasses — not a catastrophic medical issue.

The key difference is the deductible. It’s important to remember, if you break a leg, get in a car accident or are diagnosed with a major illness, the Catastrophic Health Insurance plan will not cover any costs until you reach the deductible threshold of your plan ($4,500 or $10,200). That number is your out-of-pocket deductible every year (for you and if covered, each member of your family).

Catastrophic coverage can serve as a financial cushion if:

  • you have a group plan and would like 100% drug coverage (after the yearly threshold has been met)
  • you’re concerned about high healthcare costs that may result from an accident or illness and want a “safety net” in place
  • you have critical illness (CI) protection in place and you do not want to use all of your CI benefit for drug costs.

If you are in good health, take few regular prescriptions and are under 65 years of age, this coverage may be right for you.


A smart option for small business

If you’re self-employed or own a small business, a portion of your Catastrophic Health Insurance premiums may be deductible as an expense for your business and may also be a non-taxable benefit to your employees (except in Quebec). Please consult your financial advisor or the Canada Revenue Agency for details.

Interested in extra protection against the unexpected?

Catastrophic coverage is an affordable way to protect you and your loved ones from high prescription drug costs resulting from an illness or accident. Let us help you decide. Think about what your probable healthcare needs are and how much financial risk you can tolerate before making any health insurance decision. When you start looking for a health insurance plan, simply give us a call. Our experts can answer your questions and help you decide.


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