Image by Sasin Tipchai from Pixabay

Catastrophic plans offer minimal coverage and high deductibles, leaving consumers with greater financial risk 

March 14, 2026 - OAKLAND — On Friday, California Attorney General Rob Bonta co-led a coalition of 19 attorneys general in submitting a comment letter responding to a proposed rule by the U.S. Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) that would lead to a massive expansion of catastrophic health insurance plans. Under these plans — which are currently allowed in limited situations and are not required to abide by Affordable Care Act (ACA) rules on covering essential health benefits, preexisting conditions, or not imposing annual and lifetime limits on coverage — health insurance coverage largely does not begin until significant maximum out of pocket costs (MOOP) have already occurred. Right now, that is $10,000 for an individual or $21,200 for a family, which is already too costly. In the 2027 plan year, the proposed rule at issue — entitled the “Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program” — would widen catastrophic plans beyond their original limited use and increase MOOP limits to an unaffordable $15,600 for an individual and $31,200 for a family. The comment letter explains that these changes, and numerous others, are arbitrary and capricious and are therefore unlawful if ultimately adopted. 

“The Trump Administration’s plans to expand catastrophic health plans would indeed be catastrophic for families across the country, leaving them with minimal coverage and huge out-of-pocket bills. After failing to extend ACA subsidies and letting premiums soar for millions of Americans at the beginning of the year, the Trump Administration is now trying to clean up its own mess by offering these policies as the answer to rising health care costs,” said Attorney General Bonta. “This proposed rule is a dangerous deception that uses affordability as a misnomer for plans that cover essentially nothing, and my fellow attorneys general and I insist that it should be withdrawn.”

The proposed rule introduces a broad array of substantial changes over its near 600 pages — including many that are identical or substantially similar to a 2025 Marketplace Integrity and Affordability rule that Attorney General Bonta and a multistate coalition challenged in court. That case is still in active litigation. The proposed rule also introduces a range of other changes that harm consumers. This includes increasing the out-of-pocket cost for catastrophic plans to 130% of the statutory limits while also allowing bronze plans to raise cost-sharing above the statutory maximum out-of-pocket limitations. Together, this would promote an increased use of catastrophic plans with the intent to make those plans cover even less than they already do, thereby driving down premiums at the expense of little to no coverage. The rule also creates uncertainty about defrayal determinations, while making all its changes with rushed or flawed data that is riddled with errors and inconsistencies.

The ACA was passed by Congress and signed into law by President Barack Obama in 2010 to increase the number of Americans with health insurance and decrease the cost of healthcare, but the proposed changes to the law at issue will have the opposite effect. Projections indicate that up to two million individuals will lose their health coverage because of the changes — leaving states and residents to bear the cost. Healthier enrollees may drop more extensive coverage. Others, who may enroll in a catastrophic plan and then face a severe medical crisis, might forego needed care until they can switch back to a more generous plan, thus harming their health and potentially increasing the cost of future care. The consequences of these changes will fall hardest on the consumers least able to absorb the surprise medical bills, but all consumers will be affected.

In the letter, Attorney General Bonta and the coalition argue that the proposed rule:

• Is replete with errors and provides insufficient time to implement its substantial changes.
• Reimposes provisions substantially similar to provisions of the 2025 rule — like income verification provisions and the failure-to-reconcile provision — that have been stayed as likely unlawful and arbitrary.
• Reimposes regulations requiring the Federal Exchange to verify 75% of special enrollment period enrollees, despite a court’s prior stay of that provision.
• Contains provisions relating to catastrophic plans, bronze plans, essential health benefits, and other provisions that would harm states and consumers by making healthcare more expensive and dramatically weakening coverage.

In sending this letter, California Attorney General Bonta, Massachusetts Attorney General Campbell, and New Jersey Attorney General Davenport, are joined by the attorneys general of Arizona, Colorado, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Washington, and Wisconsin.

Source: CA. DOJ