On Sept. 4, 2025, the U.S. Department of Health and Human Services (HHS) issued guidance describing circumstances under which individuals who are enrolling in health coverage through the individual market but are ineligible for advance payments of the premium tax credit (APTC) or cost-sharing reductions (CSRs) due to their income may qualify for a hardship exemption to enroll in catastrophic coverage. According to HHS, this new guidance is intended to help consumers access affordable coverage, considering the premium increases anticipated for the 2026 plan year.

Catastrophic health plans are specialized plans offered through the individual health insurance market. They generally have low monthly premiums and high deductibles, as they are designed to protect individuals from very high medical costs in the event of serious illness or injury. Catastrophic coverage is only available to individuals who are under the age of 30 and others who qualify for an affordability or hardship exemption.

Under HHS’ guidance, individuals may qualify for a hardship exemption to purchase a catastrophic plan on or off an ACA Exchange (or Marketplace) if they are determined or expect to be ineligible for APTC or CSRs based on their projected annual household income. More specifically, individuals who are ineligible for APTC or CSRs due to their projected annual household income being below 100% of the federal poverty level (FPL) or above 250% of the FPL will be eligible for a hardship exemption and enrollment in catastrophic coverage, where it is offered.

The guidance applies to individuals in Federally-facilitated Exchange (FFE) states (i.e., states that do not have their own Exchanges) and in states served by State-based Exchanges that choose to have exemptions processed through the FFE, except California, Connecticut, Maryland and the District of Columbia.

Beginning Nov. 1, 2025, individuals can apply for the hardship exemption in two ways:

HHS is also streamlining the review of paper applications to reduce administrative burdens. According to HHS, this will make it easier for individuals experiencing hardship and seeking a catastrophic plan to access the full range of catastrophic coverage options available.