Private Insurance: Is It Worth The Hype?

During the November 2019 Democratic presidential primary debate, Joe Biden stated that 160 million people like their private insurance. This figure refers to the number of Americans who receive health benefits through their employer. Polling by the Kaiser Family Foundation and the Los Angeles Times found that while most beneficiaries are generally satisfied with their insurance, about 40% of people with employer-sponsored coverage had trouble paying medical bills, out-of-pocket costs, or premiums. Additionally, half of those surveyed indicated that they had to go without or delay healthcare due to unaffordability. While Americans may express satisfaction with their private insurance plans, many are learning that their coverage leaves meaningful gaps, requiring them to skip or delay healthcare due to cost.

People with private insurance like their doctors, not their insurance companies

It is often said that people like their private insurance, and while this may be true to an extent, it is not the full story. Polling suggests that most Americans are generally satisfied with their employer-sponsored health coverage, but many who receive insurance through their jobs still face financial difficulty covering healthcare costs.

A survey by the Kaiser Family Foundation and the Los Angeles Times found that about 40% of people with employer-sponsored coverage had trouble paying medical bills, out-of-pocket costs, or premiums, and half said they delayed or went without healthcare because of high costs. Those with high-deductible plans that require larger out-of-pocket costs were less likely to be satisfied with their coverage.

While most insured adults give their health insurance positive ratings, people in poorer health tend to give lower ratings. A majority of insured adults (58%) say they have experienced a problem using their health insurance in the past 12 months – such as denied claims, provider network problems, and pre-authorization problems. Nearly half of insured adults who had insurance problems were unable to satisfactorily resolve them, with some reporting serious consequences.

Despite these issues, most consumers support public policies to make insurance simpler to understand and to help them avoid or resolve insurance problems. About nine in ten say they support requirements on insurers to maintain accurate and up-to-date provider directories, provide simpler, easier-to-read explanations of benefits, disclose their claims denial rates to regulators and the public, and provide information in advance about whether care is covered and the out-of-pocket cost liability.

While Americans may say they like their private insurance, the reality is that many are learning that when they try to use their coverage, it doesn't meet their health needs. This is particularly true for those with high-deductible plans, who are less likely to be happy with their coverage and more likely to report problems paying for healthcare.

So, while it may be true that people with private insurance like the idea of having coverage, it seems that they like their doctors and hospitals more than their insurance companies. This is supported by a survey which found that a majority of voters support a Medicare for All plan that eliminates private insurers if they can keep their healthcare providers.

People with private insurance often experience problems with claims and denials

While polling suggests that most people with private insurance are "generally satisfied" with their coverage, many still experience problems with claims and denials. A KFF survey found that roughly 6 in 10 insured adults experience problems when they use their insurance, including denied claims, network adequacy issues, preauthorization delays and denials, and other issues. The survey also found that people with private insurance are more likely to have denied claims than people with public coverage.

Among insured adults who report insurance problems, only half say that the biggest problem they encountered was solved to their satisfaction. This figure is even lower for those who experienced denied claims, who were half as likely to say that their problem was resolved satisfactorily compared to those whose problems did not include a denied claim.

The consequences of insurance problems, including denied claims, can be serious and include delayed or forgone care, declining health status, and unexpected increases in out-of-pocket costs. In fact, a recent KFF study of ACA plans found that in 2021, companies denied, on average, 17% of claims, even when patients received care from in-network physicians. Some insurers reported much higher denial rates, with one insurer denying 49% of claims in 2021 and another denying 80% of claims in 2020.

The increase in claim denials may be due, in part, to insurers increasingly employing computer algorithms or staff with little relevant experience to issue rapid-fire denials of claims without reviewing patients' medical charts. A ProPublica investigation of insurance giant Cigna found that an automated system allowed medical reviewers to sign off on 50 charts in 10 seconds, presumably without examining patients' records.

The process of challenging a denial can be complicated and time-consuming, requiring hours of patients' and doctors' time. Many people do not have the knowledge or stamina to take on this task, unless the bill is especially large or the treatment is obviously lifesaving. As a result, people with private insurance often experience significant challenges and adverse consequences when dealing with claims and denials.

Private insurance is more expensive than government-backed insurance

The high cost of private health insurance is a concern for enrollees, and it also impacts the federal budget. The federal government subsidizes most premiums directly or indirectly, costing approximately $300 billion in fiscal year 2016. The cost of private insurance premiums has been increasing faster than the growth of the economy and income levels. From 2005 to 2014, premiums for employment-based insurance grew by 48% for single coverage and by 55% for family coverage. By 2025, average premiums for employment-based coverage are projected to be about $10,000 for single coverage and $24,500 for family coverage, a nearly 60% increase compared to 2016.

While most Americans are covered by private health insurance, it is important to note that private insurance premiums are high and continue to rise. This can place a financial burden on individuals and families, especially those with higher deductible plans who may struggle to pay medical bills, out-of-pocket costs, or premiums. As a result, some individuals may delay or forgo necessary healthcare due to affordability concerns, even with private insurance coverage.

In contrast, government insurance programs such as Medicare and Medicaid made up 45% of national healthcare spending in 2022, amounting to $1.9 trillion. While private insurance programs accounted for 30%, totalling about $1.3 trillion. It is projected that federal spending for Medicare and Medicaid will increase faster than spending by private insurance in the future. By 2031, federal spending is expected to account for 49% of funding for healthcare expenditures, while private insurance will make up 30%.

The difference in cost between private and government-backed insurance is a significant factor to consider when evaluating healthcare options. Private insurance, while more expensive, offers a range of benefits and can be obtained through employers, the Affordable Care Act (ACA) marketplace, or directly from a health insurance company. On the other hand, government-backed insurance, such as Medicare and Medicaid, is more affordable and designed to provide coverage for specific groups, such as older adults, low-income households, and individuals with certain disabilities.

Private insurance is the most common way Americans get coverage

Private insurance is the most common way Americans get health coverage. According to the U.S. Census Bureau, 66% of Americans have a private health plan, compared to 36% with public plans. Private health insurance is a contract between an individual and a private health insurance company, which mandates that the insurer covers some or all of the individual's medical expenses as long as they pay their premium.

Private health insurance can be obtained through an employer, the Affordable Care Act (ACA) marketplace, or directly from a health insurance company. Almost half of Americans receive employer-sponsored health insurance, according to the Kaiser Family Foundation. Group health insurance plans offered through workplaces are often the most affordable private health insurance option, as employers subsidize the costs.

ACA marketplace plans are another option for obtaining private health insurance. These plans are available through companies such as Kaiser Permanente, Blue Cross Blue Shield, and UnitedHealthcare. The ACA marketplace allows individuals to compare available health insurance plans and enroll online, over the phone, or in person.

Individuals can also purchase private health insurance directly from a health insurance company. These plans may not comply with ACA regulations and may not provide all the essential health benefits found in ACA plans. However, they can be cheaper than plans purchased on the marketplace.

While private insurance is the most common way Americans obtain health coverage, it is important to note that public health insurance, provided by the state or federal government, is also a significant option for many. Medicare, Medicaid, and the Children's Health Insurance Program (CHIP) are examples of public health insurance programs.

People with private insurance often experience provider network issues

While polling suggests that a majority of Americans are "generally satisfied" with their private insurance, there are still many issues with the current system. Provider network issues are a common problem for people with private insurance. A provider network is a group of physicians, specialists, and other healthcare providers who are contracted by an insurance company to provide medical care to those enrolled in plans offered by that company. These providers are often referred to as "in-network providers".

In the US, a provider network is considered "inadequate" if it does not have enough providers for enrollees to receive timely care nearby. Inadequate networks may lead enrollees to seek higher-cost care from out-of-network providers. Out-of-network providers can bill the patient for the difference between what they charge and what the health plan pays, which can result in unexpected and large bills. Additionally, some health plans do not cover out-of-network services at all, leaving patients responsible for the full cost of care.

Provider network adequacy is determined by the health plan's ability to deliver the benefits promised to enrollees by providing reasonable access to a sufficient number of in-network providers. Most states review plans for adequacy prior to approving them for sale and on an annual basis. However, the standards used to assess network adequacy, such as maximum wait time or sufficient choice of providers, vary by state. This can lead to inconsistencies in the quality of care and access to providers across different states.

While people with private insurance may experience provider network issues, it is important to note that the majority of Americans still prefer a private insurance system over a government-run one. According to a Gallup poll, 53% of US adults prefer a private system, while 43% support a government-run system. This preference for private insurance persists even as a majority of Americans (57%) believe that the federal government should ensure that all Americans have healthcare coverage.

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