Private Insurance: What Are The True Benefits And Drawbacks?

Private health insurance is a healthcare coverage contract between an individual and a private health insurance company. It is the most common way Americans get coverage, with 66% of Americans having a private health plan compared to 36% with public plans. Private health insurance can be purchased through an employer, the Affordable Care Act (ACA) marketplace, or directly from a health insurance company. The insurance covers medical, hospital, and preventive care, and can vary significantly in terms of coverage. It is called private because it is offered by privately-run health insurance companies, as opposed to government-run programs like Medicare and Medicaid.

Private health insurance is provided by private companies, not the government

There are two large categories of health insurance: private and public. Private health insurance is the most common way Americans get coverage. The U.S. Census Bureau estimates that 66% of Americans have a private health plan compared to nearly 36% of those with public plans. Private health insurance includes employer-sponsored plans, which cover about half of the American population. Another 6% of Americans purchase private coverage outside of the workplace in the individual/family health insurance market, both on and off-exchange.

Private health insurance can be purchased from a variety of sources: your employer, a state or federal marketplace, or a private marketplace. Private health insurance currently covers a little more than half of the U.S. population.

Public health insurance is offered by the federal government. You have to meet specific requirements to get coverage, such as your age and household income. Examples of public health insurance include Medicare, Medicaid, and the Children's Health Insurance Program (CHIP).

Private health insurance is the most common way Americans get coverage

Private health insurance is the most common way Americans get health coverage. About two-thirds of Americans (67%) have private insurance as their primary health coverage.

Private health insurance includes employer-sponsored plans, which cover about half of the American population. Employer-sponsored health insurance is subsidised by the government via the tax code, as it's typically offered as a pre-tax benefit for employees. Over a ten-year period from 2019-2028, the Congressional Budget Office projects that federal subsidies for employer-sponsored health coverage are projected to be $3.7 trillion.

Another 6% of Americans purchase private coverage outside of the workplace in the individual/family health insurance market, both on and off-exchange. People who purchase private health insurance in the marketplace/exchange may be eligible for premium subsidies and cost-sharing reductions, which make coverage and care much more affordable.

There are also less-regulated types of private health insurance, such as short-term health plans, fixed indemnity plans, critical illness insurance, accident supplements, and dental and vision insurance. These types of coverage are sold by private health insurance companies but are generally only suitable to serve as supplemental coverage or short-term health insurance.

The majority of private insurance (55%) is employer-sponsored, and a smaller share (11%) is purchased by individuals from for-profit and nonprofit carriers. Most employers contract with private health plans to administer benefits, and most employer plans cover workers and their dependents, offering a choice of several plans.

Private health insurance is a contract between the insured and the insurer

Private health insurance is a contract between you and a private health insurance company. The insurance company agrees to pay some or all of your medical expenses as long as you pay your premium. The contract is designed to split the cost between you and the insurer, making medical care more affordable. This cost-sharing takes the form of deductibles, copays, and coinsurance.

There are several ways to obtain private health insurance. You can get it through your employer, the Affordable Care Act (ACA) marketplace, or directly from a health insurance company. Almost half of all Americans receive employer-sponsored health insurance, according to the Kaiser Family Foundation.

If you are not eligible for private health insurance from an employer, and also not eligible for public health insurance (such as Medicare, Medicaid, or CHIP), you can purchase private health insurance in the marketplace or exchange in your state. You can also buy it directly from a health insurance company, but premium subsidies and cost-sharing reductions are not available if you go this route.

Private health insurance is distinct from public health insurance, which is offered by the federal or state government. To qualify for public health insurance, you typically need to meet specific requirements, such as age or income restrictions. In contrast, private health insurance is sold by a private entity and does not have the same income or age requirements as public programs.

Private health insurance can be purchased through an employer, the Affordable Care Act (ACA) marketplace, or directly from an insurance company

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

There are several ways to purchase private health insurance, including:

Through an Employer

Employer-sponsored health insurance is a common way for individuals to obtain private health insurance. This type of coverage is often offered by employers as part of their benefits package, and it can be available to individuals only or extended to their spouses and dependents at a higher price. The Affordable Care Act (ACA) mandates that businesses with 50 full-time employees or more provide comprehensive health insurance that covers at least 60% of health insurance costs. Almost half of all Americans receive employer-sponsored health insurance, according to the Kaiser Family Foundation.

Affordable Care Act (ACA) Marketplace

The ACA marketplace, also known as Healthcare.gov, is another option for purchasing private health insurance. Individuals can compare available health insurance plans and enroll online, over the phone, or in person. The federal government operates the health insurance marketplace in most states, while some states have their own exchanges. When applying, individuals enter their household and income information, and the marketplace estimates the cost of health insurance after considering potential premium tax credits and subsidies. The ACA requires that private health insurance plans cover 10 essential health benefits, such as outpatient care, mental health services, pediatric services, pregnancy and maternity care, preventive care, and rehabilitation services.

Directly from an Insurance Company

Individuals can also buy private health insurance directly from a health insurance company. These plans may or may not comply with ACA regulations, and they may not provide all the essential health benefits found in ACA plans. As a result, individuals may find cheaper health insurance options outside of the marketplace, but these plans do not qualify for premium tax credits or subsidies. This option may be suitable for those whose household income exceeds the limits for tax credits and subsidies.

Private health insurance plans typically cover medical, hospital, and preventive care

Private health insurance plans can vary significantly in terms of coverage but can help pay for a range of medical services. These include:

• Hospital services: Costs related to hospital stays, surgeries, and treatment received in a hospital.
• Medical services: Consultations, doctor visits, outpatient treatment, and preventive care expenses.
• Mental health services: Bills for mental health treatment, including therapy and counseling.
• Prescription drugs: Partial or full payment for prescription medication.
• Rehabilitation and physical therapy: Costs for occupational and physical therapy.
• Specialist care: Visits to specialists, such as cardiologists or dermatologists.

The specific coverage of a private health plan depends on whether it is a Preferred Provider Organization (PPO) plan, a Health Maintenance Organization (HMO) plan, or an Exclusive Provider Organization (EPO) plan. PPO plans allow out-of-network care but at a higher cost than in-network care, while HMO and EPO plans generally do not pay for out-of-network care unless it is an emergency.

ACA plans on the marketplace are required to cover ten essential health benefits, including:

• Ambulatory care, also called outpatient care.
• Mental health and substance use disorder services.
• Pediatric services—ACA plans must cover oral and vision care for children.
• Pregnancy, maternal and newborn care.
• Preventive and wellness care, as well as chronic disease management.
• Rehab and habilitative services and devices.

Additionally, the federal government mandates that private ACA health insurance plans cover birth control services and breastfeeding coverage.

Frequently asked questions