When weighing health insurance options, the term private insurance may come across your path and lead to some confusion about what’s best for you. The private health insurance umbrella covers many types of health insurance coverage, and there’s a good chance you’ve had it in the past through your employer. But what exactly is private health care coverage, and how does private insurance coverage differ from public health insurance options? From costs to coverage options, we’re here to answer your private insurance questions so you can navigate your insurance options with confidence.
What is private health insurance?
Private health insurance refers to plans offered by private health insurance organizations such as HealthPartners, as opposed to government-funded programs like Medicaid or the health insurance exchange. While the government can subsidize private plans, the plans themselves are run by private companies. Private insurance programs are required to meet federal standards based on how many employees a company has and must cover the Affordable Care Act (ACA) essential health benefits. A little more than half of the United States population is covered by private health insurance.
The different types of private health insurance
Private health insurance plans can vary widely depending on the type of plan or coverage. Here are several types:
Employer-sponsored health insurance
Employer-sponsored health insurance is the most common type of private health insurance, covering about half of the U.S. population. With employer-sponsored health insurance, an employer works with a private health insurance organization to offer specific plan options to their employees. The employees then enroll in their preferred plan and pay any applicable premiums, copays, and other expenses. Employers can choose to cover employee premiums or offer other incentives to get employees to sign up for their health insurance offerings.
Exchange health insurance
People whose employers don’t sponsor health insurance may consider the health insurance marketplace. This is insurance purchased via the insurance marketplace, or exchange, in the individual/family market. This type of insurance is subsidized by the Affordable Care Act through premium subsidies, which can make these plans much more affordable than they might be otherwise. If you don’t qualify for financial assistance with a subsidy, you may still be able to deduct your health insurance premiums on your tax return.
Short-term health plans
As the name suggests, short-term health insurance plans are health insurance plans intended to cover plan holders for a limited amount of time. This type of insurance is often used to bridge an unexpected gap in health insurance coverage due to a layoff or other temporary cause.
Fixed indemnity plans
Fixed indemnity health insurance pays a set amount on a per-period or per-incident basis no matter what the end costs end up being. For example, a fixed indemnity plan may pay $100 a day while a person is hospitalized even if the actual total exceeds $100 a day. While most traditional private health insurance plans cover a certain percentage of costs or require members to meet a deductible before covering services, fixed indemnity plans pay a finite amount of money for any service.
Critical illness and accident insurance
Critical illness and accident insurance covers costs related to a critical illness (such as cancer, an organ transplant or heart attack) or accident, often up to a certain amount. Unlike health insurance plans that cover specific services and kick in before members receive their final bill, this kind of insurance sends a payment directly to the policyholder that they may use at their discretion. (For example, covering the cost of medical bills, rent, groceries, child care or rehabilitation.)
Dental and vision insurance
Got a toothache or need contact lenses? Dental and vision insurance plans cover costs associated with dental and vision exams, procedures and other services. Dental and vision insurance plans are not as tightly regulated as major medical insurance plans and therefore vary greatly in their specific coverage details. People often choose to add a dental or vision plan on top of their health insurance plan.
How public health insurance differs from private insurance
Unlike private health insurance, public health insurance is funded by the government at the federal or state level. Taxpayer dollars are put into a trust and are used to pay eligible medical expenses or lower the cost of prescription drugs for policyholders. Original Medicare, Medicaid, the Children’s Health Insurance Program and military health insurance are all examples of public health insurance programs.
The benefits of public health insurance are that beneficiaries often pay few or minimal fees when accessing care, and that public health programs often benefit those who would otherwise not be able to afford health insurance on their own. However, a major drawback of public health insurance is that there are often fewer choices when it comes to care. This can mean limited plan options and tighter restrictions on where someone could go to receive in-network services. Because of the limited locations for services, wait times for public health insurance users can also be longer than those with private health insurance plans.
In contrast, the benefits of private health insurance include more options for in-network care locations, shorter wait times, and a wider variety of health insurance plans to choose from.
How much does private insurance cost?
The cost of private health insurance can depend on several factors, including employer-covered costs, subsidies, financial assistance and individual plan rates. A plan’s deductible, copayments and out-of-pocket maximums can impact how much private health insurance costs in any given year, even compared to a plan with the same monthly premium. It’s always best to check with your private health insurance provider for the latest insurance plan prices.
Do I need to have private health insurance?
The short answer is no, you are not required to have private health insurance.
As of the 2019 coverage year, the ACA no longer requires people in the U.S. to have health insurance (often referred to as the “individual mandate”). If you have public health insurance, you do not also need to have a private health insurance plan. While health insurance is a vital safeguard against unexpected or high health care costs, there is no penalty for not having health insurance of any kind.
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