What Is Private Insurance [What Does It Cover & the Cost]

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Public health insurance comes with its fair share of health coverage perks but also carries specific eligibility requirements. If one doesn’t meet these requirements, a reliable option is to turn to private insurance. But what is private insurance? This article addresses what private insurance covers compared to public health insurance, its costs, and who can benefit the most from it.

What Is Private Health Insurance?

Private health insurance is not provided by a state or federal government but by a private entity. You can buy private health insurance through insurance brokers or directly from private insurance companies. Private health insurance offers various plans, but about half of the US population has adopted employer-sponsored plans. Around 6% of Americans purchase private health insurance not related to their employment.

Private insurance is not as regulated as public health insurance coverage. Some plans are not part of the regular medical coverage, such as short-term health plans, critical illness plans, dental insurance, vision insurance, etc.

Private health insurance is—in some cases—subsidized by the government. But through the Affordable Care Act, people can qualify for premium subsidies and cost-sharing reductions, making obtaining private coverage more affordable.

NOTE: Most of the US’s private (non-government) health coverage is employment-based. Almost all large company employers offer group health insurance to their employees.

What Does Private Health Insurance Cover?

Getting private health insurance covers all aspects of public health care, including emergency services, hospitalization, maternity, newborn care, laboratory tests, prescription drugs, etc. In addition, private health insurance offers many additional health care plans.

Other benefits of private health insurance include supplemental coverage in short-term health plans and fixed indemnity plans. In addition, there are critical illness plans, accident supplements, dental insurance, and vision plans available to all insured. Finally, private health insurance includes some plans that do not fall under the health insurance scheme, e.g., direct primary care plans and Farm Bureau plans.

NOTE: Travel insurance is sometimes covered by private health insurance but not through all companies. Check out the best travel insurance for USA citizens and get a complete insurance package.

The Cost of Private Health Insurance

Private health insurance varies in price. If your employer covers your insurance, then you’ll need to pay only a small portion of the overall monthly fee. But if you purchase private health insurance on the marketplace, then the price of your insurance can vary according to your income. In recent years, most marketplace enrollees receive premium subsidiaries at around $490/month.

How much is private health insurance? The cost of such insurance depends on your location and age, applying to those who earn more than 400% of the poverty level. As a result, some parts of the US have relatively more expensive insurance policies than others. In addition, older individuals are charged more than younger—the same can be said for smokers and nonsmokers.

NOTE: Another type of private health insurance includes catastrophic health insurance, only available to those aged 30 or younger. A hardship exemption from the government is required to qualify for this type of insurance.

Key Takeaways

What is private insurance? Health insurance coverage is not offered by a US state or federal government but by a private entity.
Private health insurance covers all aspects of public health care and some supplemental health plans, such as dental and vision plans.
Through the Affordable Care Act, individuals can qualify for premium subsidies and cost-sharing reductions, thus lowering the price of private health insurance.
Private Health insurance varies in price, depending on who issues your health insurance.
If you purchase private health insurance on the Marketplace, the price of your insurance can vary according to your income

Public vs Private Health Insurance

Public health insurance in the US is offered from the following government-run programs:

Medicare

Medicare is the US federal health insurance program available for all who meet the requirements of the program. Medicare is available for all citizens 65 years or older or those younger with specific disabilities.

Medicaid

Medicaid is a state and federal safety-net program offering health insurance for all vulnerable individuals, no matter their backgrounds.

Children’s Health Insurance Program (CHIP)

CHIP is a subset of the Medicaid program, offering subsidized low to no-cost health insurance for children.

Public health insurance is more affordable than private health insurance and has decidedly lower administrative and additional costs. But public health insurance is limited to who is eligible to apply. In addition, the insured are given a limited selection of health care providers to choose from, as not all health providers support government-sponsored health insurance plans.

One of the main benefits of private health insurance is that it’s more flexible when choosing which facility you would like to visit. In addition, you have a wider choice of plans and coverage with private coverage.

The most significant difference, however, between public and private health care boils down to eligibility. If you don’t fall under the appropriate category eligible for public health care, getting private health insurance is the next best thing. Private health care offers plans to all those who have the funds to cover the costs related to premiums.

Private health insurance, however, is more expensive and must be paid regularly; otherwise, you won’t be able to use all the resources that come with health insurance.

NOTE: In some instances, international health insurance is the best choice for health care coverage if you often travel. Check out the best international health insurance and choose the plan that best works for you.

Who Benefits from Private Insurance?

Along with the ‘what is private insurance’ question, how do I get private health insurance? First, you must fall under the ideal category for private insurance. Purchasing private health insurance can be a smart move if you’re listed under one of the following categories:

Unemployed

If you’ve recently lost your job and are in fear that it will cost you your health insurance, you can still be eligible to maintain health care coverage through your employer for an additional period. Such coverage is available through the Consolidated Omnibus Budget Reconciliation Act (COBRA). With COBRA, you can continue your health insurance coverage through your employer but at your own expense. But with COBRA, the cost of private health insurance can get quite expensive.

Self-employed

In the US, the self-employed are advised to obtain health insurance through their spouse. But if this is not an option, you need to cover the expenses for private coverage.

Small Business Owners

If you’re a small business owner with employees, you will most probably provide health insurance as part of an employee benefits package—though not necessarily required by the state. But most employers do offer health insurance, making the job market more competitive. In addition, if you decide to purchase private health insurance, you can choose one of the types of private health insurance called a group plan.

Age 26 and Younger

According to the Affordable Care Act of 2010, US citizens under the age of 26 can choose to be covered as dependents by their parent’s health insurance. Afterward, they must choose their own insurance policy. But not all under 26 have the option to be covered through their parents, which means they must seek private health insurance.

NOTE: Another category of those who need to turn to private health insurance includes retired individuals under 65. You will only be eligible for Medicare if you’re over 65.

Buying Private Insurance

How do I get private health insurance? Purchasing private health insurance is mandatory if you’re not covered by your employer or public health care (Medicare, Medicaid, or any other health care coverage service).

You can choose to purchase private insurance through your state’s marketplace, a health insurance company, or insurance brokers. But if you decide to buy from a health insurance company, you can’t use premium subsidies or cost-sharing reductions—options available only when purchasing from the marketplace or exchange.

NOTE: The Affordable Care Act has established the marketplace to achieve compliance with the mandate that dictates that all Americans should be enrolled in the health coverage system.

Conclusion

What is private health insurance? Private insurance is an excellent health coverage option for US citizens who cannot meet the requirements for public health insurance. But private health care can be more expensive than its counterpart. Still, some insurance companies do provide great supplemental coverage through additional plans that would otherwise not be covered through public health care.

FAQ

What are examples of private insurance?

Some private health insurance examples include Blue Cross and Blue Shield plans, non-Blue commercial plans, HMOs, and self-funded employer plans.

What is the difference between public and private health insurance?

The primary difference between public and private health insurance includes the eligibility requirements and the price. Public health insurance has specific requirements as to who can apply (by (age and income) and be approved for health insurance and is relatively cheaper. In contrast, private health insurance is more expensive, but all are eligible to apply.

What are the disadvantages of private health insurance?

If you understand the question ‘what is private insurance,’ you might be aware of the pricing. The most significant disadvantage of private health insurance is that it’s more expensive and must be paid regularly; otherwise, you won’t be able to use all the resources that come with health insurance.

ABOUT AUTHOR

I learned a lot about finance after working for a digital marketing company specializing in investing and trading stocks, forex, etc. After that, I got exposed to other verticals such as wealth management and personal finance, which further improved my understanding of the financial world.

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