What Is Private Insurance?


Enter your ZIP code to get started

Shield

Free. Simple. Secure.

Banner image
ByMark Fitzpatrick
Edited byCasie McCoskey
ByMark Fitzpatrick
Edited byCasie McCoskey

Updated: May 22, 2024

Advertising & Editorial Disclosure

Private health insurance simply refers to health insurance plans that private companies provide. These plans cater to a broad audience, including individuals, families and employers offering group plans.

However, understanding the available coverage options, essential benefits mandated by the Affordable Care Act, and varying available plan types like Catastrophic, Bronze, Silver, Gold and Platinum comes in handy when selecting a private health insurance plan.

What Is Private Health Insurance?

Private health insurance can encompass individual and group coverage. It is distinct from government-run, public health insurance programs like Medicare, Medicaid and CHIP (Children's Health Insurance Program). Group coverage often arises from your job. The total cost involves the following key aspects:

  • Deductible: The upfront amount payable before the initiation of plan benefits.
  • Copayments and coinsurance: The individual's share of medical costs.
  • Out-of-pocket maximum: The highest annual cost the policyholder pays, after which the plan covers 100% of medical expenses.

Individual health insurance plans cover one person, offering various benefits and coverage options. Family health insurance plans operate similarly but extend coverage to multiple family members, typically increasing costs like deductibles, out-of-pocket maximums and monthly expenses.

Private health insurance enrollment is possible through employers, ACA marketplaces or direct purchases from insurance companies.

Varieties of private health insurance include less regulated options like short-term health plans, fixed indemnity plans, critical illness insurance and vision or dental insurance. Private insurers sell these supplemental coverages, which complement primary medical insurance.

What Private Health Insurance Covers

Private health insurance plans encompass medical, hospital and preventive care, offering coverage for a range of services. These include hospital stays, surgeries and treatment expenses. Medical services such as consultations, doctor visits, preventive care and mental health services, including therapy and counseling, are typically covered.

These plans also contribute to the cost of prescription drugs and cover rehabilitation, physical therapy and specialist care from professionals like cardiologists or dermatologists.

The Affordable Care Act (ACA) mandates that plans offered on the Health Insurance Marketplace must cover ten essential health benefits. These benefits are not only exclusive to marketplace plans but are also commonly covered by employer-sponsored health plans.

The 10 Essential Health Benefits Mandated by the ACA:

 
  1. Hospitalization: Coverage for inpatient care, including surgeries and other medical procedures that require a hospital stay.
  2. Emergency Services: Coverage for emergency medical services, ensuring immediate care in urgent situations.
  3. Outpatient Services: Includes visits to urgent care facilities and other outpatient medical services.
  4. Prescription Drugs: Partial or full coverage for necessary medications health care providers prescribe.
  5. Preventive and Wellness Services: Coverage for preventive measures such as vaccinations, screenings and wellness check-ups.
  6. Pediatric Services: Coverage for essential health care needs for children, including well-child visits and immunizations.
  7. Pregnancy, Maternity and Newborn Care: Coverage for prenatal and maternity care, as well as care for newborns.
  8. Mental Health and Substance Abuse Care: Includes therapy, counseling and treatment for mental health disorders and substance abuse.
  9. Rehabilitative Services: Coverage for services that aid recovery and rehabilitation after illness, injury or surgery.
  10. Laboratory Services: Coverage for diagnostic tests and lab work essential for accurate medical assessments.

In addition to the essential health benefits above, plans must also include:

  • Birth Control Coverage: Ensures accessibility to contraception methods.
  • Breastfeeding Coverage: Provides support for lactation needs.

The extent of coverage outside your provider network also varies by plan type:

Your access to out-of-network care may be limited depending on your private health insurance provider type. Generally, in-network providers are less expensive and easier to access.

Qualifying for Private Health Insurance

Here are some key considerations regarding private health insurance qualifications:

  • It’s available for most individuals: Private health insurance is generally open to a wide range of individuals, including those not qualifying for government assistance programs.

  • There are no income-based subsidies directly from the provider: Private health insurance plans typically do not offer income-based subsidies to make coverage more affordable if you buy directly from the insurance company or a broker. In such cases, factors such as age, health status and the level of coverage selected often determine the cost of private health insurance. However, choosing these private health plans through the Health Insurance Marketplace may make you eligible for the subsidies.

Overall, private health insurance does not have strict qualifications, but it usually depends on the age, gender and health conditions of the prospective policyholder.

Can I Buy Private Health Insurance at Any Time?

You can purchase private health insurance outside the Health Insurance Marketplace, HealthCare.gov, at any time directly from an insurance company, broker or agent.

However, if you choose to buy a policy through the Health Insurance Marketplace, there are specific time constraints:

  • Open Enrollment Period: This annual period is the main window for purchasing or changing health insurance plans. Coverage obtained during this period usually starts in the following year. The federal open enrollment period for health insurance typically begins on November 1 and concludes on January 15. It's important to note that while the federal open enrollment period has these specific dates, some states may choose to extend this period.

  • Special Enrollment Period (SEP): Certain life events, such as marriage, the birth of a child or the loss of other health coverage, may qualify you for a Special Enrollment Period. During an SEP, you can enroll in or change your health insurance plans outside the regular open enrollment period.

Note these restrictions if you prefer to purchase a policy on the marketplace so you can plan accordingly.

Private Health Insurance Coverage Levels

Private health insurance provides coverage across several tier categories: Catastrophic, Bronze, Silver, Gold and Platinum, each catering to different health care and financial needs. We explore the ins and outs of these tiers below:

Catastrophic Plans
  • Target Audience: Young, healthy individuals or those needing basic medical care.
  • Coverage: Protects against major health issues or accidents, but routine care expenses are primarily out-of-pocket.
  • Cost Structure: Lowest monthly rates but with high deductibles. Note that these plans don't offer premium tax credits, making Bronze or Silver plans potentially better values for those eligible.
  • Eligibility: Typically for individuals under 30 or those with a financial hardship exemption. These plans also have limited availability depending on your state.
Bronze Plans
  • Target Audience: Consumers seeking more comprehensive coverage than Catastrophic plans while prioritizing lower monthly costs. These plans are available to a broader age range than Catastrophic plans without specific exemptions.
  • Coverage: Offer protection against major health issues with moderate routine care coverage.
  • Cost Structure: Affordable monthly rates with higher coverage for routine medical care than Catastrophic plans.
Silver Plans
  • Target Audience: Individuals seeking financial stability in the face of serious medical problems.
  • Coverage: Provides accessibility to routine care and protects against major health incidents.
  • Cost Structure: Moderate monthly rates, deductibles and out-of-pocket maximums.
Gold and Platinum Plans
  • Target Audience: Consumers with frequent health care needs, older individuals or those requiring costly prescription drugs.
  • Coverage: Offers comprehensive medical benefits for recurring health care services.
  • Cost Structure: Higher monthly costs but with the best benefits, resulting in lower out-of-pocket expenses during medical care utilization.
mglogo icon
MONEYGEEK EXPERT TIP

Silver plans are a financially attractive option for those qualifying for low-income health insurance. Cost-sharing reductions (CSRs) are only available with Silver-tier plans and lower out-of-pocket costs by reducing deductibles, copayments and coinsurance.

How to Get Private Health Insurance

You can get health insurance through your employer or on your own. The process varies based on whether you receive coverage through your job or not.

Getting Insurance Through Employment

If covered through your job, your employer typically deducts payments from your paycheck at a monthly rate. The U.S. Bureau of Labor Statistics indicates the percentage of workers with access to medical care benefits and the take-up rates among full-time and part-time employees:

Access to Medical Care Benefits:
  • 87% of full-time private industry workers had access to medical care benefits.
  • 25% of part-time workers had access to medical care benefits.
Take-Up Rates:
  • The take-up rate refers to the percentage of workers who opted to enroll in or use the offered medical care benefits.
  • Among full-time workers, the take-up rate was 65%.
  • For part-time workers, the take-up rate was 54%.

This data demonstrates that some employees choose not to or cannot utilize employer medical care benefits. These individuals may need to seek private insurance from another source.

Getting Insurance Without Employer Coverage

For those without employer-based insurance, for instance, if you are looking for health insurance as a self-employed individual, there are four primary avenues to purchase individual or family health coverage:

  1. Online Comparison Sites: Use online comparison sites to quickly assess plans available in your area. Compare policies from multiple private health insurance companies to find the most suitable option.
  2. Direct Purchase From Insurance Companies: If you have specific companies in mind, obtain quotes directly from them. Direct purchase provides a straightforward comparison, though discounts for this method are not typically available.
  3. Marketplace Plans: Explore HealthCare.gov or state-specific marketplace sites (in some states) to compare plans. Remember, enrollment in is subject to specific periods, such as the Fall open enrollment or qualifying for a special enrollment period due to events like relocating or losing previous coverage. You may also be eligible for Premium Tax Credits. These subsidies aim to lessen the monthly expense associated with a health insurance plan, with the reduction being contingent on the individual's annual income. Notably, this discount is applicable across all plan tiers, excluding Catastrophic plans.
  4. Insurance Agent Assistance: If you have an insurance agent for other coverage types, they can assist in selecting the most suitable private health insurance policy.

Consider which route fits your needs best as you select your health care provider.

healthInsurance icon
MONEYGEEK EXPERT TIP

When buying insurance, consider factors such as rates, coverage and customer service reviews. We recommend obtaining quotes from multiple companies for a comprehensive evaluation. Depending on your location, starting with your state's most popular health insurance company can be a practical approach. Be aware of enrollment limitations and potential discounts based on your income before you get started.

Purchasing Private Health Insurance on Your Own

You can purchase private health insurance on your own from the Health Insurance Marketplace or you can buy a Non-Marketplace plan from the insurance provider directly, under various circumstances, like when you can no longer depend on your parent's insurance or your employer doesn't sponsor it.

Here are scenarios where you might need to purchase health insurance on your own:

Young Adult Turning 26:

As per the Affordable Care Act (ACA), young adults can be covered under their parents' health insurance until they turn 26. Afterward, they must secure their own insurance plan.

Unemployment:

Individuals who lose their jobs may maintain coverage temporarily through the employer's health insurance plan using COBRA. However, COBRA can be expensive as the individual bears the total cost.

Part-Time Employment:

Part-time employees often lack health benefits. Those working fewer hours than full-time may need to enroll in their private health insurance.

Self-Employment:

Self-employed individuals, such as freelancers or business owners, may need to procure their health insurance, as they may not have access to employer-sponsored plans.

Business Owners Offering Employee Benefits:

Business owners with employees may be required or choose to offer health insurance as an employee benefit, necessitating the purchase of a group health insurance plan.

Small Business Health Options Program (SHOP)

 

The Affordable Care Act (ACA) introduced the Small Business Health Options Program (SHOP) for small employers (50 or fewer full-time employees) seeking health and dental coverage options. SHOP enrollment is available through private insurance companies or SHOP-registered agents, with eligibility for the Small Business Health Care Tax Credit to lower premiums.

Under the ACA, businesses with 50 or more full-time employees must provide comprehensive health insurance covering at least 60% of health insurance costs. Failure to offer the minimum affordable health insurance coverage may result in a tax penalty for non-compliant businesses.

Notably, small employers with fewer than 50 full-time and full-time equivalent employees are exempt from the Employer Shared Responsibility Payment, regardless of whether they provide health insurance to their employees.

Retirement:

Upon retirement, individuals lose eligibility for employer-sponsored health insurance. Those under 65 may need individual private health insurance until they become eligible for Medicare. Retirees often supplement Medicare with private Medigap or Medicare Advantage plans for comprehensive coverage.

Changes in Existing Coverage:

The Affordable Care Act (ACA) restricts insurers from canceling your coverage due to pre-existing conditions or application mistakes. However, there are other cases where you may lose your coverage. Your insurance premiums may also rise, making it hard to afford. So, individuals dropped by their existing insurer or facing unaffordable premiums may need to seek private health insurance for continued coverage.

About Mark Fitzpatrick


Mark Fitzpatrick headshot

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.


sources