What is Private Health Insurance? – Forbes Advisor

You can get health insurance in many ways, but you can generally group plans into two broad categories: private and public.

Private health insurance is the most common way Americans get coverage. Here’s how it works.

Types of Private Health Insurance

Private health insurance is coverage provided by a private entity (such as UnitedHealthcare or Kaiser Permanente) rather than the government. Insurance provided by the state or federal government is considered public health insurance.

The US Census estimates that 66.5% of Americans have a private health plan compared to 34.8% of those with public plans.

There are several different types of private health insurance you can buy.

Employer sponsored health insurance

Employers often offer group health insurance as part of their benefits package. This coverage may be available only to you, or coverage may be extended to your spouse and dependents at a higher price.

The Affordable Care Act (ACA) mandates that businesses with 50 or more full-time employees offer comprehensive health insurance that pays at least 60% of health insurance costs. Businesses that do not provide minimum affordable health insurance coverage may be subject to a tax penalty.

Nearly half of all Americans receive employer-sponsored health insurance, according to the Kaiser Family Foundation.

ACA marketplace plans

You can also buy health insurance through the Affordable Care Act (ACA) marketplace at Healthcare.gov. The marketplace allows you to compare available health insurance plans and enroll through a variety of methods, including online, over the phone, and in person.

The federal government provides its own health insurance marketplace in most states, while a handful of states have their own exchanges. When you apply for ACA health insurance, you enter family and income information. Based on this information, the market estimates the cost of health insurance after taking into account potential tax credits and premium subsidies.

Individual health insurance directly from an insurance company

You can also purchase individual health insurance directly from a health insurance company.

These plans do not have to be in accordance with AKK regulations. For example, they may not offer all the essential health benefits found in ACA plans, such as:

• Emergency services
• Hospitalizations
• Laboratory services
• Mental health and substance use disorder services
• Outpatient care
• Pediatric services, including vision and dentistry for children
• Pregnancy, maternity and newborn care
• Prescription drugs
• Preventive and wellness services
• Rehabilitation and rehabilitation services and equipment

Without having to comply with ACA regulations, you can buy cheaper health insurance directly from an insurer that doesn’t have as much coverage as what’s on the market. Health insurance companies often also offer similar plans as those found in the market.

An important difference between the marketplace and purchasing directly from an insurance company is that plans purchased directly from an insurance company do not qualify for premium tax credits or subsidies like marketplace plans. This may not affect you if your household income exceeds the tax credit and subsidy limits, but if you qualify for those cost savings, you must stick to a marketplace plan.

Short term health insurance

Most states allow low-cost, short-term health insurance, which provides limited coverage for a limited time. These health plans offer inexpensive coverage, but they do not offer the protections found in standard health insurance.

Short-term health plans may also exclude pre-existing conditions and have limits on prescription drug benefits, doctor visits and covered services. Short-term plans also generally do not cover maternity care or mental health.

You might consider a short-term health plan if you lose your job-related coverage and don’t want to pay for COBRA health insurance until you get new employer-sponsored coverage again. Or you may simply prefer the low costs of a short-term plan, knowing that those plans don’t offer the coverage found in a standard health plan, and you’ll pay a lot more for care when you need it.

Short-term health insurance typically lasts for an initial 364 days, with the option to renew for up to 36 months in most states. But some states have additional stipulations, and some states, including California, don’t allow short-term health insurance plans.

Catastrophic health insurance

Catastrophic health insurance is a type of coverage found in the ACA marketplace that offers the same level of coverage found in an ACA plan, but with a hefty discount.

A catastrophic health insurance plan deductible in 2022 is $8,700. After you meet the deductible, a catastrophic plan collects the rest of your health care costs for the year.

These policies are not for everyone. You must be under the age of 30 or qualify for a hardship exemption. For example, you may qualify for a hardship exemption if you are homeless.

A catastrophic plan may be a choice for a young person who just wants a safety net plan with comprehensive coverage, but this low-cost option comes with hefty out-of-pocket costs when you need care.

What is not considered private health insurance?

Medicare, Medicaid, and CHIP plans are not private health insurance.

Medicare

Medicare is the health insurance program for eligible Americans that is run by the federal government. About 18% of Americans have Medicare, according to the most recent data from the US Census Bureau.

You must meet one of three qualifications to qualify for Medicare coverage:

• You must be 65
• Have a qualifying disability
• You have end-stage renal disease that requires dialysis or a transplant

Medicare is divided into Original Medicare and Medicare Advantage.

There are two parts to so-called Original Medicare coverage:

• Medicare Part A: This covers hospitalization, nursing facilities, hospice and home care.
• Medicare Part B: This is medical insurance that covers your doctor’s appointments, outpatient care, medical supplies and preventive services.

People with Original Medicare can also get prescription drug benefits through:

• Medicare Part D: Prescription drugs, including some injections and vaccines, are covered by this part of Medicare.

An alternative to Original Medicare is Medicare Advantage, also called Part C. Private health insurance companies work with the federal government to offer Medicare Advantage plans and often have additional benefits not found in Original Medicare.

Medicaid

Medicaid is a government-funded health insurance plan designed for low-income families. Women who are pregnant and those with disabilities may also qualify. About 18% of Americans have a Medicaid plan, according to the most recent data from the US Census Bureau.

Medicaid is available in all states, but eligibility rules vary by state. Coverage begins immediately for qualified applicants. You can also visit the health insurance marketplace to fill out an application and see what options are available to you.

CHIP

More than 9.6 million children are enrolled in the Children’s Health Insurance Plan, or CHIP, which provides coverage for children and mothers. The low-income program is state-run and funded jointly by the states and the federal government.

Some states roll CHIP into the state Medicaid program, while others have separate Medicaid and CHIP programs.

CHIP coverage includes several types of coverage, such as well-baby and well-child visits, dental insurance, behavioral treatment, and vaccines.

How to find cheap private health insurance

Group health insurance plans offered through workplaces are often the most affordable private health insurance plans because employers subsidize the costs.

If you don’t qualify for an employer-sponsored plan, you can use the ACA marketplace to find coverage and buy a plan. These plans often cost more than employer plans, but you can save money if you qualify for premium tax credits and subsidies, which reduce the costs of ACA plans.

Another option for cheaper private health insurance is to buy short term health insurance. But you shouldn’t look at short-term health insurance as a long-term coverage solution. These plans offer limited coverage, high out-of-pocket costs, and an expiration date.

Private Health Insurance FAQ