If the freedom to create a plan that fits your unique needs is a top priority, then a private health insurance plan might be right for you. Unlike public health insurance plans, which are funded by tax dollars, private health insurance plans are funded by individuals (like you!). This allows for greater customization and access to a larger network of providers.
But what is private health insurance and how does it work? In this blog, we’ll discuss types of private plans, review the benefits of private health insurance, and help you decide if this type of coverage is right for you.
One of the easiest ways to explain what private healthcare is might be to explain what it’s not. So before we dive into examples of private insurance, let’s first cover some common examples of public insurance. These include:
Each of the above plans is funded by state and federal tax dollars, which makes them public health plans. A private health plan is any health plan that is not government-funded. So if you’re looking at a plan that doesn’t fit the list above, it’s most likely a private plan.
Public and private health plans operate differently in several ways. You already know that the cost of private health insurance is paid for by the insured (or, in some cases, their employer) rather than the government. There are some other key differences to keep in mind.
First, there’s eligibility. In order to qualify for a public health plan, you will need to meet certain criteria, such as income requirements or being part of a protected group. Meanwhile, anyone has the freedom to buy a private health plan. However, one important note to keep in mind is that premiums for private health insurance are higher than those for public insurance.
With a private plan, you’ll have access to a large network of providers. However, not as many doctors accept government-funded plans, so your options for care might be limited. You also have the option to customize a private plan in ways you can’t with a public plan (we’ll touch more on that later).
If you decide that private health insurance is right for you, here’s a breakdown of what you need to know to sign up for a plan (and how to use it):
If you ever have questions about what’s covered, which doctor you can see, or why a claim was denied (or only partially covered), find your insurance carrier’s member support number on your ID card.
Private health insurance is available in a wide range of options, making it easy to pick a plan that suits your lifestyle and budget. Here are some common examples of private health insurance.
If your employer offers health insurance as a benefit to their employees, that’s what’s known as employer-sponsored health insurance. Employers often receive discounts on these large group plans and can pass those savings on to employees. Additionally, an employer might pay some or all of the premiums for their covered employees.
As its name suggests, this type of plan covers a single person (as opposed to a group, or a family). Individual health plans offer comprehensive coverage, including preventive care, pre-existing conditions, mental health services, and more. If you are single and have no dependents, you will most likely purchase an individual health plan.
Family health insurance plans are designed to cover several family members, usually living in the same household. These plans eliminate the need to sign each person in a family up for their own, individual policy, instead providing coverage for everyone under the same policy.
Short-term health insurance is a practical solution for anyone experiencing a gap in coverage, which can happen during life transitions such as losing your job or going through a divorce. This type of plan doesn’t offer as comprehensive of coverage as other plans. For example, short-term plans don’t cover preventive care, pre-existing conditions, pregnancy or childbirth, or mental health care. However, it can provide protection against unexpected accidents and illness for up to 12 months.
You can think of catastrophic insurance as “emergency” insurance. It’s designed for individuals in good health who don’t go to the doctor often, but want coverage for major events such as accidents and illness. Catastrophic insurance has some of the lowest premiums, but the highest deductibles, making it ideal for those looking to keep monthly expenses low and those who don’t predict many medical expenses.
High Deductible Health Plans (HDPs), like catastrophic plans, have low premiums and high deductibles. However, unlike catastrophic plans, HDHPs are comprehensive policies that offer a range of benefits, including preventive care, emergency care, pre-existing condition coverage, mental health services, maternal care, and more. Most HDHPs are eligible for a Health Savings Account (HSA), a tax-advantaged, interest-earning account that you can use to pay for qualifying medical expenses.
Health Maintenance Organizations (HMOs) focus on prevention, requiring you to choose a primary care provider (PCP) who will help manage your healthcare journey. HMOs require referrals from your PCP to see specialists and have a network of providers through whom you’ll receive the most affordable healthcare. Some HMOs provide out-of-network coverage, but the highest level of coverage can be found within the network. HMOs typically have modest premiums and deductibles.
Preferred Provider Organizations (PPOs) provide comprehensive coverage, comparable to that of HMOs and HDHPs. However, PPO plans do not require referrals to see specialists and can offer more out-of-network coverage than other plans. That said, PPO plans do still have a network of providers, and you’ll receive the most affordable care by sticking to that network.
Exclusive Provider Organizations (EPOs) require you to see a specific network of providers, offering no out-of-network coverage (except for emergency care). EPOs usually don’t require a referral from your PCP to see a specialist and have reasonable monthly premiums, combining the flexibility of PPOs with the affordability of HMOs.
If you would like the option to go out-of-network, but know you’ll mainly remain in-network, a POS plan could be right for you. Like an HMO, a POS requires referrals to see specialists. However, like a PPO, a POS does provide coverage for out-of-network care — but you’ll pay higher costs if you leave the network. Some individuals like the freedom to decide which provider makes the most sense — in network or out of it — at the time of care (i.e. Point of Service), and so they choose this plan.
Even with quality health insurance, you’ll always have an out-of-pocket obligation in the form of deductibles and co-insurance. For some individuals, these expenses can be a major burden. Fixed Indemnity Health Insurance provides supplemental coverage to help you pay your bills during major medical events. These plans pay covered individuals a preset, fixed cash benefit to assist with out-of-pocket expenses.
Some individuals choose to add supplemental health insurance that provides coverage outside the scope of most traditional health plans. Examples include:
Supplemental health plans are not meant to substitute comprehensive medical plans. They do not provide coverage for pre-existing conditions, preventive care, or other basic healthcare needs.
If you frequently travel out of the country, check to see if your comprehensive health plan provides international coverage. Some traditional plans do, however, if yours does not, adding this supplemental coverage is critical to ensuring your care is covered during travel. International health insurance can cover hospital stays, extended critical care, and other emergency care when you’re out of the country. In some cases, it can even pay for health-related trip cancellations and medical evacuations.
Now that you have the gist of these plans, let’s address the question that’s really on your mind: What is private healthcare’s advantage over public insurance? In simple terms, because it isn’t government-regulated, private healthcare is more comprehensive and flexible than public health insurance. But, the full answer is a bit more layered.
Below are some of the top benefits of private healthcare.
Only a limited number of providers accept public healthcare. Meanwhile, most healthcare providers accept private insurance, giving you more freedom to explore your options and choose the doctor who best fits your needs.
Because fewer doctors accept public versus private health insurance, individuals with public insurance typically face long wait times for appointments. Alternatively, with private insurance, you can choose from many doctors, so you aren’t competing for limited spots within a small network of providers. That means you can select the one who can see you ASAP.
Since there is such a broad spectrum of private health plan types, you can find a policy that pays for the specific treatment you’re seeking. That gives you the freedom to choose a plan that will cover specialized treatments and advanced procedures that public plans don’t cover.
While public health plans can be rigid, private health plans are highly customizable, giving you the flexibility to create the coverage that best fits your needs. From adding dental and vision care to choosing plans that cover holistic treatments and more, there are countless ways you can tailor your private coverage.
In general, individuals with private health insurance enjoy a better patient experience compared to those with public health insurance. Healthcare facilities that exclusively take private insurance tend to have more comfortable rooms and more modern amenities than publicly funded facilities. Private healthcare also typically covers private hospital rooms, along with premium services such as physical therapy, holistic treatment, and cutting-edge technology that can enhance patient comfort and satisfaction.
Private health plans can provide frequent travelers with international coverage for medical emergencies. This type of coverage isn’t typically available through public health insurance plans, leaving individuals vulnerable when they leave the country.
When you purchase private health insurance through the Health Insurance Marketplace, you can apply for tax credits that bring down your total tax liability, or cover part of your monthly premiums. Additionally, some self-employed individuals can deduct their private health insurance premiums from their income.
If you want the most comprehensive protection against all types of medical events, private health insurance is the way to go. With so many plans to choose from — and even piece together — private plans let you create coverage that protects you against devastating financial burdens, offering priceless peace of mind.
Several factors influence the cost of private health insurance, including things like your age, location, income, size of your household, and even tobacco use. In fact, insurers are allowed to charge older adults (in their sixties) as much as three times what they charge younger adults (in their 20s). Plus, insurers can charge members who use tobacco 50 percent more than those who do not use tobacco.
Your plan tier — including Bronze, Silver, Gold, Platinum, and Catastrophic — also influences the price of your premiums. As you’ve probably guessed by now, it’s difficult to predict exactly what you’ll pay in premiums. However, we do know that in 2024, the average monthly premium was $603.04.
Premiums are only one part of your health insurance costs. Those monthly payments keep your plan active and must be paid, whether or not you receive care. However, when you go to the doctor, you could face these additional costs:
When choosing a plan, it’s important to consider not only the monthly premium but also the other costs that will arise and make sure you’re prepared to cover them.
Now that you have a better understanding of the advantages of private health insurance, let’s go over how to determine the best private plan for your needs. Here are some things to consider when shopping for plans.
Finding a plan that fits your budget will relieve financial stress, and get you access to quality care without compromising your financial goals. But, it’s not as simple as choosing the cheapest premiums. Remember that, the lower the premiums are, the higher the other costs tend to be, like your deductible and co-insurance rate. So make sure that you can not only afford the monthly premium but that you’re also prepared to cover any other out-of-pocket costs that might come up.
It’s important that you find a plan with a network of providers that align with your needs and goals. That’s why it’s crucial that you do your research on a plan’s in-network doctors. Look for information like:
A comprehensive, quality, and accessible network of providers can make a huge difference in your experience as a patient, so it’s important to choose wisely.
Want more information about health insurance in general? Read our guide to learn how health insurance works.
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We’ve covered a lot about private insurance — the meaning, costs, plan types, and more — but we know you might still have questions. Here are quick answers to some of our most commonly asked questions about private health plans.
The primary difference between these two types of insurance is public insurance is funded by federal and state taxes, while private insurance is funded directly by member premiums.
Not all private health plans are required to meet minimum standards, but most major medical plans do. However, other types of plans such as supplemental, international travel, and fixed indemnity plans do not need to meet minimum standards.
The government does subsidize private health plans for some financially eligible individuals. You can check to see if you qualify for financial aid when enrolling for coverage.
You can buy private health insurance either directly through the carrier or on the Health Insurance Marketplace.
No. You can enroll either through the Open Enrollment Period (which typically lasts from November 1st through mid-to-late January of the following year), or during a Special Enrollment Period if you experience a qualifying life event, such as a job loss, divorce, or death of the primary policyholder.
If you want the most comprehensive coverage, private health insurance can certainly be worth it. With the ability to customize and add onto your plan to ensure the majority of care you might require is covered, private health insurance protects you against financial catastrophes and offers peace of mind.
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