Since graduating from the University of WA with a B.A. in English Literature, Shawn has been professionally writing in the spheres of entertainment, insurance, business, marketing, and politics. His work has been published on SUPERJUMP, FanFare, Den of Geek, and Amplihigher. He is passionate about using his writing skills and insurance knowledge to educate the general population on everyday iss...

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Written by Shawn Laib
Insurance and Finance Writer Shawn Laib

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 29, 2022

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The Truth in a Nutshell

  • Private health insurance is an alternative to publicly funded health insurance like Medicare, Medicaid, and CHIP
  • Some private health insurance is available through employers, but individuals can purchase health insurance on their own too
  • Private health insurance companies offer plans both on the ACA marketplace and through off-exchange purchase options

Whether you recently experienced a qualifying life event or are simply researching your options, you probably have many questions about private health insurance.

What is the definition of private health insurance, and how is it different from public-funded options? Is it cheaper to buy private health insurance on or off the exchange? Should you go with employer-provided health insurance or seek it on your own?

There are many important questions like these to ask yourself when shopping for health insurance.

Whether you are new to the process or just shopping around, this article will help you understand your options regarding private health insurance. When searching for affordable coverage that meets your needs, it is crucial to compare health insurance quotes.

By speaking with a professional and comparing quotes, you can be sure to get the best deal on the right coverage for you and your family.

What is private health insurance?

Private health insurance is the alternative to public-funded health insurance options. Public health insurance options include Medicaid, Medicare, and CHIP. Private health insurance is suitable for individuals who do not qualify for or are not interested in public health insurance.

There are many private health insurance companies available in the United States. Depending on your state of residence, you may have more options than others. The top private health insurance companies by gross market share are:

  • UnitedHealth Group
  • Anthem BlueCross and BlueShield
  • Centene Corporation
  • Kaiser Permanente
  • Humana

There may be other private health insurance companies available in your area.

You will pay monthly premiums directly to the insurance company when you have a private health insurance plan. This structure differs from public-funded options, which are subsidized by the state and federal government. Taxes pay for public health insurance plans, although Medicare does still require you pay a monthly premium.

When shopping for private health insurance quotes, there are many ways to obtain a plan. These include employer-provided health insurance, Obamacare or ACA marketplace plans, and off-exchange direct purchases.

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Employer-Provided Private Health Insurance

Full-time employees are typically eligible for additional benefits besides just their salary. These benefits include retirement plans, life insurance, and private health insurance.

If your company offers private health insurance, then the rates you pay might be lower than if you purchase individually. This possibility for lower premiums exists because the employer splits the risk across all employees, minimizing monthly rates. Additionally, employers pay a certain percentage of monthly health insurance premiums.

The Affordable Care Act Health Insurance Marketplace

The Affordable Care Act, or Obamacare, health insurance options are available on the marketplace (also known as the health insurance exchange.) If you are not eligible for employer-provided health insurance, you are likely to seek coverage through the marketplace.

Depending on your income, the monthly rates you pay for ACA health insurance plans can be lower than employer-provided plans. The government offers tax credits for individuals who make less than 40% of the federal poverty line, saving you money.

Plans available on the health insurance marketplace come in three different metal tiers. These tiers are Bronze, Silver, and Gold. Some private health insurance companies also offer Platinum plans.

Bronze

Bronze-level private health insurance is the minimal essential coverage available. For Bronze plans, the monthly rates are typically inexpensive. Lower premiums come at a trade-off as deductibles, and out-of-pocket expenses can be quite high. The average cost of a Bronze tier health insurance plan premium in 2022 is $329.

Bronze plans are suitable for individuals who are generally in good health. A Bronze plan might be ideal if you do not go to the doctor often and only want to cover large one-off expenses.

Silver

Silver-level health insurance plans are the most balanced type of private health insurance. While the premiums tend to be more expensive than Bronze tier plans, the out-of-pocket costs are lower. On average, a Silver tier plan premium in 2022 is $428.

Silver tier plans are ideal for most average Americans. The monthly rates are affordable, and out-of-pocket costs are reasonable. Suppose you see the doctor regularly but do not have expensive procedures or medications. In that case, Silver is probably a good plan for you.

Gold

A Gold tier plan is the highest level private health insurance coverage available on the marketplace. The premiums for Gold plans are the highest of the three metal tiers, with the trade-off being low out-of-pocket costs. Monthly rates for Gold tier plans tend to be around $462.

If you have a chronic health condition, require frequent doctor’s visits, or take expensive medications, a Gold tier plan is likely worth the extra monthly expense.

Platinum

Not all private health insurance companies offer Platinum tier plans. A Platinum plan will have the highest monthly rates, but out-of-pocket costs can be next to nothing. If you require frequent intensive care, a Platinum plan might be worth the investment.

Plans purchased off the marketplace might not follow the essential care rules established by the Affordable Care Act. You should thoroughly research off-exchange plans to ensure you are not overpaying while also being underinsured.

What expenses are associated with private health insurance plans?

When shopping for a private health insurance plan, you have probably run into quite a few unfamiliar terms. What is coinsurance, and how does it differ from co-payment? Why is a deductible usually a different number than the maximum out-of-pocket expense?

You will be responsible for different expenses if you have a private health insurance plan. Private health insurance companies manage these financial obligations differently.

Coinsurance vs. Co-payment

Many people are familiar with copay, but coinsurance is less well-known. Copay refers to a set dollar amount individuals must pay when seeking care. Commonly you will see a flat rate, such as a $20 copay, for doctor’s visits or prescription drugs. Coinsurance is similar to co-payment, but it is a set percentage instead of a set dollar amount. For example, if you have a 10% coinsurance for hospital visits, you would be responsible for paying $100 of a $1,000 emergency room bill.

Deductible vs. Maximum Out-of-Pocket Expense

A deductible is the amount of money you will need to pay before your insurance takes over. The deductible and out-of-pocket expense can be the same number for some plans. This structure makes it easy to determine precisely how much you will be responsible for paying. Maximum out-of-pocket expense refers to the cap on how much you will need to pay altogether. After your deductible is met, you may still be responsible for co-payment or coinsurance until you reach your maximum out-of-pocket expense.

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What are the different types of private health insurance?

Private health insurance comes in a few different types. HMO, PPO, and EPO are the most common plan types.

Health Maintenance Organizations (HMOs)

HMOs are the most restrictive but often require the least amount of paperwork and research. You can only see providers in-network, and you are responsible for paying the entire bill for out-of-network providers.

Preferred Provider Organizations (PPOs)

PPOs allow more freedom when choosing your primary care physician. If you need to see a specialist, you’ll have to get a referral from your primary care physician. Paying for out-of-network care is more expensive than in-network care, but some coverage exists.

Exclusive Provider Organizations (EPOs)

EPOs offer a similar level of freedom as a PPO but with a lower premium. Seeing a specialist does not require any referral from your primary care physician. Similar to an HMO. If you see an out-of-network provider, you are responsible for paying the entire bill.

Other plan types are available, such as point-of-service (POS) and indemnity plans. These are less common than HMOs, PPOs, and EPOs.

Private Health Insurance Options

If you are not eligible for public health insurance, private health insurance is your primary option for healthcare coverage. After reading this article, you should better understand what private health insurance is and what associated terms mean.

Before selecting a private health insurance company, you should research the coverage you need. Instead of just going with the lowest premiums, you need to have a complete picture of what level of care you anticipate needing.

Comparing private health insurance quotes is essential to get the most affordable comprehensive coverage to suit your lifestyle.