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What are the Pros and Cons of Private Health Insurance?

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What are the Pros and Cons of Private Health Insurance?

What are the Pros and Cons of Private Health Insurance?

Just the Essentials...

  • Private health insurance is often less expensive than group health insurance offered through an employer, though you may face a more restricted network or higher deductibles in exchange for savings.
  • Private health insurance is not linked to employment, guaranteeing coverage throughout the year.
  • Group health insurance plans generally offer more benefits, but limit you to a single plan determined by your employer.

What are my options when it comes to health insurance?

Not everyone has access to health insurance through their employer. Perhaps you’re self-employed, or work for a small business that isn’t required to offer it. In that case, private health insurance is your best option. Private health insurance is any insurance policy offered to individuals through a private insurer. This is in contrast to group health insurance, typically offered through an employer or large organization in conjunction with a private insurer, or government-sponsored plans like Medicaid. Depending on your situation, you might have the choice between a group plan through your employer or spouse, or a private marketplace plan. While choosing the group plan might seem like an obvious choice, there are some pros and cons you need to consider when committing to any insurance plan.

The Benefits of Private Health Insurance

The biggest benefit of a private insurance plan is choice

With group health insurance, you are locked into whatever plan your employer provides. This means you are limited to a single network, pay a standard premium, and receive a standard package of benefits. This can lead to some inconveniences, like a family physician being out-of-network, or the services offered being ill-suited for your needs. With private insurance, this isn’t an issue: you can choose from a variety of marketplace plans, with varying networks and added perks. Do you have a medical condition that requires special benefits not typically covered by insurance? A private plan may be right for you.

Another benefit is cost: group health insurance plans are partially paid for by your employer, meaning you’ll pay less than you would for purchasing an equivalent individual plan. However, even with discounts, these plans can cost hundreds of dollars per month. For someone young and relatively healthy who does not need extensive insurance coverage, going for a lower-cost plan may be the wise solution. The premium tax credit and cost-sharing reductions can make these plans even more affordable.

Private insurance also comes with stability: so long as you pay your premiums, you are guaranteed coverage for the year. You cannot lose coverage for being laid-off, fired, or seeing your company go out of business. While you can extend group coverage after losing employment with COBRA, the expensive premiums may discourage the recently unemployed.

The Drawbacks of Private Health Insurance

Private insurance is very much a case of ‘you get what you pay for’. In terms of out-of-pocket costs, a private health plan can seem cheaper compared to your employer’s plan, especially with the premium tax credit and cost-sharing reductions in play. However, there are some unseen costs associated with going private.

To put it bluntly, many group health insurance plans are just better than their private alternatives. This isn’t universally the case, but they often have more flexible networks and lower deductibles than what you could get on the Marketplace for the same out-of-pocket cost. That’s because the bulk of the cost in a group plan is taken on by your employer, who receives a discount in exchange for buying in bulk. That’s right: the same principle that lets you save money buying toilet paper at Costco applies to your health insurance. 

Group insurance plans often use broader networks like Preferred Provider Organizations, which allow for more flexibility in what doctors you can see. Less expensive private plans, like Health Maintenance Organizations (HMOs) limit you to a narrower network of providers and may require you to get a referral from your primary care physician before you can see a specialist. Some services, like mental health, might not be fully covered.

You also take on a larger cost-sharing burden when choosing a lower premium plan. Many private plans are considered to be high deductible, meaning you are unlikely to meet the deductible for services in a given year. Catastrophic plans often fall into this category, as do some Bronze metal plans. While these plans will cover annual doctor visits and prescriptions, you’ll have to pay thousands of dollars in deductibles and co-insurance should the worst occur. A low-deductible plan can avert this, but these are often comparable in price to group health insurance plans, if not more expensive.

It’s important to weigh your options when buying health insurance. That’s where we can help. Contact one of our licensed insurance agents today by calling (800) 318-9984 or entering your ZIP code to start reviewing your options!

Key Resources:

1. Where Can I Buy Private Health Insurance?

2. What is Group Health Insurance

3. What is Coinsurance

4. What is a Healthcare Network