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  • Private health insurance is different than group health insurance plans
  • There are out-of-pocket expenses associated with private health insurance
  • Individuals are able to customize private health insurance plans


While many people have health insurance through an employer’s group health insurance, There are individuals and families who have to get it through a private health insurance company. A private health insurance company sells insurance to individuals and families much like an auto insurance company sells auto insurance to consumers.

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What makes private health insurances plan differentAdobeStock_56335353-1600x1600

Private health insurance has a few differences compared to group health insurance. The advantages and disadvantages of private health insurance will vary depending on an individual’s or family’s health needs.

Health insurance is a necessity. It will help to pay for medical costs such as hospital stays, doctor visits, and surgery if an individual becomes sick or has an accident.

What expenses are associated with private health insurance plans?

Each plan will have its own out-of-pocket expenses that are associated with the cost of the plan. Basic expenses typically include:

  • Premiums  – The premium is the cost of the health insurance plan for one year. It can usually be made in one lump sum payment or divided into monthly payments.
  • Deductibles – A deductible is a certain monetary amount that must be paid out-of-pocket before the health insurance will begin to cover health service costs.
  • Out-of-pocket expenses that count towards a deductible include doctor visits, cost of prescriptions, and some medical equipment. Once the deductible has been paid, the health insurance will begin to cover medical expenses.
  • Co-payments – Co-payments are a set amount that must be paid out-of-pocket for medical services and prescriptions; the health insurance pays the rest of the amount. Each service or prescription will have a set co-payment that is the responsibility of the insured.

What options are available for private insurance?

Private health insurance options include two basic types of plans. Each has its own benefits and costs to fit an individual’s or family’s needs.

Indemnity plans allow for flexibility and freedom to choose a health service provider, hospital, and pharmacy. These plans have monthly premiums and deductibles; some have a percentage co-payment as well.

Managed Care plans have more restrictions with health providers and pharmacies. Under managed care plans, an individual has to see a provider who is on the approved providers list; this list is generally called a network.

While managed care plans can be cheaper, they will not pay for services rendered by a provider who is not in the network.

Further options include flexible spending accounts and health savings accounts that let consumers pay for insurance with tax-free dollars. Catastrophe health plans and limited health insurance plans offer limited benefits or high deductibles for more inexpensive coverage options.

How does private health insurance compare to group health insurance?

AdobeStock_99673991-1600x1600Group health insurance is offered through an employer; it covers a whole group of people rather than just an individual or family.  Because the risk is spread over a large group, it is a less risky proposition for the insurance company.

Some participants will use the coverage a lot and some will use it very little. This spread-out risk makes group insurance generally less expensive than private insurance.

Furthermore, the premiums for group health insurance are usually partially paid by the employer as a benefit to employees.

Private insurance tends to be more expensive because the full cost of the premium must be paid by the insured. However, employees are commonly limited by the coverage provided by an employer.

If the coverage is lacking an option that an employee needs, such as coverage for maternity costs, then the employee has no further options within the employer’s plan.

An individual or family who receives coverage through a private health insurance company has the freedom and flexibility to compare rates, coverage and options to best fit their health needs.

What are the benefits of private health insurance?

Private insurance gives consumers a measure of control over rates and the coverage purchased, as the plans can be customized.

If an individual does not need a particular coverage or option, then it can usually be removed to lower the premium of the plan.

Furthermore, consumers who buy private health insurance can adjust other features of the plan, such as deductibles, to further decrease the price of the plan’s premium.

What are the disadvantages of private health insurance?

AdobeStock_92692139-1600x1600Private health insurance is generally more expensive than insurance provided through an employer. The premiums are paid completely out-of-pocket by the insured and the risk of high payouts due to disease or injury is not shared.

Moreover, because of this higher risk, private insurance companies are likely to deny coverage to those with pre-existing conditions such as diabetes, heart disease, and cancer.

Those who suffer from diseases or poor health are more likely to need high-dollar medical services; because of HIPAA laws, group health insurance cannot deny coverage to any eligible employee, but private health insurance can.

While private health insurance companies can no longer deny or restrict coverage to children under the age of 19 due to a pre-existing condition, many adults find it very hard to find affordable health insurance through a private insurance provider due to a pre-existing condition.

How do I get the best rates for private health insurance?

Health insurance rates will vary depending on factors such as age, gender, overall health and where you live. Some of these factors, such as overall health, can usually be improved by the consumer to lower health insurance rates.

However, the best rates can be found by getting quotes from multiple health insurance companies. Comparing rates, coverage, deductibles and co-payments is really the only way to find the best rates for an individual’s or family’s health insurance coverage.

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[su_spoiler title=”References:” icon=”caret-square” style=”fancy” open=”yes”]

  1. https://www.healthcare.gov/glossary/health-savings-account-HSA/
  2. http://www.hhs.gov/healthcare/facts-and-features/fact-sheets/aca-and-maternity-care/
  3. https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/
  4. https://www.healthcare.gov/glossary/pre-existing-condition/
  5. http://www.privatehealth.gov.au/healthinsurance/howitworks/


Categories: FAQ