What Is Private Insurance, And How Do You Get It? (2025) (2024)

November 20, 2024 | Read in 5 mins

Whether you have health insurance or are shopping for it, you likely know it can be confusing. Your first question out of the gate might be, “What is private insurance?”

In short, private health insurance is coverage provided under a health plan offered by an employer, union, or organization or purchased from a health insurance company, whether through a marketplace or directly.

What Is Private Health Insurance?

You might be surprised by how many Americans are uninsured, largely due to the costs involved. Medical care is often more expensive than most people can afford to pay on their own. Private health insurance can allow you to access the health care you need and guard against financial ruin from medical costs if you become seriously ill or injured.

You may get your health insurance through an employer-sponsored insurance plan or group insurance plan. A majority of working Americans, nearly 54%, get their health care coverage through the latter arrangement.

You also can purchase coverage directly from a health insurance company or the federal government’s Health Care Marketplace, which is intended to expand healthcare coverage to Americans.

However, buying health insurance through the federal marketplace might raise the question, “What is private insurance?” While the government might provide a subsidy for your insurance, the coverage you receive is private.

Private health insurance stands in contrast to public health insurance, which the government runs. With such a program, a local, state, or federal government pays for part or all of your health and medical care.

Public health insurance includes Medicare for taxpayers aged 65 and older, Medicaid for those who fall below a certain income level, Children’s Health Insurance Program (CHIP), and TRICARE, a Department of Defense benefit that provides health and medical coverage for veterans and military service men and women.

How Does Private Health Insurance Work?

A private health insurance policy is a contract between you and your insurance company, even if you’re part of an employer-sponsored plan. You agree to pay the insurer a monthly premium, and it, in turn, agrees to pay for part or all of your medical care.

Private health insurance works by pooling the premiums of all customers. By doing so, the company combines the risk of the group and determines the amount needed to pay for the medical care of everyone in the pool. This setup requires healthy people to offset the higher cost of those who might require more costly care.

This approach can provide you with health coverage at a lower cost than you would pay on your own. Many private health plans pay up to 100% for preventive care, including annual checkups, health screenings, and vaccinations.

That said, you may have other costs beyond your premium. These can include:

• Deductible: The amount you pay before your insurance kicks in
• Coinsurance: Your share of the cost for care (usually an 80/20 split)
• Copay: A flat fee you pay when you go to the doctor or buy a prescription

While private health insurance comes from private companies, the insurance system as a whole is regulated by federal and state governments.

Types of Private Health Insurance

The type of private health insurance that will work best for you will depend on your situation. Here are a few examples of private insurance plans worth considering:

Individual

An individual plan is a policy that covers a single person. This type of plan is ideal if you’re unmarried and have no dependent children.

Family

A family health insurance plan can cover you, your spouse, and other dependents. The family-plan premium for employer-sponsored health insurance rose 7% in 2024 to $25,572, with the average worker’s share at $6,296.

Medicare Advantage

Medicare Advantage (Part C) is an alternative to traditional Medicare (Parts A and B) offered through private insurance companies. This plan often includes prescription coverage (Part D).

Short-Term

Short-term health insurance can provide you with crucial coverage when you’re not on a conventional plan, such as when you’re between jobs. The term is temporary, often extending up to 12 months, and doesn’t provide preventive care or cover pre-existing conditions, pregnancy, childbirth, mental health, or substance abuse.

Catastrophic

If you’re young and healthy, catastrophic health insurance can provide only necessary coverage for severe injuries or serious illness.

Supplemental

While not a substitute for comprehensive health coverage, a supplemental health insurance plan can offer additional financial support for certain medical situations.

Dental and Vision

Typically offered as stand-alone policies, dental and vision plans can extend coverage to help pay for the cost of oral and eye care, such as checkups and exams, surgical procedures, and eyeglasses.

Is dental insurance worth it? Is vision insurance worth it? Since they’ll make your premiums more expensive, it’s up to you to decide.

Long-Term Care

Often overlooked in retirement, long-term care insurance can help cover the costs of home healthcare or an extended stay in a nursing home or assisted living facility.

Specific Disease or Illness

Health insurance for a specific condition, such as cancer or diabetes, can help defray the cost of treatment and other related expenses.

Travel

Travel health insurance can be useful for covering expenses for a medical emergency or care while you’re abroad. Pre-existing conditions aren’t typically covered.

Private health insurance can vary based on where you live and the insurer you choose. To get the coverage that best fits your needs, it’s important to carefully review and compare your plan options.

If you’re on a group health insurance plan and relocate with the same employer, your options may change. It may therefore be wise to consider private health insurance when planning your move.

Learn More About Private Health Insurance With ConsumerShield

If you’re shopping for a new health insurance policy or looking for someone to answer additional questions, help is within reach. At ConsumerShield, our mission is to empower consumers with information. Reach out today to find the coverage you need.

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