Private health insurance – A complete guide

Don’t despair if you’re self-employed or can’t get group health insurance for an employer. You can still obtain private health insurance plans for yourself or your family through several different channels. 

The key is to carefully consider your needs and health status and shop around for options.

What is private health insurance?

Around half of the country’s population gets employer-sponsored health insurance, according to the Kaiser Family Foundation. But not every employer offers group health insurance, and some employees prefer to decline their employer’s health insurance — opting to shop around for coverage.

Many other Americans are self-employed, which means they have no choice but to purchase individual health insurance if they want coverage.

Fortunately for all those who fit this criteria, private individual and family health insurance options are available through either the federal marketplace or directly from insurance companies.

 

Private health insurance plan options

The Affordable Care Act (ACA) created the ACA marketplace, which lets people compare plans that offer comprehensive coverage. These plans are often called Obamacare.

“These plans have to cover the 10 essential health benefits, they can’t medically underwrite and they can’t have a cap on their annual coverage,” says Marshall Darr, vice president of marketing for Decent. “They also can’t exclude you for pre-existing medical conditions. They’re more regulated, and your costs may be lower if you qualify for a government subsidy, but oftentimes they are more expensive than employer-sponsored insurance.”

Insurers like Blue Cross Blue Shield, Cigna and Aetna often offer private individual health insurance, which you can buy directly from the company. 

“Some of these companies opt to be ACA-compliant, meaning they offer many of the consumer protections that Obamacare plans offer, but others do not. Private marketplace plans are often a little cheaper than federal marketplace plans, and they tend to be curated offerings to particular subsets of the population,” Darr explains.

 

Types of individual private health insurance

Both federal marketplace and private marketplace plans come in different types and tiers. These can differ by benefit type, such as:

• Preferred provider organization (PPO) — These plans are often the most expensive. They offer more flexibility than other plan types and allow you to get care out of your network and see specialists without getting referrals.
• Health maintenance organization (HMO) — HMOs are more restrictive than PPOs and require you to choose a primary care provider. You’ll need referrals from your primary care provider to see specialists and the plan won’t pay for out-of-network care. 
• Exclusive provider organization (EPO) — EPOs are a PPO/HMO hybrid. The plans don’t pay for care outside of your network, but you don’t need referrals to see specialists. 
• Point of service (POS) — POS plans require you to choose a primary care provider, but you can receive care outside of your network. You also don’t need referrals to see specialists. 

Those are just the different benefit designs. Individual plans are also classified by metal tier, based on costs:

• Bronze — These plans have the lowest premiums but the highest out-of-pocket costs when you need health care. 
• Silver — Silver plans have lower premiums than Gold or Platinum but lower out-of-pocket costs than Bronze plans. Silver plans are also often eligible for additional cost-saving subsidies for people who qualify. 
• Gold — Gold plans have higher premiums than Bronze and Silver but lower out-of-pocket costs for those plans. 
• Platinum — Platinum plans have the highest premiums but lowest out-of-pocket costs. 

Bronze plans are usually the cheapest plans in terms of the lowest upfront costs. However, they’re also high-deductible health plans (HDHPs), which means you pay more when you need care. 

“A high-deductible health plan is a worthy option if you are trying to save money on health expenses,” says Jason Bornhorst, CEO/co-founder of FirstDollar.com. “These plans tend to have the lowest premiums but charge a higher deductible. That makes them typically good choices for younger, healthy people.”

With an HDHP, you pay more healthcare costs yourself (a deductible of at least $1,400 for an individual or $2,800 for a family) before your insurance carrier begins to pay its share. An HDHP can be paired with a health savings account (HSA). HSAs allow you to save tax-advantaged money for healthcare expenses. 

But while HDHPs usually charge less for premiums, they can cost more in the long run if you need many healthcare services.

 

Other private health insurance options

If you are on a tight budget, you may be able to pick from two different types of plans designed to save money: short-term health insurance and catastrophic coverage.

Short-term health insurance is worth considering if you are between health plans and need temporary health coverage to fill in the gaps in the event of an emergency — and don’t want to pay for COBRA coverage. These plans commonly include varying levels of coverage for doctor visits, preventive care, prescription medications and urgent/emergency care, but little else. For instance, short-term plans don’t usually cover mental health or prescription drug benefits. 

Most states allow short-term plans for up to a year with the chance to renew the policies twice. However, some states restrict the months, while others forbid short-term health insurance. 

Another option for some Americans is catastrophic health insurance. They’re only available for people under 30 years old or people who can demonstrate financial or circumstantial hardship due to bankruptcy, eviction or other reasons.

Catastrophic plans cover essential services like emergency room visits, pregnancy care and prescription medications, as well as some preventive services and a handful of primary care visits annually. The premiums for these plans are relatively inexpensive, but the deductibles required can be high ($8,550 in 2021). Once you pay your deductible, your insurer covers all covered costs with no coinsurance or copayment required. 

 

How to get private health insurance

You can buy health insurance through the ACA marketplace or directly from the insurance company. You can also receive help via insurance brokers. 

Federal marketplace plans can be found and purchased through the healthcare insurance marketplace at Healthcare.gov during open enrollment, which is Nov. 1 through Dec. 15 in most states. About a dozen sites have longer open enrollment periods. 

People may qualify for a special enrollment period during other times of year. You may be eligible for the 60-day period to get a plan if you experience a significant life event, such as getting married, losing other coverage or having a baby. 

At Healthcare.gov, you can select your state to begin an application and review plan choices for which you qualify. Or, you can separately enlist the help of an insurance agent or broker, who can aid you in narrowing down the type of coverage and plan that’s best for you on the federal healthcare exchange.

 

How much does private health insurance cost?

The cost for private healthcare plans varies significantly, depending on many factors like your age, whether you opt for individual or family coverage, the insurance company, type of plan (PPO vs. HMO, etc.) and plan tier (Platinum vs. Bronze, etc.).

EHealthInsurance.com’s recent research shows that the average monthly premium for an ACA plan is:

• $456 for individual coverage 
• $1,152 for family coverage 

Keep in mind that ACA plans are usually much more expensive than employer-sponsor plans unless you qualify for subsidies. 

The ACA provides cost-saving subsidies and tax credits for people with ACA plans who have a household income that’s below 400% of the federal poverty level. To estimate your likely costs for a federal marketplace plan, click here.

Overall, the average monthly premium costs without subsidies Bronze, Silver or Gold single coverage plan in 2020 were:

• Bronze — $448
• Silver — $483
• Gold — $569
• Platinum — $732
  
  

What are the best private health insurance companies?

The ideal private health insurance plan for you will depend on many factors and which companies offer health plans in your area.

The largest health insurers include UnitedHealthcare, Humana, Aetna, Anthem, Centene and Kaiser Permanente. Not all of them offer individual plans — and even those with those plans don’t provide them in every state. You’ll also want to check any insurer’s provider network before signing up. Make sure your physicians accept the insurance and the plan has a wide enough provider network near you in case you need to see specialists. 

“It’s always best to shop around carefully and ponder different plans based on several considerations, including your pre-existing health conditions, general health and fitness level and overall anticipated utilization of services,” recommends Mitchell Fong, health insurance expert with OnlineDoctor.com. “Coverage for any rainy day situation is always important, but shopping for the right coverage, flexibility, deductible, coinsurance and premium is equally essential so that you can find the best plan for you.”

Darr says three crucial criteria should factor into your decision:

• Think about your budget; it’s important to know what you can afford when deciding on a plan. 
• Give thought to your personal health situation. “Do you need to see a particular doctor regularly? Are you planning on having children over the next year? Answers to these questions can inform what plan will best cover you over the next year.”
• Consider your risk tolerance.”You can’t know the future. Even if you have a perfect understanding of your current needs and how existing plans map to them, they might change drastically over the life of your policy,” adds Darr.

For further guidance on selecting a private health insurance plan, check out Insure.com’s Best Health Insurance Companies.

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