Private health insurance covers approximately half of U.S. population. This coverage ranges from employer-sponsored plans and Affordable Care Act-compliant individual/family health coverage purchased on or off an exchange/marketplace to less regulated forms like short term medical, zero deductible plans and fixed indemnity plans.
Many Americans do not qualify for Affordable Care Act subsidies and must cover full price for health insurance premiums, forcing them to seek alternatives.
Cost
Private health insurance plans may be less expensive than marketplace or Obamacare health plans depending on your healthcare needs and budget, with significant cost-savings possible if you do not qualify for premium subsidies or cost-sharing reductions. When choosing the type of private plan to use, make sure it offers coverage for any preferred doctors or facilities in its network.
Many states and the federal government enforce minimum standards on both employer-sponsored private health plans as well as individual and small-group insurance purchased on a marketplace or exchange, such as maternity coverage requirements and mental health parity standards.
The Affordable Care Act added additional rules to marketplace or exchange plans, such as mandating that the least-expensive silver plan provide all essential benefits and that no more than 8.5% of household income be spent on marketplace or exchange plans.
Coverage
The Affordable Care Act, commonly known as Obamacare, prohibits medical underwriting and requires individuals to purchase health insurance; low-income individuals receive subsidies. Furthermore, preexisting conditions must be covered, and all marketplace plans must include essential health benefits – including maternity and childbirth coverage – under this act.
Private health coverage covers approximately half of American population, including employer-sponsored group health plans and individually purchased policies in the individual market. Both types are regulated at both state and federal levels, with many states offering additional consumer protections.
People currently employed may hesitate to switch from job-based health coverage to marketplace/exchange plans if they do not qualify for premium subsidies; however, if they’re considering leaving their current position or finding it costly to add family members onto an employer plan, a marketplace or private plan might be more suitable than its equivalent on the marketplace. Plus, private plans often offer wider provider networks than marketplace offerings.
Taxes
The Affordable Care Act (ACA) introduced several new taxes and fees, such as an individual mandate penalty for not having insurance, premium tax credits and premium tax refunds. These taxes were intended to encourage healthier individuals to enroll in health exchanges, thus creating a balanced risk pool and thus lower premiums overall.
The Affordable Care Act also set minimum standards for private insurance plans, mandating that individuals, small groups and large groups cover essential benefits from the ACA while large group plans provide a minimum value. All plans must also cap in-network out-of-pocket costs.
Employer-based health coverage premiums, unlike other expenses, are exempt from income and payroll taxes, meaning premiums have increased relatively slowly compared to income per capita in recent years – this trend should continue. Furthermore, the Affordable Care Act included a 40 percent excise tax – commonly known as the Cadillac tax – on high cost employer sponsored health plans exceeding certain thresholds of cost.
Flexibility
At times, private health insurance plans can provide more flexibility than the exchange plans. You can compare prices for both by entering your income into the exchange’s quote tool; but be mindful that not all private plans comply with ACA-compliant criteria and will therefore not qualify for subsidies; in addition, some have narrower networks than ACA-compliant ones and other forms such as indemnity plans, critical illness policies or short-term medical policies may exist as alternatives.
Individuals and families with access to job-based health insurance may not qualify for premium subsidies in the marketplace/exchange (at least until 2025), although they might still be able to afford full-price exchange plans; or find that private plans with wider networks might be more cost-efficient for them than government plans. Furthermore, the Affordable Care Act prohibits medical underwriting based on health status so more flexibility for consumers can be offered through medical underwriting exemption.
