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What is private insurance and is it right for me?

Health insurance is a popular topic in our country. People talk about how expensive it is and politicians share their ideas on how to lower the costs. 

The discussions usually focus on one question – whether public health insurance or private health insurance is the best option to bring down the exorbitant cost of healthcare?

This article explores these two types of health insurance, what the differences are, and which plan is right for you. 

What is the Difference Between Public and Private Insurance?

There are two types of health insurance in the United States:

Public or government-run insurance

Subsidized or paid for by public funds (state and federal). Several public options are available in each state, but each has strict eligibility requirements.

  • Medicare – federal health insurance program for people over the age of 65 and certain younger individuals with disabilities or renal failure.
  • Medicaid – insurance program funded jointly by federal and state governments for low-income adults and children people with low income. It’s administered by states in accordance with federal requirements. 
  • Children’s Health Insurance Program (CHIP) – low-cost health insurance coverage funded through a federal and state partnership for children and pregnant women in families who don’t qualify for Medicaid but cannot afford to purchase private health insurance. It is funded through a state and federal partnership. Some states have an expanded Medicaid program and do not have a separate CHIP program.
  • Veteran’s Administration – federally administered program for veterans of the military who were discharged honorably or for medical reasons. Healthcare is delivered in government-owned VA hospitals. 


Offered by a private entity such as an insurance company. Private insurance includes the following plans:

  • Offered through an employer 
    • Employer-provided health plans are purchased by companies and offered to their employees, who have the option to accept or decline coverage. 
    • Premiums are split between employers and employees based on the type of plan and deducted from employee paychecks.
    • For an extra cost, coverage is available for an employee’s immediate family and other dependents.
    • Some employers choose to self-fund their health insurance plans, which means they assume the financial risk for providing health care benefits to employees. The insurance company serves as a third-party administrator. 
  • Purchased Individually 
    • Federal or state marketplace plans- created as a result of the Affordable Care Act to provide individuals who are not getting health insurance any other way.
    • Directly from insurance companies – individuals or families not getting health insurance from an employer or a government-run marketplace can purchase health insurance directly from the insurance company through a licensed broker or agent.
  • Private health insurance for Medicare beneficiaries
    • Medicare part D stand-alone prescription drug plans
    • Supplemental (Medigap) health insurance policies to fill any gaps in Medicare coverage
    • Employer-sponsored retiree health coverage

Most Americans have private insurance and the majority obtain it for themselves and their family through their employer. Find out why private insurance is the best option for most people.

What are the Different Types of Private Health Insurance Plans?

All private health insurance plans are designed to make healthcare more affordable by dividing the cost between you and the insurer. Cost-sharing includes deductibles, copays, out-of-pocket maximums, and coinsurance. 

Health insurance plan services and costs vary by location, insurance company Lower-cost healthcare plans offer fewer choices in doctors and hospitals. The different type of plans include:

Health Maintenance Organization (HMO)

HMOs are health insurance groups, which provide services for a fixed fee. HMOs are the strictest plans because members can only use doctors and hospitals within the plan’s network. HMOs focus on preventive care and screening to keep costs low. Patients must select a primary care physician (PCP) and obtain referrals to visit specialists. HMOs have higher deductibles but lower premiums.

Preferred Provider Organization (PPO)

Similar to HMOs, PPOs contract with a network of doctors and hospitals who agree to charge a discounted fee for services. The networks are usually larger than HMOs. Patients can visit doctors outside the network but will have to pay a higher cost. Referrals to specialists are not required. PPOs charge a copay for doctor visits and have a deductible. Premiums are higher with a PPO.

Exclusive Provider Organization (EPO)

EPOs are similar to PPOs except services performed by doctors and hospitals outside the provider network are not covered except in emergencies.

Point of Service (POS)

POS plans area combination between an HMO and a PPO. If patients use doctors inside the network, they pay less. Co-pays and deductibles in a POS are very low for in-network services but higher for services outside the network. POS plans require patients to get a referral from their PCP to see a specialist.

High Deductible Health Plan (HDHP)

HDHPs have low monthly premiums, but high deductibles. Patients who want to save costs and don’t have a chronic health condition may choose a HDHP to cover them in case of an emergency or serious health problem. 

HDHPs are often used with a health savings account (HSA), which is a special account enabling people to save money on taxes for healthcare expenses. 

What Does Private Insurance Cost?

What distinguishes private health insurance from government-funded insurance is who pays the premium. In private insurance, the insured pays all or, in the case of employer-provided plans, some of the premium. 

The cost of health insurance is determined by the type of private insurance plan you purchase and how much the monthly premium is. In accordance with the Affordable Care Act, insurance companies are only allowed to base the cost of premiums on five factors: 

  • Age
  • Tobacco-use
  • Your location
  • Number of people on your plan

When shopping for a plan, you want to ensure you find a good balance between the cost of a monthly premium and shared costs (copays, coinsurance, deductible).

Determine how much you can afford to pay out-of-pocket each year in a worst-case scenario, Find a deductible and out-of-pocket maximum you are comfortable with. Don’t forget, the higher the deductible, the lower your premium. Think about your monthly cash flow when making this decision.

Get Quoted Today

Our licensed health insurance agents are ready and waiting to help you out today. We will walk you through any questions you have and help get you quotes based on your unique situation. Get covered today.


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