Private health insurance

Revisores de contenido

Rebecca Frontz, DO, MS (Pediatrics),Stefan Stoisavljevic, PhD

Colaboradores/as

Mike Cothren,John Gully,Talia Ingram, MSMI, CMI

The United States relies on a mixed healthcare system that combines both public and private elements. As a result, healthcare coverage in the U.S. is not uniform, but instead made up of a patchwork of coverage options each with its own structure and benefits. Broadly, healthcare coverage in the United States can be summed up in three categories: private insurance, which is the most common one; government-funded insurance that supports people who may have difficulty affording care, such as older adults, individuals with disabilities, and those with lower incomes.; and self-pay, which is not really a type of insurance but actually a lack of insurance. It refers to individuals who are uninsured and pay the full cost out of pocket.

Okay, let’s focus on private health insurance. It’s offered by insurance companies and it’s usually provided through an employer, though people can also buy it on their own. Private or “commercial” insurance often provides a balance between cost and flexibility in the choice of clinicians and facilities.

Now, there are some key terms patients usually notice the most about private health insurance. First up is the premium. This is a fixed amount the patient pays, typically monthly, to keep coverage active, regardless of whether care is used. It functions like a subscription fee. If the plan is purchased through an employer, the employer pays part of the premium, reducing the employee’s contribution. Factors that can increase the premium include older age, tobacco use, and geographic location.

The premium is intertwined with a deductible, which is the fixed amount the patient pays out-of-pocket for covered services before the insurance plan begins to pay.

In general, a higher deductible is paired with a lower premium, while a lower deductible usually comes with a higher premium and less out-of-pocket spending when care is needed.

Next up is a copay, a fixed, flat fee that the patient pays for specific covered health services. It is a cost-sharing mechanism between the patient and insurer until the maximum out-of-pocket limit is reached. For example, a patient may pay a set fee, let’s say 25 dollars for example, for a primary care visit. Specialist and emergency services often have higher copays like 50 and 300 dollars respectively.

Another important term is coinsurance. This is the percentage of costs the patient pays after meeting the deductible. Unlike copay, coinsurance is a percentage of the total bill. A 20 percent coinsurance means the patient pays 20 percent while insurance covers 80 percent. Higher coinsurance increases out-of-pocket costs, while lower coinsurance shifts more cost to the insurer.

Let’s apply these terms to a case of Alex, who broke their leg and headed to the emergency department. A clinician examined them, ordered an X-ray, and placed a cast. A few weeks later, they received a bill for 10,000 dollars.

Transcript

The premium is intertwined with a deductible, which is the fixed amount the patient pays out-of-pocket for covered services before the insurance plan begins to pay.

In general, a higher deductible is paired with a lower premium, while a lower deductible usually comes with a higher premium and less out-of-pocket spending when care is needed.

PRIVATE HEALTH INSURANCE
Key Term	Definition	Example
Private Health Insurance	Health coverage offered by insurance companies, usually through an employer, though individuals can also purchase it directly.	An employee receives commercial insurance through work and pays part of the monthly premium while the employer contributes the rest.
Self-pay	A situation in which a person does not have insurance and pays the full cost of healthcare services out of pocket.	An uninsured patient receives care and is responsible for the entire bill.
Government-funded Insurance	Healthcare coverage supported by government programs for groups such as older adults, people with disabilities, and people with lower incomes.	A qualifying patient receives coverage through a government-sponsored program rather than a private insurer.
Premium	A fixed amount paid, typically each month, to keep insurance coverage active, whether or not healthcare services are used.	A patient pays a $200 monthly premium to maintain coverage.
Deductible	The fixed amount a patient pays out of pocket for covered services before the insurance plan begins to share costs.	A patient must pay a $2,500 deductible before insurance begins sharing the remaining cost.
Copay	A fixed, flat fee the patient pays for a specific covered healthcare service.	A primary care visit may have a $25 copay, while an emergency department visit may have a $300 copay.
Coinsurance	The percentage of covered healthcare costs the patient pays after meeting the deductible.	With 20% coinsurance, the patient pays 20% of the covered bill and the insurer pays 80%.
Out-of-pocket Maximum	The most a patient is required to pay for covered care during a plan year; after reaching it, additional covered costs are paid by the plan.	After a patient’s emergency visit, only $760 remains before reaching the $5,000 out-of-pocket maximum.
Health Maintenance Organization (HMO)	A private plan that generally requires patients to use a narrow network of clinicians and hospitals and usually requires referrals to see specialists.	A patient has an HMO and needs in-network specialist care; earlier out-of-network care would cost substantially more.
Exclusive Provider Organization (EPO)	A private plan that requires patients to stay in network for coverage but generally does not require referrals to specialists.	A patient can see an in-network specialist without first obtaining a referral.
Preferred Provider Organization (PPO)	A private plan with a large provider network that does not require referrals and may cover out-of-network care at a higher cost.	A patient sees an out-of-network specialist, but pays more than they would for an in-network clinician.
High-deductible Health Plan (HDHP)	A plan with lower monthly premiums and higher deductibles, resulting in greater costs when care is first accessed.	A person who expects infrequent medical care may choose an HDHP to reduce monthly premium costs.
Network	The group of clinicians and facilities contracted with an insurance plan to provide covered care at negotiated rates.	An HMO patient generally needs to see clinicians inside the plan’s network for coverage.
Out-of-network Care	Care received from clinicians or facilities outside an insurance plan’s contracted network, which may result in reduced coverage or higher patient costs.	A patient learns that being seen sooner outside her HMO network could cost several hundred to over $1,000 out of pocket.
Beneficence	The ethical principle of acting in the patient’s best interest.	A clinician tries to reduce financial barriers while still pursuing needed evaluation and treatment.
Justice	The ethical principle of treating people fairly.	A clinician considers fair access to care when insurance limitations create barriers.
Emergency Medical Treatment And Labor Act (EMTALA)	A law requiring emergency evaluation and stabilization regardless of a patient’s ability to pay.	A patient with an emergency condition must be evaluated and stabilized even if they cannot afford the care.

Private health insurance

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