Definition of Private Insurance

Millions of Americans have private health insurance. This type of plan is owned by the individual and is not one offered through an employer or as part of a government- sponsored program. There are benefits to having your own policy as well as drawbacks. There are two major types of private plans available in the United States: managed health care and indemnity health.

The Facts

Private insurance is insurance provided through either a for-profit or not-for-profit company rather than by the federal or state government. In 2007, 202 million Americans owned a private plan. The average cost of an individual health plan between 2006 and 2007 was $2,613 while the cost for a family of four was close to $13,000.

Managed Health Care Plans

Managed health care plans are tailored to give the insured the best quality coverage at an affordable cost. There are three types of managed health care plans including HMOs (Health Maintenance Organization), PPOs (Preferred Provider Organization) and POSs (Point of Service). These plans utilize a network of doctors who perform medical services at a contracted rate. A dedicated PCP (Primary Care Physician), a doctor who coordinates a member's medical care, may be required or be highly recommended under some plans. A member pays low out-of-pocket expenses and recieves higher benefit amounts if they stay within the network for care and/or receive a referral from their PCP for any visit to a specialist.

Indemnity Health Plans

Indemnity health plans allow the insured to seek medical attention regardless of location or cost. There are three options under this type of plan. One pays the insured 100% of the total claim, and another pays a percentage, usually 80%, while the insured pays the rest. The third option pays the insured a set amount each day for services for a maximum number of days. Indemnity health plans, although the most flexible, are also the most expensive of all private plans.

Pros

By having a private insurance plan, you are in total control of your plan. You can customize the plan by adding or subtracting services and purchasing it at a price that suits your budget. Owning a private plan means that you can take it wherever you go. Your coverage stays with you regardless of if you change employers or location. Having private insurance gives you the added benefit of knowing that you and your family members can seek medical attention whenever it is necessary.

Cons

Individuals with private insurance are responsible for the entire cost of the premiums, which has risen over 119% since 1999 and can cost tens of thousands of dollars annually. If you or anyone in your family has medical problems, that will also raise your premium payments and may add some restrictions to your policy. If your health is deemed too much of a risk, then you may be denied coverage altogether.

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