Where do people get private insurance?
Most people get private insurance through their employers. When employers buy insurance for their employees, it is less expensive because the risk of high healthcare costs can be spread out among a large group of people. If people are self-employed, retired or work for a small company, they can buy private insurance on their own, but it is usually more expensive.
What do you do if your employer doesn't offer health insurance? Watch a video.
Module 2: Insurance
Health Insurance Payers and Plans
Healthcare costs are paid for by private payers or public payers. Private payers are insurance companies and public payers are federal or state governments.
A private payer is a private insurance company. There are many private insurance companies in the U.S. Each company offers different types of plans that must meet or exceed basic standards set by the state and federal government.
What are the different types of private health insurance?
Health insurance plans can vary. Generally, lower cost healthcare plans give patients fewer choices in doctors and hospitals. Lower cost plans may also make it more difficult for patients to see a specialist. Types of health plans include:
- Health Maintenance Organization (HMO)
HMO's use a "managed care" approach to healthcare. Managed care focuses on preventive care and screening for diseases early to keep costs down. HMO's are the strictest type of insurance plan because patients can only see HMO doctors and hospitals. Patients do not pay a deductible and may pay a small co-pay.
- Preferred Provider Organization (PPO)
Like an HMO, Preferred Provider Organizations (PPO's) contract with a "network" of doctors and hospitals who agree to charge a certain amount. Patients in a PPO usually have a co-pay for doctor visits and a deductible. Referrals to specialists are not required in a PPO. Patients can see doctors outside the network, but they will pay more and may need to send medical bills to the insurance company for payment.
- Point of Service (POS)
A Point of Service Plan (POS) is a 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 if they stay in the network, but higher if they use doctors outside the network. POS plans require patients to get a referral their primary care physician (PCP) to see a specialist.
- Fee for Service (FFS)
Fee for Service is the oldest kind of health insurance plan. This conventional plan allows patients to choose any doctor or hospital and the insurance company pays for the services. This type of plan became less common as businesses started using lower cost managed care plans.
- High Deductible Health Plan
A High Deductible Health Plan (HDHP) has low monthly premiums, but high deductibles. Patients must pay a fairly large amount of money before the insurance begins to cover costs. Patients without a lot of money may choose this plan because they want to be covered in case they have an accident or a serious health problem. HDHP's can be combined with a health savings account (HSA). HSA's can be helpful if people plan to pay a lot of money in a year for healthcare. An HSA is a special account that lets people save money on taxes to pay for healthcare expenses.
What is an important difference between insurance plans? Specialists.
Some insurance plans allow patients to see a specialist anytime. For example, if a patient has a rash they can go directly to a dermatologist. If they have an allergy, they can go directly to an allergist. Other insurance plans require patients to see their primary care doctor first, and then get a "referral" to see a specialist.
What are the trends for types of private insurance?
The chart below shows trends for private health plans. In 1988, conventional insurance was widely used. Now, the most common type of private insurance plan is a PPO. This change is because managed care programs are less expensive.