Downside to Private Health Insurance

Managed Health Care

There are three types of managed health care plans: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) and Point of Service (POS). Managed health care plans provide cost effective care by either requiring or encouraging their members to seek medical services within a network of contracted physicians in their geographical area.

Members will receive higher insurance benefits by staying in-network. Managed health care members may be required to choose a Primary Care Physician (PCP) who will coordinate their health care choices. However, this limits the member's freedom. If they decide to go out-of network, they will face higher out-of-pocket expenses or even be responsible for the entire medical bill with no insurance benefits.

Indemnity health insurance is known as the "traditional" health plan as it is the oldest health policy in the United States. Indemnity health insurance is a plan that pays a portion of the member's medical bill after services have been rendered.

This plan provides the most freedom for its members as they are able to receive care from a doctor of their choice regardless of cost or location. However, this plan is the most expensive. In some instances, physicians may require the patient to pay the entire medical bill upfront and have the insurer reimburse them.

Premiums for individually owned private health insurance policies are based on insured's information that is provided on the application. Some of the factors that determine premium pricing are the insured's age, gender, job occupation, health history and whether he/she is smokes cigarettes. Employer-sponsored plan premiums are based on information such as the size, occupation and age of the group.

Policy owners of private health insurance plans may have to pay higher out of pocket expenses such as co-pays, deductibles and co-insurances. Unlike employer-sponsored health plans where premiums can be partially or totally paid by the plan's sponsor, individual private health plan owners will be responsible for paying the entire premium payment. If the insurer determines that the insured is a higher risk, the amount of the premiums charged will increase from normal rates.

Having private health insurance is becoming very expensive. According to the Kaiser Family Foundation, private health insurance premiums over the last decade has risen over 131 percent. Not coincidentally, the employee's share of their employer-sponsored health insurance plan increased from $1,543 to $3,515 during the same time period. Also, unlike applicants for employer-sponsored health plans who must be accepted regardless of their health status, applicants for individual private health plans can be denied coverage if the insurer considered the risk too great.