Role of Private Health Insurance

Significance

• The United States differs from many other industrialized countries in its health care approach in that most Americans are insured through private companies rather than the government. About 175 million Americans are insured by private insurance companies or nonprofit organizations; the rest are either uninsured or have access to health care through government programs such as Medicare, Medicaid the Children's Health Insurance Program and state high-risk pools.
  
  

Types

• There are two basic types of health insurance: group policies, usually offered by an employer, and policies purchased by individuals. Employer-sponsored health insurance is the most common type; about 158 million people have health plans through their employers, compared to 14 million who buy their insurance coverage on the market, according to the April 2008 update of "How Private Health Insurance Works: A Primer" from the Henry J. Kaiser Family Foundation.
  
  

Individual Policies

• Individual health policies are available for those who work for a small business, those who are self-employed or unemployed or those who need a short-term policy because they are between jobs or have a lapse in employer coverage because they changed jobs. These plans provide a way for people to maintain health care coverage at all times, as long as they're willing to a pay for it. Individual policies also have some perks that employer-sponsored plans don't offer.
  
  

Benefits

• Individual health insurance policies let people shop around to find coverage and a network that meets their needs instead of choosing only from what a group plan has to offer. Individual plans also offer high-deductible coverage. Young, healthy people without risk factors of major illness can opt for this type of coverage. Such plans have much lower premiums, but the insured will pay thousands of out-of-pocket expenses before coverage kicks in.
  
  Having private health insurance can mean more flexibility in switching jobs or moving without affecting coverage, although moving to another state could affect an individually purchased policy.
  
  

Drawbacks

• Individual plans still present plenty of challenges. They are more expensive than group plans because the risk is higher. Most employers pick up part of the premium, so employees pay only a percentage of the total premium. Thus, healthy people will see higher premiums when purchasing individually than through employer-sponsored insurance.
  
  Private plans are underwritten based on an applicant's age, weight, health and family history, smoking status and pre-existing conditions. People with pre-existing conditions such as asthma, diabetes or depression may have trouble getting individual health care.