Private health insurance steps in to fill any gaps between what public health insurance covers, if anything, and the health insurance coverage people wish to have. This may involve adding supplemental coverage to the basic coverage that public health insurance provides, or may consist of one’s entire coverage when public health insurance is not available.
In most developed countries, people do have access to some sort of public health insurance, which covers everyone to some degree. The scope of this insurance does differ though, and may not cover certain things that people wish to be covered for, even though in many cases it may not even be wise to buy insurance for these expenses since they are of a more incidental and common nature.
This is the opposite of what insurance should be covering, and the proper role of insurance is to protect us against undue financial hardship arising from uncommon or very uncommon events that have costs that are beyond our means to manage.
Since private insurance is, to some degree at least, market driven, if people demand a certain type of coverage, regardless of how much sense it may make, this does present an opportunity for insurance companies to make additional profits, and will look to come up with a scheme that people may be able to purchase.
At this point, people will decide whether or not the price points that are arrived at by insurers to provide certain types of coverages have enough perceived value to them, and there is more to this then just expected value. It may cost more overall to insure something, but this may offer the benefits of allowing one to budget better for minor health expenses, paying a known amount per month and preferring that even though the overall costs may be higher.
Choices Involved with Private Health Insurance
Unlike with a public health insurance system, which does not require or even allow choices to be made about one’s coverage, including whether or not to participate, private insurance may offer a number of choices and this can be pretty daunting to those needing to decide these things.
There are generally choices to be made with any private insurance, including how much one wants or needs to be covered for, what types of coverage one wishes and what deductibles one wants to accept. While this all applies to health insurance as well, its scope tends be very broad and therefore there tends to be more to decide when selecting between coverage options.
This is generally limited to one purchasing their own health insurance though, and things are made much simpler with group coverage. Individual coverage can be tailored much better to one’s own needs, but with group coverage, it’s more efficient to purchase blanket policies that are designed to cover the needs of large groups generally.
While group policies may offer some options, the differences between them are broader, and while this does make these decisions easier to be sure, the more limited options do not allow for people to tune the coverage to their needs as well.
However, these group plans allow employers to purchase the insurance at cheaper rates than people would have access to otherwise, and not have to purchase the coverage directly, even though ultimately the cost of the program is always borne by the users as part of their compensation package, where both wages and benefits are calculated together when deciding on how much compensation an employer is willing and able to provide.
People love group coverage though, and in areas without universal health insurance such as the United States, health insurance benefits are viewed as an important component of one’s overall compensation and not offering can place an employer at a significant disadvantage even if the compensation overall is higher.
Whenever we are faced with choices with health insurance, we need to carefully consider our options to seek to protect ourselves sufficiently but not over-insure ourselves to the point where we are insuring against incidental expenses and are making frequent claims and will tend to pay more for these expenses overall when reimbursed by insurance.
Stand Alone Private Insurance
Whenever we have no other health insurance coverage and we’re looking to purchase it, we will then be buying a comprehensive form of coverage that will address all of our health insurance needs. Like other insurances, people generally buy all of the coverage for a class of insurance from a single insurer and under a single policy.
This makes sense as insurance companies offer discounts for larger amounts of coverage, and will expand these discounts generally when one has different classes of insurance with them, their car insurance, their home insurance, and so on.
While general insurance companies offer things like life, auto, and property insurance, health insurance is offered by companies that specialize in it, and health insurance is a different kind of animal in many respects and requires a particular expertise, which companies who specialize in health insurance have.
People generally don’t shop around near enough for insurance generally, and it always pays to compare coverages and prices among several providers if that is possible, although in some places for certain types of insurance there may be few competitors. In the United States, where most of the world’s private health insurance is purchased, in any given area of the country, there are a number of large companies that offer it, and any opportunity that we miss to do comparison shopping is a missed opportunity.
Since stand-alone private health insurance will be the only policy you have, if your policy does not cover enough or covers too much or is in any other sense not desirable, this can result in unacceptable situations. Stand-alone health insurance is expensive and the decisions involved in selecting the right coverage deserve a lot of care and consideration.
Since these policies are directed at large groups, it might not be possible to tailor them to one’s particular needs exactly, but there are generally enough choices that can be made to get one fairly close in many circumstances anyway. We’re just looking to take what is available and seek the best fit though by comparing various options with our needs and circumstances.
Among the options involved is what providers you can use, and insurance companies will often use networks of providers where they look to manage the other side of things more closely, and a more limited network allows this to be done more easily, because there is less of a population of providers to come to acceptable terms with.
Health insurance companies will use their negotiating power to come to terms with providers where they offer them the benefit of being included in their network in exchange for more favorable rates, and the less they pay to providers, the less they need to charge their clients.
This form of management has its detractors, particularly with people who would prefer more freedom of choice, but in these cases, we can always look to change our insurance companies to seek to be treated by a provider not in the network if needed.
When this happens with group coverage though, and most of the complaints about this arise in this setting, there really isn’t much we can do about it, although if enough employees complain to their employer it is possible that changes could be made to better accommodate them.
It is important to realize though that with stand-alone privately purchased coverage, we need to understand that the goal of this should never be to seek to be reimbursed for any and all health care expenditures, or more accurately, all conventional health care expenses, because this is simply not going to be efficient and you run the risk of paying more for the smaller stuff.
Deductibles and co-pays should be warmly welcomed instead of shunned in this scenario, because the choice is between paying a part of your costs or paying even more than this in premiums to cover these incidental amounts as well.
Ideally, health insurance should only cover larger expenses if we are buying it ourselves, which allows us to be protected against the financial burden of these large expenses while having us manage the smaller things ourselves. When a large event does occur, we don’t want to insure against the entire event either, we should instead only insure against the portion that we cannot manage ourselves without a lot of pain.
Supplemental Health Insurance
If we have most of our needs and all of our major needs covered by public health insurance, we still may want to consider purchasing supplementary health coverage, but we do need to carefully consider these choices and be sensible about it.
People will buy coverage for a lot of smaller expenses that may not even happen very often, where coverages may include incidental expenses that are incurred with disorders we don’t have, supplies for instance for the invalid, as well as a number of other things that simply do not apply to our situation.
Supplemental health insurance does tend to be over-inclusive by nature though, as it offers very broad choices that cover a litany of potential health care expenses, with most of it only consisting of expenses of a more minor nature.
We also want to be avoiding minor expenses such as this if they are predictable, and there are a lot of people who have a mistaken view that if someone else pays for something, that’s always preferable for some reason and they tend to not calculate their costs into this and even consider whether it would be cheaper for them to pay for these things out of their own pocket without the coverage for them.
This is not to say that all supplemental health insurance is economically unwise, but very often it is, and the only way that we are going to be able to know this is to examine the costs and benefits of our coverage and at least get a sense of this.
If it is close enough, we may decide that there is a benefit in itself from just paying fixed amounts per month and not having to worry about variances in expenses that can occur without the insurance.
If we are benefiting significantly from the coverage, the insurance company may increase our premiums, or in some cases, cancel the coverage, and we do need to keep in mind that their motivation is to make money from us, not subsidize us or allow us to really benefit that much on an ongoing basis. This can happen with the rarer and more expensive events but insurance companies do not wish to engage in situations where their net expectation is negative, where they are likely to lose money on a given policy in other words.
Whenever we are looking to purchase any private health insurance, the important thing is to spend some time thinking about what may be best for us. This comes down to realizing that the goal here is to spend extra money through premiums to protect us from things that simply cost too much to pay, to not generally insure the things we can pay, and to know the difference between them.