What is public health insurance

A public option refers to a health insurance coverage program run by the state or federal government (although they can be administered by a private entity or private insurance company) and made available as an option alongside the existing private health insurance plans.

Public options are still mostly theoretical in the United States, although Washington State debuted a quazi-public option program in the fall of 2020. Colorado will have a quazi-public option program available for purchase in the fall of 2022, and Nevada has begun the process of creating a public option program with plans that will be available for purchase in the fall of 2025.

In the ensuing years, various public option proposals have been put forth by states and by federal lawmakers. Varying approaches to a public option were supported by several of the candidates who ran for the 2020 Democratic presidential nomination. The platform of then-candidate Joe Biden, who won the 2020 election, incorporated a proposal for a widely available public option that would be similar to Medicare but available for purchase by any American.

(Congress has a slim Democratic majority as of 2021, and the idea of a federally-run public option has been considered. But the Biden administration and Congressional Democrats have tended to focus more on the American Rescue Plan’s subsidy enhancements, which are driving record-high enrollment in the health insurance marketplace, and record-low after-subsidy premiums.)

Public option concepts run the gamut from a strictly government-run and administered program, to Medicaid buy-in (which would generally incorporate private insurers that have Medicaid managed care contracts), to a quasi public-private program in which the government sets some or all of the parameters and reimbursement rates, and contracts with private insurers to offer the coverage. Thus far, that third option has been the one that a few states have opted to pursue:

Public option proposals often face an uphill battle in order to gain support and buy-in from private health insurers and hospital associations. Since the public option concept is based on a foundation of lower reimbursement rates for medical providers, hospitals and other providers worry that the plans will result in reduced revenue. And since the whole idea is to be able to offer health coverage with lower premiums, private insurers worry about the added competition.

In the three states where legislation has been enacted to create a “public option” program, substantial concessions have been made in the face of staunch hospital and insurer opposition to the idea of a true public option program.

Policymakers also have to be aware of the catch-22 that goes along with the introduction of a lower-cost health plan: If it takes over the benchmark spot in a given area, premium subsidies will drop for everyone in that area. That can result in higher after-subsidy premiums for people who enroll in any of the other available health plans.

Looking for a new health insurance plan? In your search, you’ll come across two main types of plans: private and public. This page explores the differences between the two and will help you decide which is a better option for you.

Regardless of which type of health insurance plan you intend to buy, make sure that the health insurance company you choose to work with has a streamlined, member-centric, and digital-first approach. The right company will put your physical and well-being first while also making it easy to manage your insurance plan online, ensuring you get the care you deserve, whenever you need it. This article will discuss:

• Private Health Insurance
• Public Health Insurance
• Factors to Consider When Choosing Public or Private Health Insurance Policies

Private Health Insurance

Private health insurance refers to a plan that is purchased without assistance from the government. The majority of Americans–66.5%, according to the 2020 Census–use private health insurance. Individuals who do not qualify for public health care programs will need to find a private plan if they wish to obtain coverage.

Private health insurance is generally the more expensive option of the two, but there are still many affordable private companies and plans to choose from.

There are two primary types of private health insurance plans: those offered through your workplace and Individual plans purchased on the Marketplace. The Marketplace is a government-run health insurance shopping and enrollment service that can be accessed by going to healthcare.gov.

Due to the employer mandate in the Affordable Care Act (ACA), employers with more than 50 full-time employees are required to offer health insurance plans to their full-time employees. If they don’t, they must pay a fine. 

Although smaller businesses are not technically required to offer health insurance plans to their employees, many still do in order to stay competitive with larger companies.

Getting healthcare through your workplace comes with its advantages:

• Health care costs are generally lower because group healthcare plans are generally less expensive than their Individual plan counterparts
• Your employer often pays for a significant portion of your monthly health insurance premiums
• Due to the employer mandate, employers are also required to extend coverage options to your dependents under the age of 26, and many employers choose to offer coverage to full-time employees’ spouses as well

As you can see, employer-sponsored health insurance plans have many upsides and are usually the first choice for those who both have access to them and are not eligible for public health plans. However, certain employers, particularly small businesses, sometimes offer limited options to choose from, such as when they offer only high-deductible health plans (HDHPs). If you make frequent use of healthcare services and your employer-sponsored insurance options have high deductibles and/or copays, you may be better served looking at Individual plans.

Individual Health Insurance Plans

Individual and Family health insurance plans are offered through the Marketplace on healthcare.gov. Note that although healthcare.gov is a government website, Individual or Family plans purchased through the Marketplace on healthcare.gov are not necessarily public plans.

Individual plans are ideal for individuals who do not have access to employer-sponsored plans or those who wish to extensively customize their health insurance coverage. Individual plans may also appeal to individuals who take certain prescription drugs that are not covered by workplace plans. Typically, Individual plans are more expensive than workplace plans because there is no employer involved with Individual plans, and therefore no employer contribution.

Public Health Insurance

Public health insurance refers to plans that are purchased through a government program. According to the 2020 Census, 34.8% of Americans were covered through public health insurance. 

Thanks to government subsidies, public health insurance is often less expensive than private health insurance is. However, public health insurance is often more restricting than private health insurance regarding the types of services covered and frequency at which you can make use of them.

There are three main public health insurance plans to choose from: Medicare, Medicaid, and Children’s Health Insurance Program (CHIP). Whether or not you qualify for one of these programs depends on certain criteria about you and your lifestyle.

Medicare

Medicare is a government-sponsored health insurance program for seniors 65 and older and some younger people with certain disabilities and diseases. In 2020, more than 60 million Americans were covered through Medicare. 

Due to its low rates, Medicare is a good option for many individuals looking to reduce expenditures. However, Medicare plans can come with limitations in regards to the health care providers and services you can access. They may also come with high out-of-pocket costs in certain situations, such as if you have to go to the hospital. 

Medicaid 

Medicaid is a government-sponsored health insurance program that focuses on helping low-income individuals afford coverage. You may be eligible for Medicaid if your income is under 138% of the federal poverty level. In 2020, more than 80 million Americans were covered through either the Medicaid program or Children’s Health Insurance Program (CHIP), with 10 million new Americans enrolling in the services between February 2020 and January 2021.

Like Medicare plans, Medicaid plans are often significantly cheaper for beneficiaries than private health insurance plans are. And, like Medicare plans, Medicaid plans have the potential to be more limiting in certain areas than private health insurance plans are.

Children’s Health Insurance Program (CHIP)

Children’s Health Insurance Program (CHIP) is similar to Medicaid with a difference in the intended enrollees. Medicaid is for low-income individuals; CHIP is for individuals who earn too much to be eligible for Medicaid, but too little to afford a traditional private health insurance plan. If a family is eligible for CHIP, the children in that family can receive significantly reduced rates on plans that cover pediatric services and more.

CHIP is highly recommended for any family that is eligible to receive benefits through it. Click here to learn more about CHIP and eligibility requirements.

By taking into account the following four aspects of you and your lifestyle, you can easily determine which type of health insurance plan is right for you.

​​Income

Income is the most important determinant when deciding between health insurance plans. Generally, individuals with higher income will need to purchase a private healthcare plan. Individuals with higher income also have the luxury of purchasing more extensive health insurance plans if the increased premiums and/or deductibles aren’t an issue. 

Individuals with lower income may be limited in the extent of coverage they can receive under a private health insurance plan. If eligible, lower-income individuals can apply to Medicaid or CHP for potentially reduced rates on many basic healthcare services. 

Age and State of Health

Generally, individuals who are 65 and over are eligible for Medicare. Many seniors who are eligible for the program will find it to be adequate for their needs. However, if you are an individual who makes use of healthcare services significantly more than the average person, potentially as a result of getting older, you may be better served by a private plan with more comprehensive customization options, especially if you are eligible for a workplace health insurance plan.

​​The Number of People Insured

Individuals who need coverage only for themselves generally have more flexibility than families do. For example, the costs of obtaining coverage through the Marketplace are significantly higher for families than they are for individuals because the lack of employer contribution is felt across multiple people.

Any Pre-Existing Medical Conditions

Due to the ACA, you cannot be discriminated against by health insurance companies due to pre-existing conditions. However, some pre-existing conditions may result in you making frequent use of certain medical services. Therefore, if you have a pre-existing condition, it’s wise to seek out the best and most affordable plan that caters to the needs you know you’ll have in particular.

Takeaway

Private health insurance plans are generally more expensive, but potentially more comprehensive and customizable. Public health insurance plans are less expensive due to federal government assistance, but may be less comprehensive than you’d like due to certain limitations or restrictions. 

The right choice for you will depend on certain criteria surrounding you and your lifestyle. To make sure you get the best health care coverage for you in particular at the lowest price possible, be sure to do your due diligence and explore all of your options before you make your final decision.

Beyond cost and scope of services, be sure to select a health insurance company that takes a digital-first and customer-centric approach to their services. Ensuring the process is free of hassles means you can get the care you need without spending extra time managing your plan.