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Small Business Employee Benefits and HR Blog

What You Need to Know about Private Health Insurance: Pros and Cons

If you’re one of the many small business owners looking into health insurance either for yourself or Private_health_insurance_pros_cons-1your small business, you may have heard buzz about private health insurance. So, to help you gain a better knowledge of private health insurance for both individuals and small businesses, here are its pros and cons.

What is Private Health Insurance?

In this article, when speaking of private health insurance, we’re referring to private health insurance plans which are purchased off the public Health Insurance Marketplaces. In this context, private health insurance is also referred to as “Off-Marketplace” health insurance.

Both group and individual private health insurance plans can be purchased through a broker, a private exchange, or directly through a health insurance company.

Related: Public vs Private Exchanges - What's the Difference?

Pros and Cons of Private Health Insurance

Whether you’re looking into a small group health plan for your business, or searching for an individual plan for yourself, private health insurance is still available. How does private health insurance compare to what’s available on the public Marketplaces? Here’s a look at the pros and cons.

Pros

Plan options: Depending on your region, you may find more private health insurance plan options and carriers as compared to your state’s Health Insurance Marketplace. This applies to both small business owners looking for a small group plan and for individuals who are looking for their own plan.

Similar to public health insurance plans: Did you know private health insurance is almost identical to plan individuals purchase through the public exchange? In fact, the only difference between the two is that those who choose a private individual or group plan do not have access to the Affordable Care Act’s tax credits.

It’s also important to note that private health plans are also required to be compliant with the Affordable Care Act (ACA).

Cost: Some private health insurance plans for both individual and group plans are similar in pricing to those on the public exchange and can even be lower depending on the type of coverage chosen. This is especially true in regions where there is more competition and plan selection outside of the public Marketplace.  

Alternative to SHOP plans: In some instances, small business owners do not qualify for tax credits when purchasing a plan on the Small business Health Options Program (SHOP) exchanges. In this case, many small business owners turn to private exchanges in search of a small group health plan for greater selection.

Cons

No access to ACA tax credits: Although private health insurance plans are similar to those on the public Marketplace, one of the biggest differences is that individuals are unable to utilize premium tax credits.

Why?

Under the ACA, premium tax credits are only available toward health plans purchased on the public Health Insurance Marketplaces.  Similarly for small businesses, the Small Business Healthcare Tax Credits are not available on the private market (unless there are no health plans available in the SHOP).

Related: Premium Tax Credit Charts - 2015

Conclusion

Private health insurance plans are an alternative to health insurance plans bought on the public Health Insurance Marketplaces. As you consider private health insurance, remember these pros and cons to purchasing health insurance on the private market.

What questions do you have about private health insurance exchange plans? Comment below.

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