Private health insurance is any health coverage you get from a non-government source, whether through an employer, purchased on your own, or bought through the federal marketplace. It stands apart from public programs like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), which are funded and administered by federal or state governments. In 2024, 66.1% of Americans had some form of private health insurance, making it the most common type of coverage in the country.
The Two Main Categories
Private health insurance falls into two broad buckets: employer-sponsored plans and individually purchased plans. Employer-sponsored insurance is by far the larger of the two, covering 53.8% of the U.S. population in 2024, or roughly 164.7 million people. Individually purchased coverage (also called direct-purchase) covered 10.7% of the population that same year.
An employer-sponsored plan is one your company offers as a workplace benefit. The employer typically pays a portion of your monthly premium, and you pay the rest through payroll deductions. Some large employers fund the medical claims directly out of their own assets rather than buying a policy from an insurance company. These are called self-funded plans, and they’re especially common at large firms. From your perspective as an employee, the experience looks the same: you pick from the plans offered, pay your share, and use your insurance card at the doctor’s office.
Individually purchased plans are ones you buy on your own, either through the Health Insurance Marketplace (HealthCare.gov or your state’s exchange) or directly from an insurance company. Marketplace plans may come with financial help. Depending on your household income, you could qualify for a premium tax credit that lowers your monthly cost, plus additional savings on deductibles and copays. Plans purchased directly from an insurer outside the marketplace don’t offer those subsidies, though the coverage itself is often identical.
What Private Plans Are Required to Cover
Under the Affordable Care Act, all non-grandfathered private plans sold in the individual and small group markets must cover ten categories of essential health benefits:
- Outpatient care (doctor visits, same-day services)
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder treatment
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services, including chronic disease management
- Pediatric services, including dental and vision for children
These plans also cannot deny you coverage or charge you more because of a pre-existing condition. Preventive services like annual checkups, certain screenings, and vaccinations are covered at no out-of-pocket cost when you use an in-network provider.
How Private Plan Types Differ
Most private insurance comes in one of four network structures. The differences boil down to how much freedom you have to choose providers and whether you need referrals to see specialists.
- HMO (Health Maintenance Organization): You choose a primary care doctor who coordinates your care and refers you to specialists. You must stay within the plan’s network except in emergencies. Premiums and out-of-pocket costs tend to be lower.
- PPO (Preferred Provider Organization): You can see specialists without a referral and use out-of-network providers, though staying in-network costs less. This flexibility comes with higher premiums.
- EPO (Exclusive Provider Organization): Similar to an HMO in that you must use in-network providers (except for emergencies), but you typically don’t need referrals to see specialists. Think of it as a hybrid of the lower cost of an HMO with some PPO flexibility.
- POS (Point of Service): Combines elements of HMOs and PPOs. You pick a primary care doctor and need referrals for specialists, but you can go out of network at a higher cost.
What Determines Your Premium
For individually purchased plans, insurers are legally limited to five factors when setting your monthly premium: your age, where you live, whether you use tobacco, which plan tier you choose, and whether you’re covering dependents. Your health history, current medical conditions, and sex cannot affect your premium.
Age has the biggest impact. Insurers can charge older adults up to three times more than younger enrollees for the same plan. Tobacco users can be charged up to 50% more. Location matters because the cost of medical care, local competition among insurers, and state regulations vary widely. Two people the same age buying the same plan tier could pay very different premiums simply because they live in different zip codes.
Short-Term Plans: A Different Category
Short-term, limited-duration insurance is technically private coverage, but it plays by different rules. These plans don’t have to cover the ten essential health benefits, and they can deny coverage for pre-existing conditions. Under federal rules effective September 2024, short-term plans can last no more than three months initially, with a total duration (including renewals) capped at four months. Plans sold before that date under older rules could last up to 36 months.
Short-term plans exist to fill temporary gaps, like the period between jobs. They’re generally cheaper, but the trade-off is significantly less protection. If you have ongoing health needs or want comprehensive coverage, these plans carry real financial risk.
How Private Insurance Differs From Public Programs
The key distinction is eligibility. Public programs like Medicaid are available based on income (generally up to 133% of the federal poverty level in expansion states, with a small additional disregard). Medicare is primarily for people 65 and older or those with certain disabilities. You qualify for these programs based on specific criteria set by federal and state law, and the government funds them through taxes.
Private insurance, by contrast, is available to anyone willing to pay the premium, regardless of age or income. If your income rises above Medicaid thresholds, you’d typically transition to a private marketplace plan, where you may still qualify for subsidies to offset costs. For employer plans, coverage is considered affordable under federal rules if your share of the premium is no more than 9.02% of your household income in 2025.
When You Can Enroll
Marketplace plans have an annual open enrollment period, running from November 1 through January 15. Outside that window, you can only sign up if you experience a qualifying life event: losing existing coverage, getting married, having a baby, moving to a new area, or gaining new immigration status. You generally have 60 days from the event to enroll.
Employer-sponsored plans follow a similar pattern. Most companies run their own open enrollment once a year, and you can make changes mid-year only with a qualifying event. If you start a new job that offers benefits, that counts as a qualifying event on its own.