What is the Difference Between Marketplace and Private Insurance?
Marketplace insurance refers to insurance plans available on the federal or state health insurance marketplace; whereas private insurance plans are those you can buy directly from an insurance company.
Depending on your state, private insurance plans may differ from marketplace insurance plans in various ways. The provider network, eligibility requirements, coverage, and costs may vary widely between health insurance plans. Understanding all of your options will help you make the best choice for your situation.
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Navigating the Health Insurance Landscape
Health insurance is a complicated topic. A patchwork of different insurers offers different plans, which also differ by state. To help streamline the comparison and shopping process, the government created federal and state health insurance marketplaces in 2014. The marketplace is also a way to access financial assistance through cost-sharing reductions. Private insurers offer plans sold directly through their company and on the marketplace.
Both options have their benefits and drawbacks. Learn more about marketplace vs. private insurance and how to weigh your choices best.
Marketplace vs. Private Insurance Comparison
Marketplace and private insurance plans overlap in many ways and differ in a few. Most insurance in the U.S. is provided by private insurance companies, even if the government helps pay for that insurance coverage. Each state regulates insurance differently. In some states, dozens of insurers compete with the ACA – the Affordable Care Act – and other plan offerings. In others, only a handful do so.
Policy Types Available
Various metal levels and catastrophic
Varies based on state
Preexisting coverage is not guaranteed
Must offer certain coverages
Some coverage may not conform to marketplace rules
Open and Special Enrollment Periods
What is Marketplace Insurance?
Marketplace insurance is the everyday term for the U.S. federal government’s health insurance marketplace. Individuals, families, and small businesses can use the marketplace website to compare and shop for plans and learn more about tax credits that reduce insurance costs. People can also determine if they qualify for state-sponsored insurance like Medicaid or the Children’s Health Insurance Program (CHIP).
Plans are sorted by “metal levels,” ranging from Bronze to Platinum, with pricing to match. The marketplace also offers low-cost catastrophic plans for young people or others who qualify. Medical coverage is the marketplace’s primary aim, but you can also buy dental coverage in the marketplace.
But not all insurance shoppers can access the federal marketplace. Some states have their own marketplace for plan comparison and shopping. If you live in one of those 18 states, you’ll be redirected to your state’s marketplace from the federal website.
Eligibility requirements vary based on your age, but some rights and limitations are pre-determined, including:
- People with preexisting conditions can qualify for any ACA plan.
- Those over 65 cannot apply for a marketplace plan but must instead apply for Medicare.
- You can only shop for a marketplace plan during open or special enrollment periods.
What is Private Insurance?
Depending on the context, private insurance can mean any insurance not provided directly by the state or federal government (such as Medicare or Medicaid). Most private insurers offer several types of plans, including some Medicare Advantage and Medicaid plans.
In general, a private insurance company’s offerings are on the insurer’s website and may include the following:
- ACA plans for individuals and families
- Non-ACA plans (short-term or limited-term insurance)
- Employer plans
- Medicare Advantage, Medicare Supplement, and Medicaid plans
Plans outside the marketplace for individuals and families could include student, overseas, and short-term health insurance. Supplemental insurance for vision, dental, accidents, international travel, critical illness, and more is another type you may see available.
Eligibility to buy a private health insurance policy may differ depending on the type and your state. For example, the ACA Marketplace plans guarantee eligibility, even if you have a preexisting condition. If offered in your state, a short-term health insurance plan does not have to comply with the ACA — so you may not be accepted or be required to pay additional fees if you have a preexisting condition. Depending on your state, you may be eligible for a short-term plan from a private insurer year-round.
Marketplace vs. Private Insurance Coverage
All marketplace plans must include these 10 essential health benefits at a minimum:
- Outpatient care without hospital admission
- Emergency services
- Pregnancy, maternity, and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Services and devices to help you with disabilities, injuries, or chronic conditions
- Laboratory services
- Preventive and wellness services, along with chronic disease management
- Pediatric services, including oral and vision care
However, depending on the type, private insurance coverage may only need to cover some of these benefits. For example, a private insurance dental or vision plan will not cover these specific benefits, nor will a short-term or hospitalization plan. It’s important to carefully review your plan’s limitations if you go through a private company.
Marketplace vs. Private Insurance Cost
Marketplace plans offer various insurers’ options in different metal levels: Bronze, Silver, Gold, and Platinum. These plans are based on how your healthcare costs are split with your insurer. You pay the most with a Bronze plan and the least with a Platinum plan.
You can compare the costs of these plans using the marketplace. You can also shop on a private insurer’s website. If the marketplace and a private insurer sell the same plan, the price will be the same. However, a private insurance site may offer other, less-expensive short-term insurance options to those without preexisting conditions.
When you apply for coverage in the marketplace, your income level could make you eligible for a “premium tax credit.” If you are, the marketplace helps offset your premium costs with your insurer by sending the credit to the insurance company. This direct reduction is not available if you purchase a plan through a private insurance company.
Which Should You Choose: Marketplace or Private?
The best place to purchase a health insurance plan varies by individual. Explore the below advantages and disadvantages.
Choose a Marketplace Plan If…
You want to shop pricing and compare benefits from multiple plans from multiple insurers. The marketplace may also be a good fit if you think you or your family members might qualify for Medicaid or want to qualify for and apply any tax credits to reduce your monthly premiums.
Advantages of Marketplace Insurance
Shopping for insurance on the marketplace offers several advantages:
- Widely applicable options: Plan options can be customized to your location, medical needs, medications, preferred physicians, and more.
- 10 essential benefits guaranteed: You’re guaranteed the 10 essential benefits without worry or extra research.
- Free preventive services: The 10 essential benefits include many free preventative services you may have to pay for out of pocket if you purchase a short-term insurance plan.
- Tax credits: You can find out immediately if you qualify for a cost-sharing reduction that lowers your premium.
- One stop-shop for eligibility: You will be able to discover whether you are eligible for Medicaid or your children are eligible for CHIP.
Disadvantages of Marketplace Insurance
Shopping for insurance on the marketplace offers several disadvantages, too:
- Delayed start: Even if you qualify for a special enrollment period and pay your premium, your coverage will not start until the first of the following month after payment.
- Not wholly customizable: If you need particular coverage — for example, a plan that covers your medical bills overseas — you may not be able to find it on the marketplace.
- Can be overwhelming: If you live in an area with many insurers, reviewing marketplace plans online can lead to information overload.
Choose a Private Plan If…
You want to work with only one insurance company, perhaps because you like the coverage options. Or, you prefer that insurer’s network or have prior experience with that insurer.
You can also shop for private plans if you have particular health or coverage needs. For example, if you need a plan that starts tomorrow and lasts only a month. Or if you need a plan that covers international emergencies. Private is also a good choice if you do not need any financial assistance.
Advantages of Private Insurance
Private insurance websites offer several advantages:
- Year-round shopping: You can only sign up for a health insurance plan on the exchange during open enrollment or a special enrollment period. If you miss these windows, a private insurer may have a plan to cover you temporarily.
- Supplemental insurance: Through a private insurer, you can shop for vision, dental, accident, and other insurance plans.
- Insurance for travelers: If you’re seeking a plan that specifically provides medical coverage abroad, you may want to shop on private insurance sites.
- Non-ACA plan options: You can learn more about Medicare Supplement, Medicare Advantage, Medicaid, and employer-based plans through private sites.
Disadvantages of Private Insurance
Private insurance websites offer several advantages:
- Time-consuming: If you do not shop on the marketplace, you’ll have to collect insurance quotes from multiple insurers, which is time-consuming.
- Challenging to compare: The marketplace makes it easy to compare plans side-by-side, including premiums, deductibles, copays, and coinsurance, but you’ll need to do more work to compare plans you’ve collected.
- A mix of ACA and non-ACA plans: You’ll need to carefully review language and terms to ensure you know what you’re buying — and what you’re not.
- No discounts: Even if you see the same plan listed on the marketplace and a private insurer’s site, only shopping on the marketplace provides you with government premium subsidies.
How to Get Insurance
Before getting insurance of any kind, assess your healthcare needs. How often do you visit the doctor? Do you have expensive prescription needs? Did you miss enrollment periods? Do some comparison shopping to see if a plan could work for you, then take one of the approaches below.
Steps to Get Marketplace Insurance
To get marketplace Insurance, you must ensure it’s open enrollment time or that you qualify for a special enrollment period due to a qualifying event.
- Locate a plan on your federal or state marketplace website.
- Discover if you qualify for premium discounts or Medicaid.
- Enroll in the plan with your personal information and documentation.
- Pay the first month’s premium.
Your insurance will kick in the following month. Your insurer will send you an information packet on your new plan and insurance card. If you’re confused or want more guidance, a licensed health insurance agent or outside organization may be able to help you choose a plan.
Steps to Get Private Insurance
To shop for non-marketplace insurance, follow these steps.
- Browse the insurance company’s website or call to speak to an agent.
- Compare plans to find the one that best suits your needs.
- Speak to a licensed health insurance agent to help you navigate the various options.
- Enroll with your personal information and documentation.
- Pay the first month’s premium.
Depending on your plan type, your insurance may start the next day or month.
Alternatives to Marketplace or Private Insurance
There are alternatives to marketplace and private insurance plans:
- Cost-Sharing Programs: This faith-based coverage option is not regulated like a traditional insurance plan. Cost-sharing programs work similarly to health insurance, but you will not have the same guaranteed protections or coverages.
- Health Discount Card: Only available in some states, this card provides discounted services and medications but doesn’t function like health insurance. Not all providers will accept the card.
- Medicaid: Medicaid is a state health insurance program primarily for lower-income families and individuals. You can determine your eligibility for your state’s Medicaid program through the marketplace.
- Medicare: Original Medicare is offered by the federal government for those 65 and older, and you cannot buy it through the Marketplace or from a private insurance company. Private insurers do offer Medicare Advantage plans, however.
All in All
The marketplace is a good fit for many people seeking affordable health plans, thanks to the numerous options and financial assistance available. Plans you find on the marketplace offer many free preventive services and guarantee coverage for 10 essential health categories.
In some cases, private insurance can help fill in coverage gaps, such as vision or dental insurance. Or, if available in your state, private short-term insurance could provide coverage while you wait for the next marketplace enrollment period. Research your options carefully, and contact an agent with any questions.