Private vs. public health insurance: Main differences

A healthy workforce isn’t built solely at the office. A strong team requires proactive wellness strategies that promote a healthy personal and professional life. The first step to a healthy team is a detailed understanding of the health plans every team member is entitled to, including their eligibility for public or private health insurance.

Distributed teams add another dimension to employer-sponsored health coverage since regulations, employer obligations, and health insurance marketplaces vary from one country to another. Some countries offer public health insurance options, which affects the benefits employees look for in their total rewards packages. Let’s dive into the differences between private vs. public health insurance so you can take care of your team.

What is public health insurance?

Public healthcare is funded by national government subsidies. This form of social insurance may be managed by a government agency, tightly regulated private insurance providers, or a combination of both. Some governments provide public healthcare benefits as part of a universal healthcare system, which guarantees access to medical treatment for all covered individuals. Publicly funded health insurance may supplement private insurance markets.

Public health insurance is distributed in numerous ways internationally. Here are two common types of health insurance models that offer universal coverage:

• Single-payer healthcare: Under this national health insurance framework, the government pays health facilities (public and/or private) to provide health services using taxpayer dollars. The Beveridge model is a type of single-payer healthcare in which most facilities are government-run and many healthcare professionals are government employees.
• Bismarck model: This cost-sharing system utilizes private facilities to manage healthcare. Citizens must purchase a plan with a non-profit health insurance company, which is heavily regulated to ensure access and quality care. Payroll deductions or taxes typically cover the cost.

The United States doesn’t offer universal healthcare but does support several public health insurance systems to cover certain groups. In addition, the government enforces regulations that increase availability and access to private health insurance. Here’s more info:

Affordable Care Act (ACA)

The Affordable Care Act (ACA) was passed during the Obama administration, which is why many people refer to it by a more colloquial health insurance term: “ObamaCare.” The ACA establishes guidelines for organizations and individuals to qualify for health plans.

The Affordable Care Act changed the way organizations provide healthcare to their workforce. It imposes additional taxes on organizations with 50 or more employees that don’t offer employer-sponsored health insurance to their full-time employees. Some small businesses are eligible for tax credits to cover health insurance costs. 

The act used to require that all U.S. citizens have health insurance, with some exceptions for religious or economic reasons, but the penalty fee was eliminated in 2019. Expansions with Medicaid services help bridge the gap for individuals who struggle financially to afford private health plans.

Medicare 

Medicare is a public healthcare service available to people 65 or older, people with disabilities, and patients with end-stage kidney failure. This federal service covers basic hospital and medical expenses. Medicare is regulated at the federal and state levels, meaning potential beneficiaries must understand local rules and regulations.

Medicare is divided into four categories: hospital insurance, medical insurance (outside of hospital treatment), prescription drug coverage, and supplemental coverage offered through private insurers to cover expensive deductibles, copayments, and coinsurance or specialized treatments. 

Medicaid

Medicaid is a federal public health service operated by individual states. This social welfare service is designed to provide healthcare access for low-income citizens. Medicaid coverage differs from state to state, with some limiting eligibility to specific groups, such as children, pregnant women, the elderly, and people with disabilities

What is private health insurance?

Private health insurance is a customizable healthcare plan provided by a private insurer. Individual health insurance plans are sold directly to policyholders or offered through employers as part of a benefits package. 

Here are four common types of private health insurance plans:

1. Health maintenance organization (HMO): This low-cost service only covers services from its network of healthcare providers and facilities. Policyholders must seek medical care from their primary care physician (PCP) before being forwarded to a specialist within the network.
2. Preferred provider organization (PPO): Patients can choose between in-network and out-of-network providers. PPO plans charge higher insurance premiums to provide more flexibility and don’t require policyholders to consult with a PCP before seeking out-of-network medical services.
3. Exclusive provider organization (EPO): Unlike HMOs, EPOs don’t require patients to have a primary care physician or get a referral to see a specialist. This type of health insurance plan doesn’t cover out-of-network services but often has a larger network than an HMO. EPO plans typically sit between HMOs and PPOs in cost.
4. Point-of-service plan (POS): A hybrid of HMOs and PPOs, POS requires policyholders to seek attention from a PCP before seeking extended coverage with out-of-network medical providers. 

Policyholders may also have a choice between a deductible health plan and a zero-deductible policy. A deductible health plan is a cost-sharing plan that requires policyholders to pay a certain amount before insurance begins to cover expenses. Zero-deductible policies don’t require out-of-pocket expenses but may come with higher premiums or limitations on service costs. 

Main differences between public and private health insurance

Private health insurance is managed exclusively by private, for-profit providers. It differs from public health insurance coverage in several notable ways, and both systems have pros and cons.

1. Cost: Public healthcare is typically provided to residents for free or at a low cost, with affordable or nonexistent health plan deductibles and copays. Private health insurance is purchased on the marketplace exchange or paid through employer-sponsored insurance premiums, with varying costs to policyholders depending on qualifications and preferences.
2. Urgency: Public and private policyholders are generally treated based on urgency. However, priority for elective services often goes to private insurance carriers. 
3. Waiting time: The quality of public insurance varies from country to country and state to state. Patients may face long waits for specialist appointments, especially if more urgent cases take precedence. Private health insurance typically gives policyholders wider access to healthcare providers, helping them find shorter wait times. 
4. Coverage limitations: In a universal healthcare system, public healthcare coverage is available to everyone. However, eligibility in the U.S. is determined by specific criteria, including age, medical history, and economic circumstances. Private healthcare coverage is customizable, offering a wide range of coverage based on personal needs and financial well-being.

What to consider when offering healthcare to global talent 

Comprehensive healthcare coverage is a strong strategy for attracting top talent in the global workforce, even if you primarily contract non-employees. However, it may pose challenges for your HR team. Here are a few downsides:

1. Geography: The quality, cost, and limitations of individual health insurance vary from country to country. Employers must conduct extensive research and monitoring, which costs time and money for HR departments.
2. Money: Providing numerous health plans across different health insurance marketplaces can be costly, negatively impacting a business’s bottom line. 
3. Access: Businesses may struggle to guarantee equal access to private health insurance in countries with poor medical infrastructure or gaps in quality standards. 

Why offer employer-sponsored healthcare?

Although employers aren’t always required to offer healthcare benefits to employees, many organizations incorporate health insurance or employee assistance programs into their total benefits package. There are many reasons to grant employees access to group health insurance, including:

• Recruiting: Job seekers want more than a competitive salary; they’re also interested in benefits, and health insurance coverage often tops the list.
• Retention: A robust benefits package—including robust health coverage—improves overall job satisfaction, encouraging employees to stay long-term. 
• Healthier workforce: Private health insurance and employee assistance programs enable workers to seek care, promoting a happy and healthy workforce. 
• Cost savings: Although group health insurance bears significant costs, it’s less expensive than lost time and productivity due to frequent health-related absences.
• Worker well-being: Different types of health initiatives accommodate diverse personal needs and reflect a commitment to work-life balance.
• Potential tax incentives: An organization can deduct the cost of premiums from federal business taxes, reducing tax liability and overhead. Certain annual revenues and company sizes may qualify you for premium tax credits.

Grow your global team with Oyster’s employer-sponsored healthcare

You built a strong global team. Now, it’s time to build a happy, healthy workforce. 

Oyster Health helps you offer high-quality group health insurance coverage to team members in 165+ countries. Better yet, Oyster works directly with health insurance carriers to bring businesses of all sizes robust health coverage plans at an affordable cost. Sign up for free and try Oyster’s tools and benefits today.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.