Public vs. Private Health Insurance: Pros and Cons
Explore the pros and cons of private vs national health insurance scheme, including coverage, cost, and accessibility. Understand which health plan fits your needs.
8 min read
October 19, 2024
Aradhana Kaniya
Introduction
In the ever-evolving landscape of healthcare, access to medical services remains a critical concern for individuals worldwide. Health insurance, both public and private, plays a pivotal role in ensuring that people can receive necessary medical care without facing financial hardship. National health insurance scheme, provided by the government, aims to offer essential healthcare at little to no cost, while private health insurance offers more tailored options, though usually at a higher cost.
In this blog we will explore the key differences between private and public health insurance, weigh their advantages and disadvantages, and highlight some of the prominent health insurance schemes in India, and showcase the government's efforts to improve access to healthcare for all.
Differences At a Glance
Before exploring the advantages and disadvantages of public and private health insurance, let us first understand the key differences between the two.
Private Health Insurance | Public Health Insurance Scheme | |
| Definition | > Purchased by individuals from private companies.
> Offers tailored coverage options based on personal healthcare needs and preferences. | > Provided by the government to its citizens
> Offers essential healthcare services either at no cost or at highly subsidised rates to ensure accessible and affordable care. |
| Cost | > Generally more expensive compared to public insurance.
> However, it offers flexibility to be tailored according to individual needs and concerns. | > Either free or highly affordable, making it accessible to a broader population.
> Those who do not qualify for free public insurance often turn to private options. |
| Coverage | Offers both primary and advanced coverage, including specialised services based on the insurer’s needs. | Primarily focuses on preventive and curative care, providing basic healthcare services to ensure public health and well-being. |
| Reach | Primarily concentrated in urban regions due to better healthcare infrastructure, higher income levels, and greater awareness, making it less accessible in rural areas. | Designed to reach both urban and rural populations, ensuring access to essential healthcare services across all geographic areas through government support. |
| Eligibility | There are generally no specific eligibility criteria for private health insurance as long as the individual can afford to pay the premiums on time. | Eligibility for national health insurance scheme is typically based on factors such as income, demographics, employment status, and age. |
| Claim Process | > Claim process in private health insurance is generally more straightforward and quick.
> Patients may need to submit claims directly or have providers handle claims on their behalf. | > Health insurance claim can be slower and more bureaucratic, with more steps involved in final approval.
> Providers often bill directly to the public system, minimising patient involvement. |
Types of Private Health Insurance
Two prominent types are employer-provided insurance and individual insurance purchased through the marketplace. Each has its unique benefits and drawbacks, catering to different needs and circumstances. Let’s explore these options in detail.
1) Employer-Provided Insurance
Many companies offer health insurance to their employees, which may be mandatory in some cases. However, most employers provide this benefit to maintain a competitive advantage.
> There are several benefits to employer-provided health insurance, such as:
> Employers contribute a significant portion of the insurance premium, reducing costs for employees.
> Group insurance plans offered through employers are often more affordable compared to individual plans.
> In some cases, depending on the country and the specific policy, the insurance may also cover the employee’s spouse or family members.
2) Individual Insurance (Purchased Through Marketplace)
This type of health insurance is purchased directly by individuals from private health insurance companies without any involvement from the government or an employer.
> It is ideal for people who are not covered by employer-provided or government health insurance plans.
> The coverage can be tailored to the individual’s specific health needs, such as pre-existing conditions or specialised treatments not typically covered by employer-provided plans.
> However, individual plans can be more expensive since there is no employer contributing to the premium, meaning the cost and coverage depend entirely on the individual’s preferences and budget.
Choosing the right health insurance is crucial for ensuring adequate coverage and financial stability. Understanding these differences can help individuals make informed decisions about their healthcare coverage. Next, let us delve into the pros and cons of private as well as public insurance.
Pros and Cons of Public Vs Private Health Insurance
This overview will explore the pros and cons of public and private health insurance, helping you make informed choices about your healthcare coverage.
A. Private health insurance
Private health insurance is often seen as a way to enhance healthcare access and quality. It offers individuals the flexibility to choose providers and services tailored to their needs. However, it also raises concerns about affordability and unequal access. Let us examine the pros and cons of private health insurance:
Pros | Cons |
Preference: > Private health insurance companies offer excellent services and medical facilities, making them more popular than public health schemes.
> 70% of Indians paying out-of-pocket opt for private health insurance over public options, highlighting its widespread preference.
> This preference emphasises the value individuals place on superior care and service provided by private insurers. | High Cost: > Private health insurance is significantly more expensive compared to national health schemes.
> Some affordable options exist. Still, private health insurance in India can be four times costlier than public options.
> Despite the higher cost, both urban and rural populations often prefer private health insurance, highlighting the perceived inadequacies of the public healthcare system in India. |
Wide-Ranging Coverage: > It offers extensive coverage, including both primary health care and curative care.
> Provides access to a broader network of hospitals and specialised healthcare providers.
> Individuals with pre-existing conditions or those seeking personal attention often prefer private insurance for its comprehensive care options. | Disease Specific Limitations: > Limitations posed for pre-existing or lifestyle-related diseases.
> Restrictions make it difficult to seek treatment for chronic or specific health concerns.
> Coverage gaps may leave insured individuals vulnerable, as their policy may not fully cover certain conditions or treatments. |
Faster Access: > Provides faster access to medical care, allowing for quicker appointments and checkups.
> It enables individuals to bypass the long wait times commonly associated with public healthcare systems.
> This immediate access ensures timely attention to medical issues, which is crucial in emergencies or urgent health situations.
| Potential Profit-Oriented Decision-Making: > A significant drawback of private health insurance is the potential for profit-driven decisions by insurers.
> Many private companies may prioritise financial motivations over the best interests of their policyholders.
> This focus on profit rather than patient welfare can disadvantage individuals, as insurers may prioritise their bottom line over addressing the health needs of their customers. |
Customization: > Offers the advantage of customizable plans to meet individual healthcare needs.
> Individuals can add riders, shorten waiting periods, or include specific coverages like dental care and pre-existing condition treatments.
> Customization gives policyholders greater control over their healthcare plan. | Unequal Access: > Disparities in access to care based on income differences.
> Variability in employer-based coverage leading to unequal benefits.
> Higher costs for individuals with pre-existing conditions and geographic variation. |
A nuanced understanding of these aspects is crucial for individuals and policymakers alike as they navigate the complex healthcare landscape.
B. Public health insurance
Public health insurance plays a crucial role in providing access to healthcare for millions. While it aims to ensure equitable treatment and reduce costs, it also faces challenges like long wait times and funding issues. Exploring the pros and cons can shed light on its impact on society.
Pros | Cons |
Universal Accessibility: > The primary objective of government-provided health insurance is to ensure the safety and well-being of citizens. > It aims to provide medical attention to everyone, regardless of financial status, race, or class. > It is designed to be inclusive, ensuring access to essential healthcare services for vulnerable sections of society. | Government Involvement: > One of the key drawbacks of national health plans is the potential impact of government decisions and policy changes. > Shifts in government priorities or budget constraints could affect the benefits provided to policyholders. > Changes in healthcare policies may lead to reductions in coverage, creating uncertainty for those reliant on public health schemes. |
Cost-Effectiveness: > National health plans come at little to no cost, easing the financial burden on individuals or families. > Heavily subsidized, reducing out-of-pocket expenses. Ensures access to necessary medical care for those with limited means. | Limited Network: > Public health insurance often operates within a limited network of hospitals and healthcare providers. > Reduced flexibility in choosing healthcare providers can pose challenges for individuals seeking specific doctors or advanced medical facilities for particular conditions. |
Preventive Care Focused: > National health insurance scheme emphasize preventive care to help policyholders avoid future health issues. > This ensures early detection and intervention, contributing to better overall public health outcomes. > Government policies typically include a defined network of hospitals and healthcare providers, encouraging regular checkups and preventative treatments that reduce the risk of long-term health complications. | Waiting Periods: > Due to the restricted network and limited resources in public healthcare systems, policyholders may face delays in receiving medical attention for non-emergency situations. > Long waiting periods can be particularly problematic, especially for managing chronic conditions. > Timely treatment is often compromised, making delays a significant disadvantage of public health insurance. |
Understanding these factors is essential for evaluating its effectiveness and shaping future healthcare policies that prioritise both quality and equity in health services.
National Health Insurance Scheme-
Every country undertakes various initiatives and measures to build a robust healthcare system that keeps its citizens healthy and informed. Governments implement several awareness programs, infrastructure developments, and healthcare aids to enhance the overall health of their populations. India is no exception; the country has taken significant steps to improve its healthcare system and ensure better access to medical services for all its citizens.
a) Aawas Health Insurance Scheme
This health insurance scheme was launched by the Government of Kerala in 2017 to support migrant workers. It not only covers healthcare expenses but also provides financial protection in case of accidental death. The scheme was designed to benefit around 5 lakh inter-state migrant workers working in Kerala. The coverage includes up to ₹15,000 for medical expenses and ₹2 lakh in case of accidental death.
b) Aam Aadmi Bima Yojana (AABY)
Aam Aadmi Bima Yojana (AABY) is a social security health insurance scheme aimed at individuals engaged in specific vocations like carpentry, handloom weaving, and fishing. Before 2013, there were two separate schemes – AABY and the Janashree Bima Yojana (JBY). These were merged in 2013 to streamline benefits. The scheme covers 48 identified vocations, offering protection and financial security to workers in these sectors.
c) Central Government Health Scheme (CGHS)
The CGHS is designed specifically for central government employees, including Supreme Court judges, railway employees, and other central government staff. This scheme has been active for over six decades and has provided health insurance coverage to more than 35 lakh employees and pensioners. CGHS remains one of the most comprehensive health schemes for government employees, covering a wide range of medical services.
d) Chief Minister’s Comprehensive Insurance Scheme
Initiated by the Government of Tamil Nadu in collaboration with United India Insurance Company Ltd., this family floater insurance scheme aims to assist residents with annual incomes below ₹75,000. It offers coverage for both government and private hospitals, with over 1,000 medical procedures included in the policy. Eligible families can avail up to ₹5 lakh in coverage under this scheme, ensuring affordable healthcare access.
Wrapping up
In conclusion, choosing the right health insurance, whether public or private, is essential for safeguarding your well-being and ensuring access to the healthcare you need. Each option comes with its own set of benefits and challenges, making it important to consider your unique circumstances before making a decision.
To stay informed on such crucial topics read more blogs. Get unbiased health insurance recommendations from OneAssure experts. Our team offers personalised guidance to navigate the complexities of health insurance, ensuring you make the best choice for you and your family.