Does private health insurance actually protect sick people?

A study found that unhealthy people with private insurance faced greater financial risks.

Headshot of Myles Ma, CPFC


Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a certified personal finance counselor and former senior reporter at Policygenius, where he covered insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

Published|4 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

When you pay for insurance, you’re ideally buying financial certainty. When you get into a car accident, car insurance protects you from bearing the full cost on your own. You pay your premium even if nothing bad happens, and it’s supposed to pay off if something bad does happen. 

Health insurance should work the same way. You pay your premium even if you’re healthy, and you’re covered if you become unhealthy. In practice, even people with health insurance face financial barriers to care when they get sick, as a new study reveals. The study, published in the Journal of General Internal Medicine, looked at three years of survey data covering 82,494 Americans with private insurance and found that those in poorer health were at greater risk of not taking medication due to cost, taking on medical debt, and being dissatisfied with care. 

Ready to shop for life insurance?

“Private insurance seems to protect those that don’t need the most protection,” says Dr. Salomeh Keyhani, professor of medicine at the University of California, San Francisco, and senior author of the study. 

While the study did not identify causes of the disparity, Keyhani speculated that people with poorer health face barriers to accessing affordable medical care. For example, you may need treatment from a specialist, but your insurance network may not include that specialist, so you have to pay out-of-network costs. 

The Policygenius 2022 Health Insurance Survey also found costs are too high for insured Americans. 41% of Americnas with health insurance said they had avoided getting medical care because they knew or feared insurance wouldn’t cover the costs, while 32% said the cost of a prescription prevented them from taking the full dose of a prescribed medication.

Where health insurance falls short

A supposed benefit of the private health insurance system is that consumers have choices: a Cheesecake Factory menu of plans and providers, allowing you to tailor your health care as you see fit. The reality is that it’s unrealistic, and often impossible, for patients to anticipate what care they’ll need if they get sick.

“This is just a false narrative,” Keyhani says. “If you get cancer, you can’t anticipate what medications your oncologists need to use.”

If you can’t anticipate care, you can’t anticipate your costs, which makes it difficult to know what kind of health insurance plan to get. Given these uncertainties, Keyhani says there should be further regulations limiting what patients have to pay out of pocket. .

Kayhani says that researchers are limited in their ability to study private insurance plans. While Medicare is federally funded and required to make much of its data public, private health insurance companies are under no such obligation, making it difficult for researchers and people shopping for insurance alike to assess the quality of private plans. So if you’re a diabetic, it’s difficult to say which health care plans have the best outcomes for diabetics.

“Consumers can’t make choices because the data aren’t transparent,” Keyhani says. 

How to pick a health insurance plan 

So where does that leave you when you sign up for health insurance? Even though it’s difficult to estimate all your health care costs over the next year, you can at least compare plan costs in a worst-case scenario, in which you have to cover the entire deductible and out-of-pocket max, and a best-case scenario, in which you pay nothing but the premium. 

From a pure cost standpoint, this comparison often points to a high deductible health plan as the best option, since the premium is usually very low, if it even has one, and you can use a health savings account. But cost isn’t everything. With a high deductible plan, it can be stressful to manage all the medical bills that come in the mail, and your costs if you get sick are harder to predict. Plus, you may not be able to afford the deductible.

If you’re signing up on the state or federal marketplaces, the good news is that Congress extended the enhanced premium subsidies introduced during the pandemic. 

“A lot of people are going to have $0 premiums in the exchanges,” and premiums are capped at 8.5% of income, [1] says Naomi Zewde, professor of health policy at UCLA Fielding School of Public Health. Because of the enhanced subsidies, plans with higher premiums and lower deductibles might be more affordable than they were before. 

Another thing to look at is networks. Your plan might be affordable, but it may not include doctors in your area. If you have a doctor you want to see, call the insurance company or the doctor’s office to make sure they’ll be covered under your plan. 

While you can’t forecast every health expense you’ll face, you should read each available plan carefully to form the best estimate you can, and weigh the costs along with your tolerance for risk. It’s a tough decision, but it’s important, given how costly health care can become.

“If we had public coverage,” Zewde says, ”we wouldn’t have to make these choices.”

Image: jacobia dahm / Getty