What is Commercial Health Insurance

Commercial health insurance is a type of health insurance that covers medical expenses and disability income for the insured.

BREAKING DOWN Commercial Health Insurance

Commercial health insurance policies are sold by for-profit carriers. They are usually sold by agents and brokers, but can also be purchased directly from the carrier in many instances. These policies vary widely in the amount and types of specific coverage that they provide.

This type of insurance is referred to as commercial because it is available on the commercial market. This distinguishes it from insurance provided via a public or government program such as Medicaid. In broad terms, any type of health insurance coverage that isn’t maintained or provided by a government-run program can be considered a commercial type of insurance.

Most commercial health insurance plans are structured as either a Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO). The main difference is that an HMO requires patients to choose one primary care physician, who serves as the central provider and coordinates the care providers by other specialist or healthcare practitioners.

Commercial Health Insurance Plans

Commercial health insurance can be categorized according to its renewal provisions and type of medical benefits provided. Commercial policies can be sold individually or as part of a group plan. These health insurance plans are offered by private and for-profit companies. Some insurance programs are operated as non-profit entities, often as an affiliated or regional operation of a larger, for-profit enterprise.

Health insurance on the commercial market is commonly obtained through an employer. Since the employer typically covers at least a portion of the cost, this is often a cost-effective way for the employee to obtain health coverage. Employers are often able to get attractive rates and terms because they negotiate contracts with insurers and can offer a large number of insurance customers.

Self-employed people and small business owners can buy their own health insurance coverage, but it is often financially beneficial for them to try and join via a group plan through a professional organization or local group.

The specific details of a commercial insurance plan can vary widely, and are determined by the company that offers the plan. State regulatory and legislative bodies also dictate certain aspects of what the plans are required to offer, and how they must operate. These laws also establish mandates for how and when insurers must pay invoices, reimburse providers and patients, and the amount of funds the insurer must keep in reserves in order to have sufficient capital to pay out benefits.