The compulsory insurance limit or in other words income threshold for private health insurance increases each year. In Germany, this is called “Versicherungspflichtgrenze” or “Jahresarbeitsentgeltgrenze” (JAEG). This income threshold is adjusted annually to the general income development in Germany. What does this mean if you’re an employee who is privately insured but earning under the new amount of €62,250 gross valid as of 2020? It means you will need to revert back to the public health scheme then. It is mandatory if you do not meet the income threshold. Only employees who earn more than this income threshold are eligible for private health insurance.
We know what you’re thinking… another legislative change to further complicate my expat health insurance situation! Just when you thought you were beginning to get the hang of everything and understand the system, right? If the compulsory insurance limit increase affects you, don’t panic. Get in touch with us here at KLforExpats. We can help you with the transition from private health insurance to the public scheme. Quick, easy and in a way that will benefit you and your personal circumstances best.
In saying this, there’s a few things that are important for employed expats to know when it comes to the income threshold increase. We’ve broken them down for you below.
Compulsory insurance limit increase: The facts
The compulsory insurance limit increase occurs every year on the 1stof January
For employees, it determines the amount of income above which they are exempt from insurance. It allows them to opt for private health insurance or stay voluntarily in the statutory scheme
The income thresholds for health insurance are valid throughout Germany
This increase applies only to employees and does not impact those who identify as freelancers or as self-employed. The latter enjoy freedom of insurance anyway and can choose independently whether they want to take out statutory or private health insurance
Who does the compulsory insurance limit increase impact?
If you are an employee and earn more than €62,250 gross, congratulation! You have the freedom of choice between statutory and private health insurance.
There are some extra rules when it comes to a salary increase during the year. That means in detail:
Employees who receive a salary increase which allows them to meet the income threshold and obtain private health insurance if they wish, must wait until the end of the calendar year to transfer from the public to private health system.
New job starters or those who have recently changed their status from self-employed to employed and earn above the income threshold do not have to wait until the end of the calendar year to switch from the public to private system. These individuals can obtain private health insurance and are immediately exempt from mandatory statutory insurance as soon as they begin their dependent employment.
And if a change of employer has the effect that you earn more money which exceeds the compulsory insurance limit, you are immediately exempt from mandatory statutory insurance as soon as the new employment begins.
For example, if Jenny is employed as an IT-consultant and she was told by her boss that she would receive a salary increase valid as of January 2020, Jenny would be able to opt for private health insurance from 1st of January 2021.
Other example: John is employed as an engineer earning € 5,000 monthly right now. As of December 2019 he will be promoted and will then be earning € 6,000 monhtly. He may opt for private health insurance from 1st of January 2020.
You see, things are complex. Don’t despair, that’s exactly what we are here for! We help you. One of our clients once said “It’s more like you’re Indiana Jones, helping me outrun the snakes.” I think that´s what it´s all about. Let us be your guide through the German health insruance maze. So do not hesitate to contact us. You can easily use the chat below to ask for quick advice. We are here and ready to help.
There is always an exception!
Over 55 years old
Privately insured people who are 55 years of age or older remain with their private health insurance provider. This is regardless of whether their income meets the new compulsory insurance limit or not.
Privately insured employees who bought private health insurance before 2003 have a special lower income threshold. It is currently €54,450 and will be €56,250 in 2020. This limit corresponds to the income threshold for assessment of contributions.
The compulsory insurance limit VS the contributions assessment ceiling – don’t mix the two up!
The contributions assessment ceiling also known as the ‘Beitragsbemessungsgrenze’ is also another dynamic threshold that needs to be taken into consideration. It is not to be confused with the compulsory insurance limit increase!
In 2019 it was €4,537,50 monthly and in 2020 it is planned to be €4,687.50. On a yearly base this equated to €54,450 gross in 2019 and €56,250 in 2020. As you see, this contributions assessment number also increases each year alongside the private health insurance income threshold. Therefore, many often muddle the two up.
The contributions assessment is relevant for calculation of premiums in the public scheme. As you might be aware, in the statutory health insurance scheme your monthly contributions are calculated as a percentage of your gross income. Currently for health insurance, that’s 14,6 % plus 0,9 % additional contribution (“Zusatzbeitrag”) and for the obligatory long term nurse care insurance it’s another 3,30 % if you have no kids, and 3,05 % if you have kids.
This means if you earn €4,000 gross per month, you pay roughly €752 for your public health insurance and the employer contributes half of it.
The contributions assessment ceiling limits this monthly premium for higher earners. This means that regardless of whether you earn €4,700 or €10,000 monthly, you will still pay the same monthly premium. The contribution is capped at an income of €4,687.50 (for 2020) – which is a monthly premium of €869.54 for high earners without kids. Anyone earning more than that pays the same contribution.
The silver lining
Unfortunately, the downside for those impacted by the compulsory insurance limit increase means that they no longer have freedom of choice when it comes to opting for private VS public health insurance. It means that anyone that does not meet the new income threshold must enter the public health insurance system regardless of their preference.
For example, if Tom is employed as a marketer and he earns € 61,000 in total in 2019 being privately insured, he will be forced back into the public scheme on the 1st of January 2020. This is because his gross earnings will not exceed the income theshold of € 62,250 in 2020.
Arushi is employed as a senior consultant earning € 8,000 monthly right now. On the 1st of January 2020 she will switch to a part-time contract to spend more time with her children and will be earning € 5,000 monhtly then. She also will then be forced back into the statutory plan.
However, there are also ways that the income threshold increase can work to an individual’s favour. We highly encourage people to exploit these advantages, where possible. For instance, it is notoriously difficult if you wish to switch to the public health system if you’re insured privately. If you initially opted for private health insurance but now have children for example, your private health insurance premiums are likely to be a lot more expensive than if you were enrolled in the public scheme. In this instance, it might be in your best interest to work part time hours so you can fall below the income threshold and reap the benefits of the public system. You could then revert back to full time work if you wished but still remain on the public system. Clever, huh? We thought so too!
Want to know more about how you could use the income threshold increase to benefit your situation? Or still confused about what the income threshold means for you? Don’t hesitate to get in touch with us at KLforExpats for free advice. As always, we know that navigating the complex world of German health insurance can at times be overwhelming for expats in Germany, so we are here to help!
These figures are up to date as of the time this blog post was published on 18 September 2019. The internet is filled with misleading information surrounding this topic, so any blog posts or articles you see published before this date with different figures may be incorrect.