Just like nothing being open on Sundays and the country’s obsession with following rules, the health insurance premiums increase is just a fact of life when living in Germany.
Let’s be frank about this!
Health Insurance costs in Germany and therefore premiums increase by an average of 3 – 5 % each year.
Should you worry?
Is it something you can avoid?
Read on to find out. In this post, we address health insurance premiums in the context of private health insurance.
When does this Increase in Contributions occur?
In most cases, an increase in premiums occurs in November. However, there is an exception of 2 or 3 insurance companies where the increase takes place in spring. You will receive a letter about adjustments to your health insurance premium if you’re privately insured. This polite wording – in German: “Beitragsanpassung” – usually means that your monthly contributions will increase the following year. This may come as a shock to some and may seem a little unfair. But the reality is, the health insurance premiums increase is something that happens regularly. This is regardless of your insurer, your specific insurance agreement or whether you are publicly or privately insured.
Why didn’t I know about the increase?
It’s not included in the terms you sign with your provider. However, historical information on past increases and a disclaimer on potential future increases accompanies the quotes provided to you by a health insurance company.
This could look like this (here: Barmenia)
Despite this, it’s often a detail easily missed in the fine print. Or unfortunately, not emphasised by agents and brokers who may not be as thorough.
Does this situation sound familiar?
Did the increase came as a surprise to you?
We encourage you to get in touch with your health insurance broker to talk through your options.
If you don’t have a broker, you’re also welcome to get in touch with us at KLforExpats for free advice.
Why do health insurance premiums increase in the first place?
An increase in health insurance premiums happens each year due to a combination of the following factors.
1. Rising benefit expenditures
The rise in benefit expenditures refers to the relationship between the costs of claims and what insurers get paid in monthly contributions. If the cost of claims exceeds the amount of money made by insurers, premiums will increase to account for this loss. Reasons that cost of claims may increase:
Medical progress which increases the cost of medical professionals using more advanced technology and solutions
Natural economic inflation which causes the cost of services to rise with the value of the Euro
The good news? An increase cannot be made randomly by an insurer. Insurance companies work with an independent trustee,who must have actuarial knowledge of premium calculation. The premiums may only be adjusted at all if there is a deviation in the amount of the percentage of 10% or a contractually stipulated percentage rate (so-called triggering factor) provided for by law. Neither insurance companies nor trustees can increase or decrease the premiums arbitrarily. Yes, this could also result in a decrease of premiums, but this rarely happens. We don’t recommend holding your breath!
2. Aging provisions
Aging provisions (in German: Alterungsrückstellungen) impact health insurance premiums increases. We’ll have a blog post coming soon on why you don’t have to worry about the price of private health insurance when you retire. Stay tuned! The basic principal is that we pay more now whilst we’re younger, to buffer what we won’t be able to pay as we age. The reason this has an impact on the yearly health insurance premiums increase is due to growing life expectancy. As life expectancy increases, so does our need to compensate with our health insurance premiums. This is especially true when interest rates are low.
Other facts to keep in mind:
Your employer will pay half of the health insurance premiums increase. This is as long as the contributions do not reach the highest amount that your employer subsidises.
The contributions for both public and private health insurance are deductible from tax.
An increase in health insurance premiums is separate to obligatory nurse care insurance (in German: Pflegepflichtversicherung = PVN) increases. Health insurance providers need to enforce this by law.
Although health insurance premiums increase by an average of 3 – 5 % each year, there are some instances where this can be much higher. For example, an insurance company may only see an increase in 2 % one year and 9 % the second year. And therefore, does not reach the 10% threshold. Customers who experienced no increase for two years will get hit with a bigger increase in the third year when the threshold is reached. These are the cases where those jumpy climbs might make you lose your temper. Luckily, most insurance companies will factor this in and charge a gradual increase so consumers aren’t blind sighted by such high increases.
What should you do if your health insurance premiums increase?
Like with everything health insurance related, we always advise clients to weigh their options carefully. Read the fine print and seek the advice of a health insurance broker so that you’re able to make a well-informed decision. However, here are some of the options available to get you thinking:
1.You can cancel your health insurance agreement and switch to another insurance company
Whilst this may look favourable, you should consider the following:
Applying to switch health insurance providers will mean that you have to complete another health assessment. Therefore, if you now have a pre-existing health condition that you didn’t have when you signed up for health insurance with your current provider, you may incur a significant surcharge.
Your age heavily impacts your premiums. Switching to a new provider means that your current age will be taken into consideration. This could be significantly higher if you’ve been with your current provider for quite some time.
2.You could stay with the same provider but change your plan and level of coverage
It may be a good idea to contact your health insurance provider directly or speak to your agent or insurance broker to see if this option makes sense for you. According to § 204 of the German Insurance Contract Act (Versicherungsvertragsgesetz), it is possible to switch to other tariffs of the insurer with similar insurance cover. Just remember, the plan you end up switching to could be subject to high premium increases next year. Therefore, please make sure to check the offer to see when this plan was last increased. If that was more than 3 years ago, you know, the next increase will be violent. And then you have won nothing.
3. Stick to what you have and ride out the increase
In most cases, this can be your most favourable option. As we explained, yearly increases of your health insurance premiums are normal and will affect everyone who is publicly or privately insured at some point.
We’d also like to emphasise that the decision to take out private health insurance isn’t a decision one should make lightly. It’s a decision for life and one that should be well-thought through and not steered by bagging the best bargain. Act wisely and know the full scope of what you’re buying into. The type of health insurance you choose could significantly impact the course of your life.