Choosing between private or public health insurance is one of the first dilemmas faced by employed expats looking to navigate the German healthcare system. Below, we take a look at everything you need to know about private health insurance; from how the industry works at a glance, to eligibility and more.
Today, 33.8 million people in Germany have private health insurance, making it the third largest class of insurance in the country after life and motor insurance. In 2017, the private health insurance industry generated €39 billion in revenue and paid out €27.19 billion in insurance benefits, claims and settlement costs.
Individuals who are eligible for private health insurance in Germany include freelancers, self-employed business owners, students, civil servants and employees who earn above the income threshold of €62,500 per calendar year. Employees who earn under this are mandatorily enrolled in the statutory health scheme.
However, for private health insurance providers, there is also an additional eligibility requirement for employees who earn above the income threshold which relates to the need to pass a medical assessment. Assuming an individual passes said assessment, private health insurance coverage can then be tailored to suit an individual’s specific needs. This is one of the biggest advantages of electing private health insurance over public health insurance.
Unlike the public system, if an individual’s medical conditions are too severe, a private health insurance provider has the right to reject the individual’s application for coverage. This can create complications for those who are not mandatorily insured in the public scheme and do not fulfill the rules to be a voluntary member. To circumvent this, all private health insurance companies are required by German law to offer a Basistarif which translates to ‘Basic Plan’. This type of coverage must offer a range of benefits comparable with public health insurance and has contributions that are set based not on one’s medical assessment but based on their age. In line with the law, the price of this coverage may not be higher than the capped highest amount of contribution paid by the highest earner enrolled in the public scheme.
Private health insurance companies offer two types of health insurance; either full comprehensive health insurance or supplementary health insurance. Comprehensive health insurance plans are all inclusive and can be fully customised for an individual to meet all their healthcare requirements. On the other hand, supplementary health insurance can be obtained by those who are publicly insured and who wish to close the gap between the benefits offered within the public scheme and private plans.
This is not to say that the public scheme does not offer a high quality of care, however those privately insured may certainly enjoy more freedom when it comes to special preferences surrounding the selection of doctors, accommodation during inpatient care, sick pay benefits and more extensive dental care options.
Mirja Lundehn – Independent insurance broker
Co-founder of KLforExpats and licensed insurance expert
Private health insurance is based on the principle of equivalence which means that the value of an individual’s insurance cover is determined by their contribution and the level of risk assumed by the private health insurer. The main factors taken into consideration are a person’s entry-age, previous illnesses, state of health, scope of benefits and any agreed deductibles. This is key to why private health insurance plans offer so much flexibility and are easily customisable.
All privately insured persons pay a higher insurance premium in their younger years than would be necessary to cover their medical costs. This higher premium (also known as the ageing reserve) is intended to compensate for the often rising medical costs that occur in old age and is something unique to the private system. This ensures that insurance premiums increase less sharply in later years of life.
There is also a common misconception that private health insurance is more expensive than public health insurance. This is not necessarily the case and is dependent on an individual’s own personal circumstances and factors such as age and number of dependents. Unlike the public health scheme, when privately insured, individuals pay per person, which might mean higher premiums for someone with or wishing to start a family. In such cases, it might be beneficial for a family to elect to be publicly insured and buy supplementary private health insurance in addition.
Individuals who are privately insured are permitted to switch between providers granted they stay with the same company for at least two years. However, this is of course dependent on the terms of the provider itself. The added bonus is that when an individual switches from one private provider to another, the savings that have gone into their fund to offset the higher premiums they’d have to pay during retirement (ageing reserves) are partially carried onto their new plan and not lost altogether.
Privately insured individuals also enjoy a significant level of freedom too in regard to upgrading or downgrading their benefits provided they are willing to undertake a medical assessment at the commencement of a new health insurance plan. To avoid having to do the medical however, some opt for a ‘joker’ to be incorporated into their policy which means that you can have a clause in your terms which allows you to upgrade your insurance after 3, 5 or 10 years without the added hassle of a medical assessment.
Private health insurance works on a cost reimbursement basis which means that private health insurance companies do not assume any payment obligations to doctors, hospitals or healthcare providers. Instead, the contractual partnership is between the individual being treated and the healthcare provider. This simply means that a privately insured person will settle their own invoices for medical treatment, then claim partial or full reimbursement from their private health insurer. An exception to this rule exists for those that are hospitalised in which case the costs are settled directly between the hospital and the private health insurance company.
A private health insurance plan which is recognised as a full comprehensive health insurance plan must include at least the reimbursement of costs for inpatient and outpatient treatment and with a deductible that does not exceed €5,000 in a calendar year. This means that in order to fulfil Germany's legal requirements surrounding health insurance (e. g. for the immigration office) you are not required to have dental care as part of your health insurance coverage.
Would you like to discuss whether private comprehensive health insurance or supplementary health insurance is right for you? Get in touch with our lead expert Mirja today for free advice.
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