Government Taking Over Healthcare Contributions: Merz Administration to Finance Premiums with Citizens' Funds
Health Insurance Woes: A Close Look at the German Perspective
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Penned By: Bona Hyun
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The fiscal soundness of German health insurers continues to be a matter of concern. The Merz administration is now eying fiscal relief for citizens receiving basic income, which may put a strain on health insurers.
Germany - The burdensome health insurance premiums are hurting insured persons - and things might worsen. Industry voices anticipate further price hikes if there's no overhaul. The precarious financial situation might perpetuate the contribution spiral.
German Health Insurers Grapple with Financial Struggles - Premiums could surge further
The precarious situation was illustrated by a Handelsblatt report: By the year-end 2024, the financial assets of 45 out of the 58 nationwide health insurers fell below the critical threshold of 20 percent of monthly spending. 22 of these insurers had "no more reserves," with the medium reporting data from the Federal Office for Social Security (BA), as stated in the article.
By law, the general contribution rate stands at 14.6 percent of insurable income. However, this rate doesn't adequately cover the insurers' expenses, leading them to levy additional contributions that vary among insurers. The average additional contribution hovers around 2.5 percent, but it can be higher or lower. Several health insurers boosted their additional contributions at the turn of the year in an attempt to restore their financial well-being.
"In the course of 2025, six of the health insurers under the scrutiny of the BA have already increased their additional contribution rate, and it is expected that more health insurers will follow suit in the coming months," said the Handelsblatt, quoting the BA. The final destination of the financial situation remains unclear due to these increases.
Upcoming Increase in Health Insurance Premiums? New Health Minister lays out plans
The precarious circumstances present the new health minister, Nina Warken (CDU), who hints at a "worrying situation" in a ZDF interview, with an array of challenges. The minister aims to prevent any hikes in premiums whenever possible, to avoid burdening citizens or businesses, Warken expressed in a conversation with the Frankfurter Allgemeine Zeitung on May 25, 2025. Performance reductions are also to be averted.
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"We have already transferred 800 million euros from the federal subsidy to the health fund to secure liquidity. But we will need additional funds from the budget," said the new health minister.
Financial Stress in Health Insurers: "We need fundamental reforms"
Warken recently suggested an emergency package to prevent or alleviate a further increase in contribution rates in statutory health insurance. Among the package components, Warken framed additional billion euros in tax funds for health insurers. It is about the health insurance contributions that the federal government pays for basic income recipients. "The problem is apparent here," said the minister to the Redaktionsnetzwerk Deutschland: "The contributions from the job centers are not sufficient to cover their health costs. There's an imbalance. We'll discuss this."
Finance Minister Lars Klingbeil (SPD) is also aiming to prevent increased social contributions. He believes that federal subsidies are not a long-term solution for health and care insurance funds. "We need fundamental reforms to permanently stabilize contributions," he recently told Bild newspaper. However, he anticipates all concerned parties to show "more creativity than worker contribution cuts."
Struggling Care Insurance Funds
The situation for care insurance funds is no brighter. Last year, the care insurance fund saw a deficit of 1.54 billion euros. To stabilize finances, care contributions were boosted by 0.2 percentage points at the start of the year. Without fresh money, a contribution hike of at least 0.3 percentage points is imminent by the end of 2026, according to DAK board chairman Andreas Storm. For instance, a policyholder with one child currently pays 3.6 percent of their gross income.
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Insights
- Managed Care Models: Introducing or expanding managed care models could optimize costs and enhance efficiency in healthcare delivery. Managed care effectiveness in German health insurance is under investigation through recent studies.[4]
- Regulatory Adjustments: Understanding regulatory complexities and navigating changes can contribute significantly. For example, policy dynamics and issue networks in health insurance policy-making are being analyzed to identify effective strategies for reform and financial sustainability.[5]
- Market Demand and Growth: Although not directly addressing financial struggles, overall insurance growth in Germany, including property and casualty (P&C) segments, is anticipated. This growth might provide a broader market context for insurers to adapt and bolster their financial standings.[3]
- Investment Strategies: Insurers face challenges obtaining attractive returns on investments due to macroeconomic influences. Portfolio diversification and aligning investments with market trends could help alleviate these challenges.[2]
- Risk Management and Diversification: Insurers like Munich Re have shown resilience by skillfully managing their portfolios. Similar strategies could be applied to health insurers, focusing on risk management and diversification across various insurance types.[1]
Future Directions
- Reform and Digitalization: Encouraging policy reforms and capitalizing on digital technologies could boost operational efficiency and customer engagement, potentially improving financial outputs for health insurers.
- Collaboration and Partnerships: Building inter-industry partnerships and forging alliances with healthcare providers and other stakeholders might help streamline services and cut costs, improving the overall financial health of the sector.
The precarious financial situation of German health insurers calls for a reevaluation of investment strategies to secure attractive returns. The minister aims to prevent any hikes in premiums, but the finance minister also believes that federal subsidies are not a long-term solution, instead advocating for fundamental reforms. On the other hand, the financial health of care insurance funds is equally concerning, with a deficit of 1.54 billion euros last year. Science and finance could play crucial roles in finding long-term solutions for both health and care insurance funds, contributing to the broader health-and-wellness sector.
