A Beginner’s Guide To The German Healthcare & Insurance System
Of the myriad of things you will need to deal with during your first weeks in Germany, I found healthcare to be the most confusing as a newcomer. Or more specifically, figuring out the various options out there for health insurance coverage. This post is intended to demystify this by giving some background behind how the German healthcare system differs from that which you are familiar. This has been written with an international audience in mind but a lot of the examples and comparisons I refer to inevitably have more of a British slant to them.
What I aim to cover here are the different aspects of the German healthcare system, and in particular how these are relevant to expats. This is not intended to look at healthcare or health insurance from a political slant. There are pros and cons to healthcare systems in every country and that would be another post all in itself. It is also not intended to provide individual advice because everybody’s circumstances are different.
I have given examples below but this is purely based on the average person. In no way is this meant to substitute detailed advice and your own individual research. Whilst it is relatively easy and possible objectively to say that Bank X provides a better product than Bank Y, it is impossible to make this distinction for healthcare providers. Nonetheless, I hope this enables you to avoid a lot of the confusion and allows you to start your search with a good, basic overview of how the system works and what aspects you should consider when searching for German health insurance.
How is it Different?
Let’s start with the nuts and bolts of the system: How does it work in practice and how does it differ from what you are used to in your home country? I will then take you on a tour of the different opportunities which may be open to you, depending on your income, family status and medical history. All of this is very relevant as you will see.
On one end of the scale is the British healthcare system, which is a fully taxpayer-funded national health service known to us Brits of course as the NHS. Healthcare professionals such as doctors, dentists and nurses all work for the state i.e. they are public sector employees. In fact, the NHS is the biggest single employer in Europe. Hospitals, clinics and surgeries are all administered by the government. Whilst these services are decentralised and are administered locally, the budget itself comes from central government and is funded entirely by the state. You often hear on British current affairs and topical debate shows the term “free at point of entry”. In practical terms it means that pretty much anyone can turn up in Accident and Emergency at a British hospital, or call an ambulance, or go to the doctor, and they will be treated without having to confirm any valid health insurance (but you will probably get a bill afterwards if you’re not a UK resident).
On the other end of the scale is the US healthcare model, which is almost exclusively accessed through individuals, or their employers doing so on their behalf as a condition of employment, taking out health insurance policies. If your insurance policy doesn’t cover you for a certain health complaint, or if you have taken out inadequate insurance, then you as an individual are in most cases liable for your treatment costs. The stories of individuals having to sell their home to cover healthcare bills because they were uninsured are very real. Medicare and Medicaid covers those most in need i.e. older people, welfare recipients and certain low-earners who otherwise would not be able to pay for healthcare but both of these still rely on an insurer-based model.
Hospitals, doctors’ surgeries, clinics, rehabilitation centres and so forth are private, for-profit businesses. They perform services and then invoice the individual (or the insurance company directly) just like any other regular business would operate. In other words, their employees belong to the regular economy and are in no way funded by the federal government. Obamacare has, broadly speaking, made access to healthcare easier for individuals who otherwise may have de-facto been shut out of the healthcare market. Nonetheless, the essence of how the actual nuts and bolts of the system work has not substantially changed. American healthcare remains private. All Obamacare essentially did was to ensure that high-risk patients could not be refused insurance by every insurance company. Each state now has to ensure health insurance is theoretically available to all individuals.
So why this whistle-stop explanation of two completely diametrically opposing examples of how a country can provide healthcare? Well, because it is the best way for me to begin to explain to those completely new to this topic the way how the German system works. It is, for all sense and purposes, a mixture of both systems: Germany tries, with varying degrees of success, to take the best bits from both.
To appreciate how it works, first of all, one must understand that the basic concept of insurance is that of risk. Or perhaps better said, the statistically predictable level of risk for whatever it is that is being insured. In this case, the patient.
Determining factors include past medical history, hereditary conditions, age, gender and lifestyle. Based on your perceived level of risk, certain types of health insurance may be unavailable to you. Having a good grasp of this, along with considering how long you plan to live and work in Germany for, will help you greatly in deciding how to insure you and your family.
Germany operates on an insurance-based system, with medical professionals working for private, for-profit companies. There is no “German NHS” or its equivalent. In the German healthcare system, hospitals are businesses, often owning chains of hospitals and related outpatient and aftercare services. Doctors and dentists are self-employed individuals, often working together in a practice, paid for through invoices they raise on their patients’ health insurance companies. Nonetheless, Germany, in keeping with its social-democratic traditions, does have a regulated public health insurance system, or socialized medicine as an American would call it. Just like in the UK, everybody who is registered as being resident in Germany has the legal right to healthcare provision.
Since January 2009, everybody is also legally obliged to have health insurance. Welfare recipients are automatically covered by the state. Unlike in the UK, however, individuals who are either employed or self-employed have a degree of choice around what type and level of cover they opt in to. You don’t just automatically have your national insurance contributions deducted from your salary. Healthcare is separate from state pension and other welfare contributions, which in Germany are automatically deducted from your payslip if you are a regular employee.
Health insurance has to be actively contracted by the individual because there is no one single-payer, public German health insurance provider. And this is where it starts to get confusing!
What Options Are Available To Me?
So, now we can take a look at what types of options are available and to whom. If you are self-employed, then you automatically have the option of whether to pay into the public health system (gesetzliche Krankenversicherung) or whether to opt out and take a private health insurance policy (private Krankenversicherung). If trying to pronounce those has got you nervous, don’t lose heart. Very rarely is choice a bad thing!
Employees , on the other hand, don’t automatically have this choice: It depends on how much you earn before tax i.e. gross salary. In 2017, you have to earn over €57,600 per annum to have the choice between gesetzlich or privat. Anyone earning below this threshold is automatically obliged to take out a public insurance policy. Whilst you may earn above the threshold to qualify for private insurance, it does not guarantee that a private medical insurance company will offer you insurance. This very much depends on the level of risk they perceive you to be as an individual.
A friend of mine a few years ago could not get private health insurance when he moved to Germany because he has diabetes. He had no option but to choose public health coverage, which as a relatively high earner meant that his healthcare contributions were substantially higher than mine were with private insurance (measured as a percentage of gross salary). The cold, hard reason is that he had a condition which most probably will require lifelong medication and result in potential health problems later in life. The insurers thus deemed that for a man in his early 30s, he would be a costly and risky proposition over his lifetime.
But now here comes the tricky and unfortunate part of the German healthcare system. You will have to advise your employer during the first month of your job which type of health insurance you wish to take, and produce a letter from your health insurance provider which confirms your monthly bill. This is because regardless of which option you take, your employer is obliged to pay a contribution towards your healthcare costs and therefore need to know how much to deduct from, or contribute to, your first payslip.
If you choose public insurance, this in total is calculated as 14.6% of your gross monthly salary. Your employer will contribute half of this sum and you will pay the other half, which is deducted directly from your salary and paid to the public insurance company, known in German as Gesetzliche Krankenkasse or GKV. Additionally you have the option to purchase extras which are not covered under the normal policy at an additional 1.1% of gross income. This is a voluntary contribution and as such is not subsidised by the employer. Therefore, in this case, of the total 15.7%, the 7.3% is funded by the employer and the remaining 8.4% by the employee.
There are many gesetzliche Krankenkassen, each one with their own nuances and opt-ins and specific advantages or disadvantages depending on what an individual is specifically looking for. A good example of this is that typically public insurers will not include common medical requirements such as dental care, physiotherapy, non-emergency sports injuries and alternative medicine. You will need to shop around to understand which of these may, or may not, be covered by various insurers. This is a very important but often overlooked point for newcomers. In extreme cases this can mean the difference between having to foot hundreds of Euro worth of medical bills yourself without any compensation from your German healthcare provider.
Opting for private insurance means that your employer will provide a contribution towards your policy. This works slightly differently however, in that you will receive the employer’s contribution (typically 50% of the monthly policy, with a few exceptions) directly on your payslip as part of your monthly salary paid into your bank. On your payslip this will be described as Arbeitgeberzuschuss private Krankenversicherung or something similar, and will usually appear after all of your gross pay and tax and social insurance deductions. You then typically pay your health insurance by direct debit independently to your insurer. Your employer takes no responsibility or liability for your private health insurance contributions and ability to pay them. The contract between policyholder and insurer is in no way underwritten by your employer.
Can You Give Some Examples?
Now that we have covered the basics, let’s take a look at a couple of examples of where it may make sense to go for one option over the other:
A 30-year-old male with no history of serious medical conditions, no dependent children, non-smoker on an annual salary of €75,000, who intends to spend 3 years in Germany before returning home. Funnily enough, that sounds very similar to my own situation 10 years ago! In this instance, it would in most cases make sense to consider private health insurance. The contributions into the public system as a higher earner would mean that it is relatively expensive (contributions are a percentage of gross salary), whereas private insurance at this point in life for this individual would almost certainly be cheaper. The premium is based on risk and this person is young, in good health and with no dependent family members.
Now let’s consider if that same example above were a 45-year-old male, married with two dependent children, moving with a view to stay in Germany permanently. Here a whole new set of factors come in to play. First of all he is 15 years older. In almost all cases a private health insurance company would consider him to be a higher risk. Secondly, he has two dependent kids whom he will also have to insure. Let’s assume for the sake of this example that his wife is not working full time and cannot insure them on her policy. And finally, his move is likely to be permanent.
This is important for two reasons: If you opt out of the public system, you cannot simply opt back in when a private insurance company jacks up the cost of the insurance policy. Otherwise, everyone smart enough to figure it out would do it! There is a three year grace period to cancel your private insurance but then after that, you can’t opt back in to the public system. There are some exceptions and loopholes but it is extremely complex and beyond the scope of this article. Also let’s also not forget that as this person gets older, his insurance will become a higher risk to the insurer and his premium as such will almost certainly rise over time. Irrelevant for a fixed term expat assignment but a vitally important consideration for those making the move permanent.
One final point on this before moving on: A new European Union law came into force at the end of 2012 that insurers may no longer discriminate between male and female insurance policies on the grounds of sexual equality. Historically, male health insurance policies had typically been cheaper for two reasons. Firstly, women on average live longer than men and thus would have higher healthcare costs over an entire lifetime. Secondly, childbirth and associated gynaecological conditions are costlier to a healthcare system. Therefore the two examples I used above would have the same relevance for women as they would for men.
So Is It A Good System?
So, the question I know you would ask me if we were sat now in a pub would be, “which system is better” or “what works well in Germany compared to country X?”. Well, I can only make comparison here to the UK, other than soundbites which my friends from other countries have given me as feedback.
Compared to the NHS, the main advantages I have experienced are that doctor waiting times are much lower because it is based on demand and supply in a free market rather than a state controlled system driven by available budgets. It is much easier to get non-essential treatment or to be referred to specialists without enduring long waiting times. Hospitals and doctor’s surgeries feel more luxurious and better staffed and equipped. There is a well-organised emergency doctor network in the city where I live which avoids the need to show up at a hospital A and E out of desperation of not knowing where else to turn at weekends or during the night for treatment. There is no feeling at all that the system is overstretched or at breaking point. It is harder to scam the system when it comes to “health tourism” because you have to pay at the point of entry. In fact, the hospitals and clinics in my home city earn a lot of money from foreigners coming here and paying for world class treatment.
Before you think of this as some kind of utopia, let’s not forget that all of this comes at a price. Healthcare in Germany is extremely expensive. The NHS has huge negotiating power over pharma companies because of its size and the level of purchasing power they have. In Germany there is no one national provider to centrally negotiate the cost of drugs or medical equipment. The obligatory costs for public insurance (in terms of salary percentage you have to pay in) has increased twice since I moved here. Private insurers have followed suit.
Second only to Japan, Germany has the worst demographic pyramid of all industrialised nations so it’s only going to get even more expensive as people live longer, medicine becomes more advanced and the ratio of working people to retired / non-working paying into the system reduces. It is a lottery you are voluntarily playing with your health if you decide to go private. One serious condition and your premium could skyrocket. Also there is the moral question of why should higher earners be allowed to opt out, go private and thus push the burden of welfare recipients’ healthcare onto lower and middle earners. Not to mention the whole admin headache of having to keep all medical receipts so as you can claim back the cost from your insurer.
So there you are: A brief helicopter tour of the healthcare system in Germany, how it works, how it is set-up, what considerations must be thought through when deciding to go public or private, and a very brief summary of what works well and what not so well.
Addendum: Different rules apply for Erasmus students and au pairs which are not covered by this article.
LiveWorkGermany provides in-depth, accurate, real, honest and up-to-date content advising expats in Germany and those seeking to relocate. Covering topics such as housing & relocation, dealing with bureaucracy, work & employment, learning German as well as everyday life in Germany through the eyes of an expat & guest bloggers. E-book and expat city guides coming soon.
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