The German Health Care System: An Overview

The German Health Care System: An Overview
Patrick Ott
Martina Martinez
Expert for insurance and finance
13. April 2023

The task of a healthcare system to maintain the health of a population is not a simple matter. For this purpose, the German health care system consists of several institutions, groups, organizations, professionals. In the following, you will learn which elements make it up and how the health care system in Germany works. In particular, we show which forms of health insurance are available to you.

Four basic principles

What is the idea behind the healthcare system in Germany? This question is answered by the following four basic principles that define and organize the German health care system and how it works.

  1. Compulsory insurance: All citizens are obliged to take out insurance. This is usually done through the statutory health insurance (GKV). Persons entitled to benefits, entrepreneurs and higher earners can register with a private health insurance (PKV). This second option is particularly useful for higher-earning employees if their health insurance contributions are above the compulsory insurance limit.
  2. Contribution financing: The health care system is financed by the contributions that the health insurance policyholders themselves regularly pay in. For those with statutory health insurance, these are proportional to their respective income (up to a certain limit, the so-called contribution assessment ceiling). Employees, however, receive subsidies from their employers and the state supports the health care system through tax revenues. For privately insured persons, the insurance premium is based on various criteria, such as health status, age and individual risk of the insured person. In this way, the German health care system differs in its financing from both purely market-based health care systems, such as in the United States, and from mainly state-funded health care systems, such as in Sweden.
  3. Solidarity principle: In the context of the health care system, solidarity means that all persons insured under the statutory health insurance system jointly bear the cost risk of cases of illness for all persons insured under the statutory health insurance system. Everyone with statutory insurance has the same entitlement to care, regardless of income and the amount of contributions paid in. Since contributions are calculated as a percentage of individual income, costs are shared between poorer and richer insured persons.
  4. Self-governance principle: Although the state sets the general framework for health care, the further organization and financing of medical care are based on the principle of self-governance. This means that they are the result of cooperation between physicians, their representatives, hospitals and the insured. The supreme body that coordinates this cooperation is the Joint Federal Committee (G-BA).

The structure of the German health care system

Broadly speaking, the German healthcare system can be described as being divided into three levels:

  1. The setting of framework conditions by the federal, state and local governments. For this first level, the keyword is: health policy. Whether centrally through the Federal Ministry of Health (BMG) and other institutions, such as the Robert Koch Institute (RKI), regionally through the federal states or locally through the health offices - the concrete care framework is first set.
  2. The design of health care, administered by corporate bodies and associations. Corporations and associations represent the positions of the various actors who actively participate in health care: Physicians, health insurers, hospitals and other health care professionals. The supreme body within this framework is the Federal Joint Committee (G-BA). The aim of this cooperation is to optimize the functioning of the health care system through the expertise of the various health care professionals in accordance with the principle of self-governance.
  3. The actual care provided by health insurers, the medical profession and health care professionals, hospitals, pharmacies and their associations. The third level concerns you as the insured person. Here it is about the concrete care of the population. Doctors, therapists, pharmacies and, last but not least, the statutory and private health insurers are responsible for providing and financing medical services.

The health insurance funds

In Germany, health insurance is compulsory for all citizens. However, individuals are free to choose which health insurance company they would like to be insured with. There are currently almost 150 health insurance companies in Germany, between which you can choose. This number includes both statutory health insurance companies and providers of private health insurance.

The health insurance funds in Germany
There are currently almost 150 health insurance companies in Germany, between which you can choose.

Most important in this respect is the difference between statutory health insurance and private health insurance. Just under ninety percent of the German health insurance population, a little over 70 million people, are insured through a statutory health insurance fund.

For expats, the most popular choice is TK (techniker) health insurance. The rest of the population has private health insurance. Here are different options for expats, depending on their wishes and budget. How the German health insurance system works, is explained below.

The statutory health insurance funds

Statutory health insurance is the main form of health insurance in Germany. Their task is to financially secure the health of the insured. This is done by providing financial support in the event of an insured event. If you need medical treatment, your health insurance will cover the costs incurred.

The amount and the frequency of the cost coverage as well as the scope of services of the insurance are regulated by law: All persons with statutory health insurance are basically entitled to the same benefits in accordance with the German Social Code (SGB V).

How are statutory health insurance funds financed?

Statutory health insurance funds are financed according to the solidarity principle. This means that the insured themselves pay regular insurance contributions and in return receive the insurance benefit when they need it. The health insurance contribution depends on the individual gross income and amounts to 14.6 percent of the same.

The contribution rate includes daily sickness benefits. If you choose to insure yourself without daily sickness benefits, the health insurance contribution is calculated on 14 percent of your gross income. In addition, an individual contribution rate is added. For salaried employees, the employer usually pays half of the health insurance contributions.

The benefits provided by the statutory health insurance funds

According to the Social Security Code, the statutory health insurance funds must provide a fixed scope of benefits. Examples are:

  • Control examinations for the detection and prevention of diseases
  • Certain protective vaccinations
  • Therapies for diseases
  • Treatments after accidents
  • Necessary inpatient treatments (with corresponding co-payment)
  • Assumption of prescribed medicines
  • Certain preventive medical examinations, depending on the age and sex of the patients
  • Medical aids and appliances prescribed by the doctor
  • Fixed allowances for dentures
  • Family insurance

However, the services provided must not exceed the limits of medical necessity and economic efficiency.

In addition to the mandatory benefits, statutory health insurers also offer supplementary benefits. Any extension of the scope of benefits provided by a statutory health insurance fund must in any case be approved by the competent supervisory authority. Examples of additional benefits are:

  • Outpatient preventive cures 
  • The granting of increased allowances for rehabilitation cures 
  • Cost absorption for alternative healing methods 
  • Vaccinations for private trips abroad
  • Subsidy for professional dental cleaning

How much does a statutory health insurance cost?

The costs of a statutory health insurance are fixed by law. The contribution rate in 2023 is 14.6 percent of income. However, statutory health insurance companies set additional contributions, which increase the total costs for the insured. The total cost of membership in a statutory health insurance fund is between 14.95 and 17.1 percent of your gross income.

However, if your income as an employee exceeds 66,600 euros per year (2023), you are above the compulsory insurance limit and are therefore exempt from insurance. In this case, you can decide for yourself whether you want to remain voluntarily with your statutory health insurance or switch to a private health insurance.

The private health insurances

If you are self-employed or if your annual gross income as an employee exceeds 66,600€, you can choose between statutory and private health insurance. As far as compulsory insurance is concerned, statutory and private health insurance are equal. That is, in both cases your insurance obligation is fulfilled.

The differences between GKV and PKV

Are you thinking about taking out private health insurance? Then there are some differences to statutory health insurance that you should consider. These are basically related to the fact that private health insurances are privately managed and not organized under public law. This has some consequences.

You contractually agree the scope of benefits with the insurer. The so-called equivalence principle applies, i.e. the principle of equivalence of benefits and services. In this way, you can choose the benefits you want and determine the amount of the insurance premiums in proportion to them.

The same applies to the insurance of family members. There is no contribution-free co-insurance of family members such as children and spouses with private health insurance.

Finally, you must also note that the billing between the health care facility or doctor and you does not take place via the health insurance company: The private insurance company will reimburse you for the costs incurred only after the fact. In most cases, there is an exception for standard inpatient services: These are often settled directly with the insurer and you then receive a statement of benefits from your insurer.

Who can take out private health insurance?

Private health insurance is not an option for everyone. This is because you are only allowed to take out private health insurance if you belong to certain groups of people regulated by law. These are:

  • Self-employed and freelancers
  • Judges and civil servants
  • Employees whose gross income exceeds 66,600 euros per year (as of 2023)
  • Persons with no or very low income (maximum 450 euros per month)

Extended scope of benefits

If you have the option of taking out private health insurance, you benefit from a broader scope of services than with a statutory health insurance plan. It is important to know that the booked benefits are agreed with the insurer. This means that you can adjust them to your individual needs.

The range of benefits varies, of course, depending on the insurer. In principle, however, you can expect the following additional benefits:

  • Free choice of doctor: Some tariffs provide for a free choice of doctor. This means that you can choose the doctor who will treat you. This is especially important if you want a particular specialist or access to private practices only.
  • Doctor's fees: If you are treated by a doctor, he or she will bill you for his or her services according to the scale of fees for dentists (GOZ) or doctors (GOÄ). Make sure that your private health insurance reimburses not only the standard rate, but also the maximum rate of the doctor's fees. This way you will not be stuck with the costs for medical treatment: If you want to be treated by specialists or in private clinics, you should choose a tariff that also reimburses costs above the maximum rates of the fee ordinance.
  • Medication and medical aids: Make sure that your tariff fully covers the costs of medical aids and medications. Benefits should not be limited to generic drugs (drugs that contain the same active ingredient as an off-patent drug) or to a "simple version" of assistive devices.
  • Dental benefits: Choose a plan that provides coverage for dental treatment, dentures, orthodontics and implants. Good plans provide 100 percent coverage for dental treatment and 80 to 90 percent coverage for dentures.
  • Psychotherapeutic treatments: Inpatient and outpatient treatment by a psychotherapist are covered as medically necessary benefits. However, some insurers limit benefits for outpatient psychotherapy. So you should find that outpatient services with medical psychologists, as well as cognitive, behavioral, and depth psychology approaches, are covered.
  • Palliative care and hospice: There are private insurers that limit their benefits for palliative or hospice care (i.e., end-of-life care as well as complementary pain management). Be sure to choose a plan that covers at least inpatient and partial inpatient hospice care.
  • Alternative practitioner services: Some plans include alternative practitioner services if you want to use them.
  • Switching options: Some private plans allow you to change or increase your coverage under certain conditions without first going through the usual health assessment. Such a tariff with the so-called option right is useful if your insurance tariff otherwise has a rather low scope of benefits.
  • Daily sickness benefits: If you are self-employed or freelance, you will not receive any continued payment of wages in the event of illness. Opt for a tariff with daily sickness benefits to compensate for a temporary loss of earnings. If you are an employee, however, you should bear in mind that continued payment of wages is only legally required for the first six weeks.

Switching between GKV and PKV

If your gross income exceeds 66,600 euros (as of 2023), your insurance obligation ceases at the end of the calendar year. This means that you can either remain voluntarily registered with the GKV or switch to a private health insurance. If your gross income is above the insurance limit, you will then be declared exempt from insurance after one year. If this declaration is made, you then have three months to decide to switch to private health insurance.

The return from a private health insurance to the GKV is only possible in certain cases. Basically, it applies that due to your life circumstances an insurance obligation arises again - for example, by the fact that you earn your living as an employee and your gross income remains below the insurance obligation, or because of unemployment. After the age of 55, however, this becomes very difficult.

Supplementary health insurance: Supplementary tariffs for those with statutory health insurance (but not only)

Private insurers offer you supplementary health insurance in addition to the basic tariff. The purpose of these special tariffs is to supplement and complete your insurance coverage. They are compatible with both statutory and private health insurance. The purpose is to insure you for special cases, which can be adapted to your individual needs. This is especially useful if you are a member of a statutory health insurance. This way you get a more comprehensive insurance coverage.

If you are insured with a private health insurance company, it might also be worthwhile to take out special supplementary insurance policies if they are important to you. However, some insurers do not allow this and in any case it must be about supplementary and not substitute services. You must also make sure that the supplementary health tariffs do not result in overinsurance: That is, you pay twice, although the insurance case is covered by your PKV ready. In this respect, an insurance broker can help you to arrange your health insurance sensibly.

Classic examples of supplementary health insurance are:

  • International health insurance
  • Supplementary eyeglass insurance
  • Supplementary non-medical practitioner insurance
  • Daily sickness benefit
  • Daily hospital allowance
  • Supplementary nursing care insurance
  • Supplementary dental insurance
  • Outpatient supplementary insurance
  • Inpatient supplementary insurance

Conclusion: Solidarity and economic efficiency in Germany's health care system

Germany's health care system is structured in such a way that it benefits both from a principle of solidarity due to the way it is financed and from the economic efficiency of the services provided - because the health insurance system helps to determine the health care system.

Various players come together in the health care system: Hospitals, central and regional institutions, associations of patients, doctors, health professionals, and pharmacies. The function of all this cooperation is to protect the health of the population nationwide.

It is important to know that in Germany there is compulsory insurance as far as health is concerned. This means that all citizens must have health insurance. This is done either through the statutory health insurance funds or through private health insurance. While the scope of benefits offered by a statutory health insurance company is fixed by law, the private offer varies depending on the insurer.

Beyond the statutory health insurance and private health insurance, you can take out additional health insurance to round out your statutory or private insurance coverage as desired. Supplementary health insurance policies cover specific insurance cases, such as benefits from alternative practitioners or inpatient accommodation and private doctors.

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