Private health insurance premiums in old age: How much are they?

There is still the prejudice that the contributions to private health insurance are unaffordable in old age. But that is not true at all. In this article, we take a look at how health insurance contributions can look in retirement.

Reviewed by our insurance experts

What changes when you retire?

Private health insurance

Retirement age contribution:

Contributions continue to be paid as before.
Pension insurance pays a supplement of 8.1% on the retirement pension drawn - It takes over the role of your employer from now on.
At the age of 60, the statutory contribution supplement of 10% ends. This reduces the contribution. This supplement builds up funds that keep contributions stable in retirement.
Daily sickness allowance is no longer required from the start of retirement and usually ends at retirement: the discontinuation reduces the contribution.
Now, insureds who took out a premium relief component at a young age benefit from the agreed reduction amount.

Old-age provision:

Interest-bearing ageing provisions counteract the increasing need for health care costs.
These are financed by each generation itself.
Lower premiums in old age due to premium reduction tariff, amount freely selectable.

Public health insurance

Retirement age contribution:

Compulsorily insured pensioners pay half the contribution rate (currently 7.3%) plus half the additional contribution (approx. 0.8%) on statutory pensions. The full contribution rate is due on pension payments (pensions, company pension, direct insurance through salary conversion) (14.6% and 1.6%). Since 2020, company pensioners have been relieved - they only have to pay contributions for income from company pensions that exceeds €164.5.
Voluntarily insured pensioners also pay 14% plus 1.6% on all other income, in particular income from private pension insurance, life insurance, rentals and leases, capital gains, interest and dividends.
Long-term care insurance: contribution is to be paid by the pensioner alone in full.

Old-age provision:

Within the GKV, no one can make specific provisions for contributions in old age.
The following, younger generation has to pay for the higher health care costs of the elderly.

What are the advantages of private compared to public health insurance?

Lower insurance premiums: The cost of private health insurance can be lower. So, you can save a lot of money (up to €3,000 per year.)
More benefits: For many treatments, private health insurance covers more costs than public health insurance (e.g. non-medical practitioners).
Individual deductible: Freely selectable deductible for treatment costs in order to reduce the premium amount.
Sustainably calculated contribution: Independent of your income and the demographic development.
Control over benefits: You can adjust your benefits and thus the premium to your needs

By the way, you can join private health insurance despite illness - your contribution will then be individualized according to the risk (risk surcharge). Depending on the diagnosis, private health insurance also has the right to refuse membership.

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What changes in the pension if you have public health insurance?

There are currently two scenarios: Either you pay a reduced contribution rate as a compulsorily insured pensioner or the full contribution rate as a voluntarily insured pensioner.

Compulsorily insured:

If you were compulsorily insured for at least 9/10 of the time in the second half of your working life, you are normally compulsorily insured as a pensioner in the statutory health insurance for pensioners (KVdR).
You pay contributions on your income from the statutory pension insurance.
The statutory pension insurance covers half of the regular contribution rate and the additional contribution, i.e. a total of 8.1%.
The full contribution is due on pension payments from your company pension (possibly above the tax-free amount) or your pension.

Voluntary insured:

If the pre-insurance period is not sufficient, for example because you were abroad or privately insured, you can only take out voluntary statutory health insurance.
Here, too, you pay contributions on your income from the statutory pension insurance. Upon application, the statutory pension insurance will pay half of the regular contribution rate and the additional contribution, i.e. a total of 8.1%.
But: All your income - including private pension insurance, rentals or leases - is subject to contributions.
There is no subsidy for this income - you pay the reduced contribution rate of 14% plus 1.6% additional contribution on all this income yourself.
Capital payments from life insurance are then also subject to contributions - you’re your contributions are capped in each year by the applicable income threshold.

Getting older does not come as a surprise. You can take specific precautions now. Think about it early on, because:

After 55, it is usually no longer possible to switch from private health insurance to statutory health insurance.
The higher initial premiums and the state of health are usually the limiting factors for a switch from statutory health insurance to private health insurance at an older age.

This is what your contribution to public health insurance could look like in retirement*:

Your state pension per month: 2.400 €

Your GKV premium (8.1%): 194,40 € + Nursing-care: 73,20 €

Your monthly premium in retirement: 267,60 €

*without consideration of contribution rate adjustments

What changes in the pension if you have private insurance?

As a privately insured pensioner, little changes formally at first - you continue to pay your contribution regardless of the amount of your income.

However, the composition of this contribution is now different:

Additional costs, such as the contribution for the statutory supplement and the daily sickness allowance, no longer apply.
If you have agreed on a premium relief component, in your younger years you always paid a little more each month than you used. Your PKV has invested this surplus and is now reducing your contributions.
Together with your pension application, you can also apply for a subsidy for private health insurance. After that, the procedure is similar to an employer subsidy: The pension insurance carrier pays half of your PKV costs, up to a maximum of the amount you would pay for GKV.

Premium reliefs in private health insurance

Premium reliefs involves paying an additional amount on top of your private health insurance premiums in return for reduced premiums after retirement.

If you are privately insured, you can proactively reduce the premiums you will pay during retirement by making an additional monthly payment on top of your premiums. These additional payments are known as premium relief components (Beitragsentlastungskomponente – BEK).

In most cases, these payments are partially subsidized through either employer contributions or, in the case of self-employed people, by the fact that these additional payments are tax-deductible. In addition, although your health insurance premiums are likely to rise to reflect inflation, such influences will not affect your premium relief components.

The additional payments you make to obtain guaranteed reductions in your premiums once you retire are invested by your insurance provider. At ottonova, we tend to be conservative in the investment returns we offer, so that we can avoid the need to increase premiums to cover the cost. However, premium relief components represent a very safe investment for later in life – and the earlier you start paying them, the higher your returns will be.

This is what your PKV contribution could look like in retirement:

Your state pension per month: 2.400 €
Your PKV premium (upon entry at the age of 32): 573,03 €

From the age of 60 minus:

10% statutory surcharge: - 40,82 €

From retirement minus:

daily sickness allowance: - 31,80 €

From 67 with contribution component benefit (BEK):

contribution component benefit: - 200 €

Pension insurance allowance

50 percent allowance: - 129,48 €

Your monthly premium in retirement: 170,93 €

*without consideration of contribution rate adjustments

Private health insurance is unaffordable in old age?

The prejudice that private health insurance premiums rise so much in old age that no one can afford them persists. But only 0.5% of all retirees pay more than the maximum public health insurance contribution. This means that the current burden of private health insurance contributions on pensioners is not as dramatically high as is often suggested.

What are the advantages of private health insurance?

Tariffs are tailored to the needs of different occupational groups.
Tariffs can be customized: The chosen tariff can be customized with additional modules to meet your own requirements and wishes.
Preferred treatment: With private health insurance you benefit from the most advanced treatments and shorter waiting times at the doctor's office. ottonova also offers an appointment service, meaning we book and organize your doctor's appointments for you.
Contractually agreed benefits: Benefits are not eliminated in old age, whereas this can be the case with statutory health insurance. With ottonova, there are also no tariff-based price/benefit schedules, i.e. no hidden benefit reductions in the event of treatment.

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What are aging reserves?

If you take out a standard policy with a private health insurance provider in Germany, your premiums will include aging reserves also called old-age provisions (Altersrückstellungen).

Please note that old-age provisions are only accrued as part of private health insurance policies. People in Germany with public health insurance pay old-age pension contributions as part of their premiums instead.

The younger you are when you enter the private health insurance system, the lower your premiums will be. One reason for this is that it enables you to start putting aside aging reserves earlier in life, rather than having to pay more to make up ground later on.

Aging reserve accrue interest over time. That can be used to help bring down premiums in later life, thereby counteracting the rising cost of health insurance.

Expats are exempt from the obligation to put aside old-age provisions in the private health insurance system for up to five years. This is part of the reason we are able to offer a special Expat tariff at ottonova.

If you leave Germany indefinitely after putting aside old-age provisions you will not be able to withdraw this money and it will be retained by the insurance collective.

However if you leave Germany with the intention of returning at a later date, you should ask your insurance provider to freeze your contract, which should enable you to retain your provisions.

Reserves and actuarial interest at ottonova.

Benefits and premiums in private health insurance are independent of demographic change. However, interest rates play a more important role. In order to keep premiums stable in old age, private insurance companies use an actuarial interest rate.

Older contracts were calculated with a higher interest rate (up to 3.5%) than can be earned at the moment, which means that in the current low-interest phase, the interest on the aging provisions is lower than calculated. The calculated interest rate has been reduced several times and is therefore one of the reasons why

that private health insurance premiums have risen more sharply in some cases than in statutory health insurance.

Not all private health insurances are the same:

When comparing offers, also find out what reserves the insurance company builds up and where and how these are invested. ottonova, for example, builds up high reserves for you. We invest around 50% of your premium - and conservatively: ottonova assumes an interest rate of 1.25% per year - which is around 1.25% below the market average.

If we had the same actuarial interest rate as other providers, your premium would be around 15% lower today. In the long term, however, you will be independent of the financial market and financial policy. And we calculate that the ottonova actuarial interest rate will have converged to the average in five to ten years. When this change is complete, the cost advantage of 15% will be noticeable.

If you opt for private health insurance, there is one important principle for relaxed aging: Cheap tariffs are not worth it. Because at the latest in old age, when you are ill more often, the gaps in benefits of these tariffs drive your costs up to dizzying heights. In addition, these plans have fewer provisions for old age. If you haven't put money aside elsewhere or can't return to the public health insurance (GKV), the only way out is the basic tariff. This costs at most as much as the maximum contribution to the GKV. By taking into account the aging reserves when changing to the basic tariff, the contribution is still below the maximum contribution in the GKV. The Internet is full of such horror stories, but you can easily avoid them by not letting yourself be fooled by su

FAQs about premiums for private health insurance in old age

After your policy is finalized it will not be adjusted again based on the variables of aging, increases in health care needs or increases in salary.

All private health insurers invest a large part of their premiums to increase the amount of money that will be required to cover the higher healthcare costs in old age. Currently, an actuarial interest rate greater than 2.5% is expected on the market. However, this does not correspond to interest rates for investments at this time. Consequently, premiums that were once cheaper will inevitably become more expensive in the future in order to compensate for these losses.

ottonova expects an interest rate of 1.25%, which corresponds to the current capital market. Our premiums are, therefore, not much cheaper today, but they will also be more stable. That’s because we are likely to increase the money in the same way we have calculated it.