Private health insurance: What is the income threshold for compulsory insurance?
The fundamental situation is actually very simple: all German employees must have health insurance. Only employees with salaries above a set amount are free to choose between private and public insurance. Employees with salaries below that amount must choose a public health insurer. The compulsory insurance income threshold for private health insurance is €64,350. This threshold – also known as the annual income threshold (or by its German acronym, JAEG) – is revised each year.
There is also a “special income threshold” – but it only applies to people who held private health insurance prior to 2003. This is because the income threshold for private health insurance was raised significantly in 2003. This change would have forced some policyholders to switch to the public health insurance system. To avoid this, people who had private health insurance prior to 2003 are subject to different limits. As a result, they can keep their private health insurance if their earnings exceed the premium assessment ceiling – which is €58,050.
Thinking about taking out private health insurance?
Find out whether private insurance is right for you!
Why was the income threshold for compulsory insurance introduced?
Until the end of 2002, the income threshold for compulsory insurance was the same as the premium assessment ceiling. However, the two were separated starting in 2003 and the income limit for accessing private health insurance is now significantly higher. The intention behind this change was to ensure more people stayed in the public health insurance system.
Who is not subject to the income threshold for compulsory insurance?
Self-employed people and civil servants are not subject to any income thresholds and can apply for and enjoy private health insurance irrespective of their earnings.
What is the difference between the premium assessment ceiling and the income threshold for compulsory insurance?
The premium assessment ceiling is of particular interest to people with public health insurance, as it is used in calculating their premiums. Generally speaking, public health insurance premiums increase in line with an individual’s earnings. However, to prevent the costs from spiraling out of control for people on high salaries, public health insurance premiums are capped. So, if a person’s annual salary is above the premium assessment ceiling of €58,050, their premiums are still only calculated based the first €58,050 they earn.
The income threshold for compulsory insurance, on the other hand, determines when a person is eligible to apply for private health insurance.
Income limits: How much do I need to earn to access private health insurance?
The German government increases the minimum salary required to access private health insurance each year. The income threshold is €64,350 per year (or €5,362.50 per month), a significant increase on the previous year’s annual figure of €62,550. Back in 2013, you only needed a salary of €52,200 to be eligible for private health insurance.
You might well be wondering why the income threshold is constantly rising, thereby making private health insurance accessible to fewer and fewer people. However, it is important to remember that wages are also rising year by year. So, due to the effects of inflation, money is worth less each year and prices rise as a result.
Overview: Changes to the income threshold for compulsory insurance since 2013:
The income threshold for compulsory insurance for employees has been rising for years – and so has the premium assessment ceiling. As a result, the maximum public insurance premium has also been rising.
Private health insurance: What counts as salary?
The basis for these calculations is the gross annual salary you regularly receive, as stated in your employment contract. If you are employed by several businesses, you can total up these salaries. However, mini-jobs do not count. There are two types of mini-job. The first is a job in which you earn less than €450 per month. The second is a job you perform for less than 3 months or a total of 70 days per calendar year.
What else can you add to your gross annual income?
- Regular Christmas bonuses and vacation pay
- Retroactive salary increases (paid in the year in which you became eligible)
- Capital-forming benefits
- Non-cash benefit for a car
- Secure profit sharing
- Additional pay for shift work and on-call hours
- Flat-rate overtime payments
- Performance-related bonuses subject to a guaranteed minimum amount (variable bonuses don’t count!)
Of course, some of these points aren’t set in stone. If you’re now feverishly crunching the numbers and wondering whether you’re over the income threshold for private health insurance, don’t worry – you have a little wiggle room. For example, you might be used to having every hour of overtime paid individually rather than as regular pay. A solution to this might be asking your employer to pay you for your overtime at a flat rate.
Plus, you could take this as an opportunity to ask for a raise. Alternatively, might your employer be willing to offer you vacation pay if you haven’t received any to date?
What doesn’t count as income in the context of private health insurance
- Rental income
- Capital gains, such as stock market profits
- Maintenance payments (i.e. alimony)
- Income from freelance/part-time work alongside your main job
- Family allowance payments
- Income not subject to income tax
- Continued pay
- Maternity allowance or short-time working benefits
- Allowance for direct insurance
- Parental allowance or child benefits
Moms and dads to be might be wondering why parental allowance payments don’t count as income. Does it mean that parents could quickly slip below the income threshold, which is so important for private health insurance? Let’s look at an example.
What would happen if my income slipped below the income threshold for private health insurance?
Today, few people’s careers follow a linear path. Two months of parental leave here, three months of unemployment there – and maybe even a sabbatical along the way, too. If your income temporarily slips below the income threshold, it doesn’t necessarily mean you will have to give up your private health insurance – provided that you know what action to take to keep it!
Income, parental leave, and private health insurance
Let’s say your partner is pregnant and you’d like to take two months’ parental leave. For these two months, you’ll receive a parental allowance – but that doesn’t count as income. If you fall below the private insurance income threshold because you take parental leave, in the strictest interpretation of the rules, you should switch to public health insurance. However, because such a short-term switch wouldn’t make much sense, you can submit an exemption request to a public health insurance provider. You can do this by contacting the public insurance provider with whom you were most recently insured.
Below the income threshold due to unemployment
In most cases, unemployment is only a brief interruption in a person’s career. You can keep your private health insurance while unemployed provided that you’ve already had private insurance for at least five years. Otherwise, you will have to switch to public health insurance. People aged 55 or older are an exception to this rule, as they usually have to stay in the private health insurance system.
What if you fall below the income threshold due to a sabbatical?
If you income falls below the current threshold for private insurance because you’ve taken a sabbatical from work, you must take out public health insurance for the duration of your leave. However, you can also pause your private insurance premiums and benefits and take out a small prospective entitlement (called a kleine Anwartschaft). This allows you to return to the private health insurance system as soon as you return to your job – without having to undergo another health examination!
Taking out private health insurance is a major life decision. Once you enter the private system, you will probably remain privately insured for the rest of your life. Short interruptions like parental leave and brief spells of unemployment are unlikely to change that. Plus, well-off employees are unlikely to give too much thought to future increases in the income threshold for private health insurance. This makes it all the more important that you think carefully about private health insurance before making your final decision.
FAQs about the income threshold for compulsory insurance
What is the income threshold for compulsory insurance?
It defines how high your salary must be before you can take out private health insurance.
Who is subject to the income threshold for compulsory insurance?
The income threshold only applies to employees.
What is the current income threshold for compulsory insurance?
The income threshold is €64,350 gross annual salary (€5,362.50 gross monthly salary).
Who sets the income threshold for compulsory insurance?
The German government sets the income threshold for compulsory insurance each year.
What happens if I fall below the income threshold for compulsory insurance?
As soon as you fall below the income threshold for compulsory insurance, you must switch to the public health insurance system. However, if your income is only reduced temporarily, perhaps because your hours have been cut, you can stay in the private health insurance system.