Private health insurance risk surcharges: How are they calculated and why do they exist?

Your health is unique to you. However, the risks to your health are just as unique. With this in mind, and in order to avoid placing a disproportionate burden on the insurance collective, private health insurance providers use a risk surcharge. In this article, we’ll explain how it’s calculated and why it’s so important.

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Risk surcharge

What are risk surcharges in private health insurance?

Everyone is different. We look different, we have different interests, and different careers – and each of us has a different medical history, written over the course of our lives. But what does that have to do with private health insurance providers and their policyholders? Well, due to the different health risks each individual brings with them, private health insurers have to apply a risk surcharge. In the private system, insurance providers take your personal level of risk into account when calculating your premiums. This is because private health insurance is based on the equivalence principle, also known as the cost-of-service principle.

Risk surcharges protect the insurance collective by ensuring that all policyholders pay premiums that are proportionate to their respective level of risk. If someone smokes, drinks alcohol and is allergic to nuts, the risk that they will fall ill (and thus require medical treatment) is greater than that of a non-smoking teetotaler with no allergies.

In this way, the risk surcharge protects the insurance collective and follows the equivalence principle. Essentially, people who are expected to draw more benefits over the lifetime of an insurance policy should pay higher premiums accordingly.

Risk surcharges are calculated on a case-by-case basis. An individual’s risk surcharge is based on the severity of their condition and how this relates to any other conditions they may have.

When you apply for health insurance from ottonova, we will ask you 11 questions – including whether you have recently undergone surgery, whether you have any chronic illnesses, and whether you wear a hearing aid. You must answer these questions truthfully. However, if you aren’t sure about something, don’t worry: we’ll be happy to discuss and clarify matters over the phone.

What does the equivalence principle have to do with the risk surcharge?

In an ideal scenario, the premiums you pay in the course of your life should cover the healthcare costs you incur. Private health insurers therefore calculate your premiums based on your age at entry and your personal risk factors – referred to as the “equivalence principle”.

This is also why everyone who wishes to take out private health insurance must first undergo a health examination. However, only the risks identified when the contract is concluded matter. Risks that arise once your insurance is up and running do not affect your private health insurance premiums in any way.

A health examination allows a private health insurance provider to assess whether an applicant is likely to incur higher-than-average healthcare costs. Private insurers use statistics as the basis for these calculations.

Private insurance risk surcharge: Amounts vary

The exact level of an individual’s risk surcharge depends on both existing risks to their health and the insurance they wish to take out. A pre-existing illness or condition could result in an application being declined, a risk surcharge being applied, or might not pose any issues at all, depending on the insurance provider.

In the private health insurance system, risk surcharges are added to your premiums in the form of either a fixed amount or an additional percentage. For example, certain pre-existing conditions might result in a 10% risk surcharge being added to your premiums. Surcharge rates differ from insurer to insurer. Insurance providers can only levy a risk surcharge at the start of your insurance policy or if you choose to change tariff with the same provider, perhaps because you’d like to change to a tariff with better benefits. However, in the latter case, your insurance provider can only apply the risk surcharge to the additional services.

It’s also important to know that, if you ever want to reduce your deductible, your private insurance provider can require you to undergo a new health examination and, potentially, apply a risk surcharge.

Choose the right private health insurance tariff for you from the start:

When are risk surcharges applied in health insurance policies?

How can a private insurance provider know whether one policyholder will incur higher healthcare costs in future than another? This often happens when a person has a chronic illness, a disability, or a serious pre-existing condition. Examples include high blood pressure, diabetes, and asthma. However, private health insurance providers must also carefully weigh up a potential policyholder’s future risk of psychological illness.

By this point, you might well be wondering whether smokers or people with allergies should expect to pay a risk surcharge. Here are the answers:

No matter what chronic conditions you have or what treatments you have already received, when applying for private health insurance, you must not conceal any information relevant to the questions asked during your health examination. Ultimately, if you fail to disclose a pre-existing condition that later comes to light when you need treatment, you could lose your insurance cover entirely.

Exclusion of private insurance benefits: Possible, but not recommended!

If you have a pre-existing condition that poses a significant risk to your health, you might sometimes have the option to exclude that condition from your cover instead of paying a risk surcharge. To put it plainly, this means that any healthcare services related to your condition – services that your insurer expects will incur significant costs – would be excluded from your insurance policy.

You should approach this option with caution. If you choose this route, you will have to pay for all treatment related to your pre-existing condition out of your own pocket for as long as your insurance policy is in place.

When are risk surcharges not applied?

As with most things, there are also exceptions when it comes to risk surcharges. For example, private health insurance providers do not apply risk surcharges for policyholders on basic tariffs.

Privately insured from the beginning? Risk assessments for children

If you take out private health insurance in the course of your life, you might have had a few health issues along the way. But what about privately insured newborn babies?

The rule here is that a newborn baby’s health status plays no role in granting them private health insurance.

Condition: You or your partner must have been privately insured for at least three months prior to the birth of your child and must register them with your insurance provider within the first two months of their life. Your insurance provider will then insure your child on the same tariff as you, without any risk surcharge.

Can I reduce my private health insurance risk surcharge?

Have you taken out private health insurance and currently pay a risk surcharge due to a pre-existing condition? It is worth keeping a very close eye on your current health status. Some conditions and issues, such as fractures, can heal completely – which can lead to your risk surcharge being reduced or removed entirely.

However: Your risk surcharge can only be lowered if you have not suffered any complaints or discomfort related to your condition for an extended period. This means that you no longer require medication, and your doctor can certify that your health has improved.

Head to your health examination armed with the facts

You now have an excellent idea of the role of risk surcharges in private health insurance. You might well be asking yourself what to expect from ottonova’s health examination and what conditions are relevant. Don’t worry: we’ve clearly itemized everything for you. And, if you’re not sure what counts as a pre-existing condition, we’d be happy to help you – just send us a message in the chat in the bottom right corner of our homepage, or give us a call.

The easy health check-up for expats


Espen Markus Mjøs
HIER SCHREIBT Espen Markus Mjøs

Espen Markus - originally from Norway - is sales agent in ottonova's English sales team. He's in contact with potential customers every day and answers Expats' questions about German health insurance.

ottonova sales experts
HIER SCHREIBT ottonova sales experts

Our ottonova team of experts has over 40 years of experience in private health insurance and answers questions about it every day. What are old-age provisions and for whom does private health insurance make sense? What is the actuarial interest rate and which tariff is right for you? They know!

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