How the social security threshold increase affects your health insurance
As usual, contribution ceilings for social security in Germany are expected to rise again in 2021. Mirja Link-Lundehn, an insurance expert from the brokerage KLforExpats, explains what this means for employees in Germany regarding their health insurance.
The income thresholds for social security contributions - which also have an impact on health insurance - are expected to be revised again from January 1, 2021. This happens every year, according to the general development of income in the country - although political considerations do sometimes play a role.
This time, the general annual income threshold for employees (also called the compulsory insurance limit) is expected to rise from 62.550 euros to 64.350 euros (5.362,50 euros gross per month). But what does this mean in practice?
Why is the rise in contribution ceilings relevant for you?
To be eligible for private health insurance, employees in Germany must earn more than the compulsory insurance limit. In German, this is called the “Versicherungspflichtgrenze” or “Jahresarbeitsentgeltgrenze” (JAEG).
This means that if you work in Germany under a local employment contract and earn more than 64.350 euros (gross) per year, you have the freedom to choose between private and public health insurance.
So, the change is great news for you if your employer registered you with a public health insurer initially, but your earnings have exceeded the compulsory insurance limit in the meantime. You can use this chance to weigh up the pros and cons of public versus private health insurance in peace and decide whether a switchover might be beneficial for your personal situation.
On the other hand, if you’re a privately-insured employee right now, and the income threshold has increased beyond what you currently earn, you might have to switch your health insurance from private to public.
Higher health insurance premiums
If you’re a high-earner and voluntarily insured in the public scheme, your health insurance is likely to become more expensive in 2021. This is because health insurance contributions will also rise in line with the changes.
The Monthly Contributions Assessment Ceiling (the threshold above which you pay no social security contributions) for health insurance and long-term care insurance will increase in 2021, to 4.837,50 euros per month (58.050 euros gross per year). This means that more of your income may become subject to social security contributions.
The contribution cap for high-income earners will increase from roughly 860 euros per month in 2020 to 910 euros in 2021. It therefore may make financial sense for you to switch to private health insurance, if your earnings are above the compulsory insurance limit threshold of 64.350 euros per year.
Are there any positives to these changes?
Well, yes! For instance, it is usually notoriously difficult for an employee to switch back into the public health insurance system if they change their mind after opting for private insurance. Taking advantage of the income limit increase is a way to easily switch if your income no longer exceeds the threshold.
In the same way, if your employer automatically enrolled you into the public scheme but you now earn above the threshold, you are eligible for private health insurance instead, if you wish.
Effectively, the increase gives you more choice and more freedom, which is ideal when it comes to health insurance and the level of benefits and freedoms that are right for you and your family.
What should you do if the changes impact you?
Whether you’re an employee who now earns more or less than the compulsory insurance limit, it’s important to weigh up your options carefully. You might consider seeking the advice of an expert so that you can make a well-informed decision. After all, this is your life and health we are talking about, and health insurance is a life-long commitment!
KLforExpats is an experienced, English-speaking independent health insurance broker. Their specialist Mirja offers a warm, friendly service and provides free, thoughtful advice, tailored to your unique situation. If you’re looking to find out more about the 2021 changes, get in touch with Mirja today.