What Does Private Health Insurance Insurance (PKV) Cost in Germany? A Comprehensive Guide

Key Factors Influencing the Cost of Private Health Insurance

While the cost of public health insurance is based on the idea that everyone pays into a shared pot, private insurance is calculated differently. Your premium is not based on income. Instead, it is calculated based on personal factors. To ensure that your healthcare costs for the future are covered, your premium each month goes towards securing your statistically estimated health costs.

Unlike in the statutory health insurance, the younger members in the private health insurance do not co-finance the rising costs of the older generation.

In the private system, the cost of your monthly premium is calculated to cover the estimated health costs of the insured persons. So it is based on:

• your age
• your health status
• and the coverage you choose. 

Why does my age matter?

The premium calculation in private health insurance is based on the so-called equivalence principle. This means that a group of persons of the same age, the collective, is considered when calculating the premiums.

The base cost is the same for any 26-year-old, or any 34-year-old, and so on. This sum already factors in important variables like possible inflation, rising costs of health treatments, and more. 

Why does my health status matter?

Private insurers also conduct a health assessment to evaluate the potential risk of an applicant. They want to prevent "unexpectedly high claims" from individuals with pre-existing conditions.

If you have chronic illnesses or significant medical history, the insurer may apply a risk surcharge, which increases your monthly premium to account for the higher likelihood of future medical costs. But note: the health insurance can also reject your application if you have certain illnesses.

By ensuring each member pays a premium proportionate to their risk, the system aims to protect the entire group from the high costs that would result if premiums were averaged across healthy and sick members alike.

How does private health insurance ensure long-term stability for premiums?

To ensure your financial security in the future, approximately half of the premium with ottonova you pay now will go towards paying for your anticipated health costs. The other half is set aside and conservatively reinvested by the insurance company to stabilize your costs in the future.

The rule here is that the insurance premium exceeds the likely costs incurred at a young age. The resulting surpluses are accumulated at interest as so-called aging reserves or old-age provisions. The provisions and accumulated interest then compensate for the presumably higher premiums in old age.

If the health condition of a collective member deteriorates, this does not lead to an adjustment of the individual premium for the private health insurance of this same member due to the individually increased costs. The additional expenses for the one insured person are allocated to the collective in this tariff and this age group as part of a premium adjustment only for this one private health insurance.

The amount of the daily sickness allowance depends in Germany on how many employees the self-employed person has.

However, it is also possible with some insurers in private health insurance if you are self-employed to take out a daily sickness allowance from the first day of illness. However, the recommendations speak against it due to the high costs.

To keep the private health insurance premium as low as possible, many self-employed persons opt for a relatively high co-pay in private German health insurance.

*The premium is based on the plan Business Class 100 for a self-employed person, 35 years (BC100-10, KT 100, BEK 200).

Important Considerations Before Choosing a PKV-Plan

Costs in old age

In principle, the insurance premium is reduced in old age, because some parts of the premium no longer apply. These are the contribution for the daily sickness benefit and the premium surcharge of ten percent.

The exact amount of the premium in old age depends on the age of entry, the selected tariff, the amount of the deductible and how well the insurer has managed the aging reserves. Another factor is whether the policyholder has integrated an age relief component into the contract.

At ottonova, approximately 50 percent of premiums are invested in aging reserves and it is possible to take out a premium relief component. From the age of 64 or 67, there is the option of reducing premiums. Thus, the amount can be reduced by an agreed amount per month.

Premium increases in private health insurance

Premium increases in tariffs from private health insurers can be expected in Germany, for example, if healthcare costs rise at an above-average rate. This can be due to disproportionate salary increases for employees in the healthcare sector or adjustments to fee schedules. If pharmaceutical manufacturers increase the cost of their products, this can also lead to an adjustment in premiums for an health insurance provider. Innovative and new but costly treatments can also drive up costs.

In addition: the legislator regulates when the insurance premium may increase. The prerequisite for a premium adjustment is that the costs within an age group of a tariff deviate upwards by more than ten percent from the original calculation.

In contrast, the public health insurance system’s rates may increase every year, and they will. The current demographic situation guarantees it. With the current system, in which every young healthy insured person pays towards a shared pot that goes towards financing the rest of the insured bodies, the shift towards an older population with fewer young people to contribute toward the costs means that costs will continue to increase, year after year. The private system makes sure that your statistically estimated individual healthcare costs are taken care of.