The Future Health Insurance: Social Equality Is Neither Desirable nor Beneficial
Ulrich H. Pieper and Christopher Dickenscheid
The German health insurance market is characterized by a dual funding system that consists of a statutory health insurance market and a private health insurance market. The fundamental differences between these two markets result from differing interpretations of the word fairness.
Within the private health insurance market, the situation is considered to be fair when, over the entire period ensured, the expected insurance premiums are equal to the expected insurance claims (principle of equivalence). Following this principle, people who entail greater costs should pay a higher insurance premium with no regard to the individuals financial capabilities. Given that the insured must pay the costs that they entail, it is essential to the stability of this market that the insured possess above-average financial capabilities and income (Schradin and Wende 2006, p. 12).
In contrast, within the statutory health insurance market, individual healthcare costs have no impact on individual healthcare premiums. Here it is considered to be fair when the premiums are based on the individuals financial capabilities and people with a higher income pay higher premiums. This guarantees that even people with no income have health insurance. Thus, solidarity is a cornerstone of the statutory health insurance market (Schradin and Wende 2006, p. 4).
Solidarity in itself is a social principle that violates basic economic principles. As a result, it brings forth a multitude of inefficiencies that in turn lead to the financial destabilization of the market. Over the past two decades, this effect has been visible within the German statutory health insurance market, as a 70 percent increase in public healthcare costs could only be mitigated by increasing the individuals insurance premiums (Bundesministerium für Gesundheit [Federal Ministry of Health] 2018). With the ongoing demographic change resulting in an aging society, this trend is likely to continue and the German public healthcare system is in need of reform.
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Any reform proposal needs to answer two fundamental questions:
Firstly, who will be insured?
Secondly, what is going to be the basis for the insurance premium calculation?
In political discussions, the answer to the first question is often the unification of the two health insurance markets. This would integrate the rather wealthy insured people of the private health insurance market into the statutory health insurance system and therefore increase solidarity. Furthermore, this would lighten the financial burden of insurance premiums for the working class that is currently put on the middle class. Overall, this would increase solidarity (at least temporarily), stabilize the market financially and, therefore, would be beneficial to society.
The answer to the second question is rather complex and has a great impact on the financial stability of the resulting system.
Fortunately, these problems are for the most part not unique to the German health insuran