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Constitutional complaints relating to private health insurance are unsuccessful

Press Release No. 59/2009 of 10 June 2009

Judgment of 10 June 2009
1 BvR 706/08, 1 BvR 837/08, 1 BvR 832/08, 1 BvR 819/08, 1 BvR 814/08

On 10 June 2009, the First Senate of the Federal Constitutional Court decided on several constitutional complaints directed against provisions of the Act to Strengthen Competition in Statutory Health Insurance (Gesetz zur Stärkung des Wettbewerbs in der gesetzlichen Krankenversicherung - GKV-WSG) of 26 March 2007 and against provisions of the Act for the Reform of Private Insurance Law (Gesetz zur Reform des Vertragsversicherungsrecht - VVG-ReformG) of 23 November 2007.

The GKV-WSG maintains the bipartite health insurance system of statutory and private health insurance, but it has introduced substantial reforms from 1 January 2009. It makes statutory or private health insurance compulsory for all inhabitants of Germany. In addition to a number of new provisions, which are intended to strengthen competition by giving the health insurance funds greater freedom of contract, the Act aims to improve rights of choice and possibilities to change insurer in private health insurance by making it possible for some of the ageing reserve to be transferred to another health insurance fund and by introducing a basic category. Statutory and private health insurance are each, as separate pillars, to ensure that the categories of persons allocated to them have permanent and adequate insurance cover against the risk of illness, even in situations of social need.

The Federal Constitutional Court has rejected as unfounded the constitutional complaints directed against this by five health insurance companies and three complainants with private health insurance. The provisions reviewed do not infringe the complainants' fundamental rights, in particular their occupational freedom and freedom of association. The prognoses on which the Act is based are constitutionally unobjectionable; however, the legislature has a duty to observe the consequences of the reform.

The following considerations were conclusive for this result:

It is true that the provisions on the basic category in private health insurance restrict the private health insurance companies' exercise of their occupation. However, with regard to the aims these provisions pursue, they are justified, and at present, according to the prognosis of the legislature, which is unobjectionable, they are not to be regarded as so serious as to prevent private health insurance from functioning in future. The companies do now have to offer a basic category in addition to and alongside their normal rates, and upon application they have to grant insurance cover under that rate. But this does not make it either impossible or more difficult in the long term to meaningfully exercise the occupation of a private health insurer. Where persons choose the basic category, it is true that the companies might be forced in individual cases not to insure them at a premium commensurate with the risk, because the amount of the premium is limited in the basic category and risk loading and exclusions of benefits are not permitted. But the insufficiency of cover that may arise is borne not by the insurance companies, but by the persons insured in private health insurance, in the form of a contribution.

In drafting the Act, it was reasonable for the legislature, within its scope for making a prognosis, to proceed on the basis that in the foreseeable future the basic category will have no significant effects on the business of the private insurance companies. The possibility of many insured moving to the basic category is out of the question, at all events at present. For the basic category entails a high premium of approximately 570 euros per month. At the same time, the main benefits of the basic category are narrower in scope than the customary benefits of the normal categories of private health insurance. Contrary to the fears of the companies, the legislature was therefore able to assume that there would be no disproportionate increases of premium in the normal categories of private health insurance as a result of the need to finance the basic category, whose premiums might not be sufficient to cover costs, and that this would not in future lead to a substantial move to the basic category, which in the long term would destroy the complete business model of private health insurance. If it should transpire in future that this reasonable prognosis is mistaken, the legislature would if necessary have a duty to correct it.

To justify the goal expressed in the GKV-WSG of ensuring that all the inhabitants of the Federal Republic of Germany have affordable health cover in the statutory or private health insurance system, the legislature may invoke the principle of the social welfare state contained in the Basic Law (Grundgesetz - GG). The combination of compulsory insurance and obligation to enter into contracts in the basic category is appropriate to achieve the legislature's goal of guaranteeing adequate and affordable health insurance cover for the category of persons allocated to private health insurance. If there were no obligation to enter into contracts, in particular persons with serious pre-existing conditions would have no possibility of being accepted by a private health insurance company because it would not accept them by reason of the increased risk. Nor did the legislature exceed the drafting discretion to which it is entitled in the further provisions on the basic category; in particular, it had no duty to restrict the basic category to a minimum basic provision.

The absolute prohibition of termination of comprehensive health insurance policies introduced by the GKV-WSG is a justified encroachment in order that members of private health insurance companies, just as in state health insurance, are covered fully, without legal risks and permanently. The same applies to the duty of the companies to provide emergency treatment for their insured even where there has been default in payment.

The introduction of partial portability of ageing reserves for new insured of private health insurance is compatible with the GG. Previously, the companies have without exception chosen contracts under which, if the insurance contract is terminated, there is no claim to transfer the ageing reserve created for the insured; as a result of this provision, this will not happen in future. This encroachment upon the freedom of the health insurance companies to practise an occupation is justified by legitimate public interests. In making ageing reserves portable, the legislature is pursuing the goal of creating a functioning competition in the private insurance market and making it easier for the insured to move to another insurance company. In the proceedings, the complainant companies themselves admitted that for the existing insured of private health insurance companies it was practically impossible after a certain age to change their health insurance company, because the loss of ageing reserves entailed by this meant that a new insurer had to make its calculations without these reserves and therefore charged increased premiums.

The introduction of partial portability of the ageing reserve does not constitute an encroachment that is unreasonable as a result of the danger of risk selection among the companies' existing insured persons. It is true that if the companies are to be able to perform their health insurance contracts in the long term, this in principle presupposes that their insured include a sufficient number of persons who are good risks. A constant migration of insured persons who are good risks, with the consequence that a company only insures persons who are bad risks and have high sickness costs, could ultimately lead to the insolvency of the company. In the past, for this reason, the discussion on reform has rejected models providing for portability of the total calculated ageing reserve, because they would carry the danger of unacceptable risk selection and increased homogeneity of insured persons. However, the GKV-WSG does not provide for the transfer of the total calculated ageing reserve, but merely for its transfer in the extent of the benefits covered in the basic category. Consequently, where a person changes insurer, under the new law a considerable proportion of the ageing reserve created for the insured in his or her normal category will still remain with the previous company. Although the reform increases the risk of migration of insured persons, it also offers increased opportunities of obtaining new insured as a result of their changing their insurers. In this way, competition between the insurance companies is encouraged in an acceptable manner.

The introduction, limited to the first six months of 2009, of partial portability in the case of contracts entered into before 1 January 2009 is also constitutionally unobjectionable. This is a provision which is only slightly onerous for the companies, for transferring part of the ageing reserve is permitted only in the basic category, which, however, is as a general rule not of financial interest to the average person with private health insurance by reason of its inferior range of benefits together with a high premium. The possibility of moving direct from the basic category to the new insurer's normal category, which is objected to by the complainant companies as an incentive to change, has de facto ceased to exist as a result of an amendment in the law at the end of 2008.

The provision of § 6.1 no. 1 of the Fifth Book of the Code of Social Law (Sozialgesetzbuch V SGB V) as amended by the GKV-WSG, challenged by a complainant who has had private health insurance to date, but also by a number of health insurance companies, is compatible with the GG. Whereas previously wage-earners and salary-earners were released from compulsory insurance if their regular earnings exceeded a specific sum in one year (annual earnings limit), it is now necessary for the earnings to be higher in three consecutive calendar years before they are released from compulsory insurance. This arrangement is reasonable for the insured persons affected. The legislature has merely extended the period in which insured persons have to remain in the statutory health insurance system before they may decide to move to private health insurance. This is directed in particular to employed persons who prior to their employment had sometimes profited from the benefits of the social security system for decades, as children covered by dependent insurance but exempt from contributions, or as trainees or career entrants with low earnings; when their earnings first exceed the annual earnings limit, they are to continue to be bound to the social security system for a certain period of time. But persons such as those commencing an academic career, who under the previous law were released from compulsory insurance at the very beginning of employment subject to insurance by reason of the amount of their earnings can also reasonably be expected to be subject to compulsory insurance for at least three years. When requiring evidence that the annual earnings limit is exceeded, the legislature may require that this situation continues for a certain period of time and remains consistent.

The decision on the three-year period was passed by five votes to three; the remainder of the decision was unanimous.