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Reserves for Old Age in the PKV: Function and Importance for Premium Development

In Private Health Insurance (PKV), approximately 328 billion euros were saved up until the end of 2023. This capital forms the basis for a central mechanism to stabilize premiums in old age: reserves for old age. They represent a significant system difference compared to the Statutory Health Insurance (GKV) and are a key factor for long-term premium calculation.

This article explains how reserves for old age function. First, the fundamentally different financing models of GKV and PKV are examined. Subsequently, it analyzes how reserves for old age are formed, used, and their relevance to long-term premium development.

1. Financing Models of GKV and PKV

To understand the importance of reserves for old age, one must be familiar with the different approaches of GKV and PKV in financing health benefits.

The GKV and the Pay-as-You-Go System

Statutory Health Insurance (GKV) is based on the pay-as-you-go system. The current contributions from insured individuals are directly used to finance current benefit expenditures. There is no significant formation of individual, capital-funded reserves for old age. This system operates on the principle of a generation contract and is dependent on demographic development: the ratio of contributors to beneficiaries influences financial stability.

The PKV and the Capital Funding System

Private Health Insurance (PKV) calculates premiums based on the capital funding system. A substantial portion of the premium is saved from the outset as reserves for old age to offset the statistically increasing healthcare costs in old age. Each insured generation pre-finances its own statistically expected old-age costs. At the end of 2023, the PKV industry had formed reserves for old age amounting to 328 billion euros for its 8.7 million insured individuals.

2. Detailed Analysis: How Do Reserves for Old Age Work?

The formation of reserves for old age is an actuarial process regulated by law in the Insurance Supervision Act (VAG). The goal is to compensate for the purely age-related cost increases over the entire contract duration.

Calculating the Premium

The PKV premium consists of various components:

Risk Premium: This part covers the average expected illness costs for the respective age group.
Savings Portion (for reserves for old age): In younger years, the premium paid is generally higher than the statistically required risk premium. The difference is allocated to the reserves for old age.
Costs and Surcharges: In addition, there are costs for insurance operations and a buffer for security.

How Are Reserves for Old Age Built Up and Invested?

Reserves for old age are funded from three sources:

The savings portion of the premium in the initial years.
The investment returns on the already accumulated reserves in the capital market.
Transferred reserves from insured individuals who terminate or pass away (cancellation profits).

The Function: Premiums Do Not Increase Solely Due to Aging

This provision mechanism ensures that premiums do not increase solely due to an insured person's aging. The higher healthcare costs incurred by an individual in old age are already factored into the premium over the entire lifespan. Premium adjustments are therefore due not to individual aging, but to external factors such as medical progress or general cost increases in the healthcare system.

3. Further Security Mechanisms for Stable Premiums in Old Age

In addition to reserves for old age, there are other statutory and tariff-based instruments that contribute to premium stability:

Statutory 10% Surcharge: Between the ages of 21 and 60, a statutory surcharge of 10% is levied on the premium. These funds are saved and used exclusively from the age of 65 onwards to cushion premium increases.
Abolition of Premium Components: The 10% surcharge is dropped at age 60. Upon retirement, the premium for daily sickness allowance also ceases.
Use of Surpluses: Earned surpluses, e.g., from interest income, are also used to limit premium increases.

4. Recommendations for Action and Relevance for Decision-Making

Reserves for old age are a central component for sustainable long-term healthcare provision.

Checklist for Your Coverage:

Early Entry: The earlier one enters PKV, the more time there is to build up reserves for old age. This generally leads to a lower premium over the entire term.
Provider Choice: It is advisable to choose an insurer that pursues a sound business policy. The rate of allocation to reserves is an important indicator of an insurer's solidity and can be compared across different providers.
Tariff Change Within the Company: Accumulated reserves for old age are fully retained when changing tariffs internally within the same company. This can be an effective way to adjust premiums in old age.
Caution with Provider Changes: When switching to a different PKV provider, a portion of the accumulated reserves for old age may be lost, especially for contracts concluded before 2009.

FAQ: Frequently Asked Questions

What happens to the reserves if I cancel?
For contracts concluded before 2009, reserves for old age are lost when changing providers. For contracts from 2009 onwards, a portion of the reserves (the so-called transfer value) can be transferred to the new insurer.
Are the reserves sufficient to cover all future costs?
They are calculated to cover purely age-related cost increases. However, unforeseeable cost increases, for example, due to new, expensive treatment methods, may necessitate premium adjustments.

Summary: The Most Important Key Takeaways

Systemic Core Difference: PKV systematically provides for higher healthcare costs in old age with reserves for old age (capital funding system), while GKV relies on a pay-as-you-go system without this form of old-age provision.
Function of Old-Age Provision: In younger years, a savings portion of the premium is invested with interest to compensate for higher costs in old age.
Legally Anchored Stability: This mechanism ensures that premiums do not rise solely due to aging.
Long-Term Relevance: The amount of reserves for old age formed is crucial for the stability of premiums in retirement. Therefore, early entry and the choice of a solid insurer are important.

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Reserves for Old Age in Private Health Insurance (PKV): Function and Importance for Premium Development