This article was translated from the original human-written German version. While we strive for accuracy, we cannot guarantee it is error-free. We recommend consulting the German original for the most precise information. This content is for informational purposes only and does not constitute financial or legal advice. Always consult with a qualified professional before making insurance or financial decisions.
How do PKV premiums develop in old age?
This guide illuminates the cost development in private health insurance for pensioners and the often-discussed question of affordability.
The article covers:
The basics of PKV premium calculation.
Built-in mechanisms for premium stabilization in old age.
An objective comparison with cost development in the GKV.
Basics of Health Insurance Systems and Premium Calculation
To understand premium development in retirement, it is important to know the fundamental differences between the GKV and PKV regarding their financing systems.
Statutory Health Insurance (GKV)
The GKV operates on the pay-as-you-go system, also known as the "intergenerational contract". This means that the current income of younger and healthy contributors is used directly to finance the current benefit expenses for older and sick insured individuals.
Age reserves are not formed, unlike in the PKV.
Premiums are income-dependent and are levied up to the current contribution assessment ceiling (BBG). For voluntarily GKV-insured individuals, rental, interest, and lease income can generally also be considered.
Financing also depends on tax subsidies. Forecasts show that significant tax subsidies could be necessary to cover rising expenses without increases in the GKV contribution rate.
The maximum GKV contribution, including long-term care insurance, was EUR 1,050.53 per month in 2024 and will be EUR 1,174.18 per month in 2025.
Private Health Insurance (PKV)
The PKV is based on the funded system. This means that insured individuals use their premiums to independently provide for the health costs that are expected to rise in old age.
A core component of premium calculation is age reserves. These are formed from the beginning of the insurance to finance the higher costs in old age.
Premiums in the PKV depend on the chosen tariff, entry age, and health status, not on income.
Financing is done without tax subsidies.
Premium Development in Comparison
Premium development in both health insurance systems is influenced by different, system-specific factors.
In the Statutory Health Insurance (GKV), the premium amount is linked to the insured person's income. The absolute premium therefore increases with income, as well as with adjustments to the contribution assessment ceiling and contribution rates, which react to the general cost development in healthcare.
In Private Health Insurance (PKV), premium adjustments are based on the cost developments of the respective insured group. Further influencing factors include general inflation in the healthcare sector and the development of capital markets, which affect the returns on age reserves.
Mechanisms for Premium Stabilization in PKV
The assumption that premium increases in the PKV are arbitrary is not true. Premium adjustments follow legally defined conditions, such as rising treatment costs, increased life expectancy, or changes in the interest rate. A portion of the premium is used from the start for building up the age reserve to finance the on average higher health costs in old age. It is legally and contractually impossible for the PKV to terminate insurance for an insured person due to illness or to individually increase their premiums.
Furthermore, there are various instruments in the PKV that influence premium development in retirement:
Abolition of the Statutory Surcharge: Between the ages of 21 and 60, a statutory surcharge of 10% is levied on the premium. The saved funds are used to stabilize premiums from the age of 65 onwards. The surcharge itself ceases upon reaching the age of 60, which leads to a premium reduction.
Abolition of Daily Sickness Allowance: Upon reaching retirement age, the premium for the daily sickness allowance usually ceases as the insurance purpose is no longer applicable.
Subsidy from Pension Insurance: Pensioners insured with PKV can apply for a subsidy from the German Pension Insurance. This subsidy amounts to 8.1% of the statutory pension but is limited to half of the actual health insurance premium.
Tariff Change within the Company (§ 204 VVG): PKV insured individuals have the legally anchored right to switch to other tariffs within their insurance company.
The accumulated age reserves are fully credited.
This allows for an adjustment of the scope of benefits or costs to individual needs and financial situation.
Many insurers offer a variety of switching options, often without a new health check.
Basic Tariff: The basic tariff represents a legally regulated option if premiums become unaffordable. The premium in the basic tariff is limited to the maximum GKV contribution. In cases of need, the premium can be halved or covered by the social welfare office, making a premium of zero euros possible in case of need.
Return to GKV
A return from PKV to GKV is possible under certain conditions, but generally only up to the completed age of 55. Such conditions can include a reduction in salary below the annual income threshold (JAEG) for employees, a switch from self-employment to employment below the JAEG, unemployment, or eligibility for family insurance.
Summary of Mechanisms
Premium development in Private Health Insurance is based on the funded system and the formation of age reserves. Legally regulated adjustments react to external factors such as rising healthcare costs or interest rate developments. The premium amount in old age is influenced by various system-inherent instruments, including the abolition of premium portions and the right to an internal tariff change.
Recommendations for Action for Insured Individuals
Proactive Provision: Early use of premium reduction tariffs can lead to a later reduction in premiums.
Tariff Management: Regular review of the tariff and the use of the statutory right to change tariffs can contribute to premium management.
Utilize Subsidies: The subsidy from the pension insurance should be actively applied for in retirement to reduce the financial burden.