– When switching to another private health insurer fails on a mass scale –
Around 10% of Germans hold private health insurance (PKV). On average, customers switch insurer five times over their lifetime, often prompted by the advertising of particular brokers and distributors. In many cases this later leads to contestation or rescission of the contract by the insurer. The pretext for this is (allegedly) false answers to health questions.
Risk for the policyholder
A recent ruling by the Stuttgart Higher Regional Court (Oberlandesgericht) dated 19.04.2012 (Case No. 7 U 157/11) mitigates this risk in individual cases at most – and certainly not where brokers are involved: namely the policyholder’s risk of suddenly and unexpectedly finding himself without insurance cover. The court held: “Where, at the time the contract was concluded, complex health questions were read out to a policyholder so quickly that their accurate recording was not ensured, an incomplete answer cannot form the basis for an avoidance on grounds of fraudulent misrepresentation or for a rescission of the insurance contract.”
Incorrect answers to health questions are discovered by the insurer’s claims department as soon as the policyholder requests reimbursement. The insurer then obtains the relevant records from the treating physicians, so that concealed pre-existing conditions can be uncovered – even where the policyholder was unaware of them. It is not uncommon for doctors to document illnesses in patient records for billing purposes that they never actually discussed with the patient.
Rescission over a single sleep disorder
In this way, the treatment of a temporary sleep disorder caused by “nocturnal brooding”, together with the prescription of a supposed sleeping aid, ends up recorded in the file as depression with the prescription of psychotropic drugs – turning the patient into one of the dreaded psychotherapy cases whose application the insurer would never have accepted had the information been truthful.
Risk arising from patient records
Many insurance intermediaries attach no importance to documenting the details of pre-existing conditions in a watertight manner – for example, by having the family doctor confirm the accuracy of the answers to the health questions. The prospect of a later contestation and withdrawal by the insurer is simply factored in by insurance agents, and even by some brokers. The insurer is then entitled to keep the premiums paid – while nonetheless reclaiming all the benefits it has provided so far. In less blatant cases, the insurer agrees to amend the policy on altered terms. This means risk exclusions and premium surcharges, or even a switch to the so-called basic tariff.
Risk of the basic tariff
In the event of rescission, the policyholder is forced to look for another insurer – the previous insurer is under no obligation to reinstate cover. The person affected does have a right to insurance cover with a new insurer, but only under the basic tariff, typically offering benefits at statutory health insurance level for the maximum premium.
Risk of private health insurance in old age
Many people insured under private health insurance for many years have learned that their cover was cheap while they were young – but became expensive once they grew older. The reason is that premium increases for older policyholders are disproportionate to the development of the tariff as a whole, unless additional reserves for support and contribution limitation can be drawn upon. The implementation of the findings of an expert commission appointed by the Bundestag in 1994 to examine the problem of rising private health insurance premiums in old age has brought some improvements here. Even so, if old-age contributions were to rise only in proportion to the development of healthcare costs – producing, say, a 4% annual increase over decades – this would soon mean that in old age an ever-greater share of any average statutory pension increase is consumed by private health insurance contributions.
Legal way out of overpriced tariffs
In the past, a large proportion of those covered by private health insurance left before reaching retirement age and tried to switch back to statutory health insurance. Today this is largely impossible, especially after the age of 55. In 1994 the legislature recognised that policyholders cannot be guaranteed protection from a premium spiral within their current tariff, and for precisely that reason it introduced a right to switch into cheaper new tariffs offered by the same insurer, with full transfer of the ageing provision – today regulated in § 204 VVG (German Insurance Contract Act). Practice shows that, at the latest with expert assistance, it is almost always possible to find tariffs that still rank well above statutory health insurance level and that, over a few years at least, deliver a significant premium saving. A halving of the premium can often be achieved even without major reductions in benefits, since the new tariffs are calculated on the basis of a much healthier insured portfolio. As this is regularly the only avenue expressly created by the legislature for escaping unaffordable private health insurance premiums, those who decline to use it frequently cannot be helped at all.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
