{"id":30526,"date":"2021-11-18T13:53:06","date_gmt":"2021-11-18T12:53:06","guid":{"rendered":"https:\/\/www.fiala.de\/?p=30526"},"modified":"2026-06-22T21:43:10","modified_gmt":"2026-06-22T19:43:10","slug":"olg-cologne-private-health-insurance-premium-adjustments-ineffective","status":"publish","type":"post","link":"https:\/\/www.fiala.de\/en\/olg-cologne-private-health-insurance-premium-adjustments-ineffective\/","title":{"rendered":"Cologne Higher Regional Court: Premium Adjustments in Private Health Insurance Are Often Ineffective"},"content":{"rendered":"

OLG Cologne deems a procedure customary across the private health insurance industry to be inadmissible<\/strong><\/h2>\n

In its judgment of 20 July 2012 (Case No.: 20 U 149\/11<\/a>), the OLG Cologne (Cologne Higher Regional Court) ruled that a procedure used for decades by private health insurers (PKV, German private health insurance) to adjust premiums was incorrect. As a result, many premium adjustments made since 1995 must be regarded as ineffective.<\/p>\n

The OLG holds several premium adjustments to be invalid<\/strong><\/h3>\n

The claimant, a doctor by profession, holds medical expenses insurance under tariffs N213 for outpatient treatment, N3 for inpatient treatment and N4 for dental treatment. The contract is based on the General Insurance Conditions for Medical Expenses and Daily Hospital Allowance Insurance, Part I of which corresponds to the MB\/KK 94; Part II contains the insurer’s tariff conditions, and Part III the tariffs N213, N3 and N4. Among other things, the court held that the premium increase under tariff N213 effective 1 January 2001 was ineffective.<\/p>\n

Judicial review of premium adjustments<\/strong><\/h3>\n

Pursuant to Section 203 of the VVG (German Insurance Contract Act), where an insurer’s ordinary right of termination is excluded by statute or contract, the insurer is entitled to reset the premium in line with corrected calculation bases — including for existing contracts — in the event of a change in the actual claims requirement, compared with the technical calculation basis and the premium derived from it, that is regarded as more than merely temporary, provided that an independent trustee has reviewed the calculation bases and approved the premium adjustment.<\/p>\n

According to the case law of the BGH (Federal Court of Justice), this confers on the insurer a statutory right of adjustment that is independent of any contractual adjustment clause, and whose detailed requirements follow from supervisory law — in particular Section 12b(1) to (4) VAG (German Insurance Supervision Act) and the provisions of the KalV (Calculation Ordinance) (BGH, NJW 2004, 2679<\/a>, 2680). In court, a premium adjustment must be reviewed to determine whether it can be regarded as consistent with the applicable legal provisions according to actuarial principles. As a first step, it must be examined whether the prerequisites for the adjustment are met (BGH, NJW 2004, 2679<\/a>, 2681).<\/p>\n

The conditions for an adjustment were not met in 2001<\/strong><\/h3>\n

With regard to tariff N213 for outpatient medical treatment, the conditions for a premium increase in 2001 for the relevant observation unit (men) were, according to the OLG Cologne, not met. Under Section 203 VVG<\/a>, an entitlement to a premium increase exists in the event of a more than merely temporary increase in the claims requirement; the detailed rules for determining this are set out in Section 12b(2) VAG and Section 14 KalV (Calculation Ordinance).<\/p>\n

First, the calculation basis of the insurance benefits must change, and that change must exceed a certain threshold — the so-called triggering factor. Under Section 12b(2) sentence 2 VAG this is 10 percent, unless — as in the present case — a lower percentage is provided for in the general insurance conditions. Under Section 8b(1.1) of the insurer’s tariff conditions, an adjustment may already be made where a deviation of more than 5 percent is established.<\/p>\n

The change would only have permitted a reduction<\/strong><\/h3>\n

The triggering factor is determined by comparing the required insurance benefits with the calculated insurance benefits. Under Section 14(1) sentence 1 KalV, this comparison must be carried out separately for each observation unit of a tariff, since under Section 10(1) sentence 2 KalV the insurer must calculate each observation unit of a tariff separately. The relevant observation unit here is “men in tariff N213”. In 2001, the required insurance benefits in the observation unit “men in tariff N213” were 5.99 percent below<\/strong> the calculated ones, so that the triggering factor under Section 8b(1.1) of the insurer’s tariff conditions was reached. This downward deviation<\/strong>, however, did not in the view of the OLG Cologne entitle the insurer to increase the premium<\/strong>.<\/p>\n

The OLG Cologne’s reasoning<\/strong><\/h3>\n

The OLG Cologne states:<\/strong><\/p>\n

“Admittedly, under Section 12b(2) sentence 2 VAG, where a comparison of the required insurance benefits with the calculated insurance benefits of a tariff reveals a deviation exceeding the threshold, the insurer must review all premiums under that tariff and, where the deviation is not merely temporary, adjust them with the trustee’s consent. The rule therefore does not make a premium adjustment contingent on the required benefit exceeding the calculated one. Rather, it is equally conceivable that a change in the required insurance benefit that is favourable to the policyholder, as compared with the calculated benefit, will result in a premium reduction … A development favourable to the policyholder does not, however, entitle the insurer to increase premiums, according to the meaning and purpose of the adjustment provisions; it merely prompts an examination of whether a premium reduction is possible. It would be absurd if the insurer could exploit the fact that the required insurance benefits fall short of the calculated ones in order to bring about a premium increase by reference to possible changes in other calculation bases.”<\/p>\n

Decades of insurer practice unlawful?<\/strong><\/h3>\n

For decades and to this day, insurers have taken the view — without the supervisory authority ever objecting — that a downward change in the so-called triggering factor can also justify a premium increase where this is apparent from the calculation as a whole. Accordingly, this has been, and continues to be, implemented as a matter of routine. The ultimately surprising ruling of the OLG Cologne therefore means that premium adjustments in private health insurance will be ineffective on a mass scale, unless other courts depart from it. The opposite, however, is emerging: other courts have even indicated that, if an adjustment clause permitted a premium increase in the event of a downward deviation, the clause as a whole would — on one possible reading of its wording — be judged invalid.<\/p>\n

Premium adjustments are subject to judicial review<\/strong><\/h3>\n

The rulings of the Federal Constitutional Court of 28 November 1999 (Case No. 1 BvR 2203\/98<\/a>) and of the BGH (Federal Court of Justice) of 16 June 2004 (Case No. IV ZR 117\/02<\/a>) confirmed, in principle, that the ordinary courts must carry out a comprehensive review of the substance and legality of a contested premium adjustment in private health insurance where a dispute arises. If the prerequisite (the triggering factor) for a premium increase is not met, it is no longer relevant whether the calculation was carried out in accordance with the requirements of the Calculation Ordinance — the adjustment is already invalid for lack of that prerequisite. A so-called negative declaratory action is sufficient for this purpose; the insurer then bears the burden of proof for all the prerequisites of the premium adjustment, which is why it also regularly has to advance the sometimes considerable costs of an actuarial court expert.<\/p>\n

Naturally, that expert must not previously have acted as a private expert in the same matter, so that where a prior expert opinion has been commissioned for a particular insurer, that person cannot act as a court expert in the same matter. The pool of qualified court experts is therefore ultimately small.<\/p>\n

How should an insurer respond to a triggering-factor enquiry?<\/strong><\/h3>\n

Insurers must consider how to respond to a policyholder’s enquiry as to whether the triggering factor exceeded the required threshold or was, for instance, negative — particularly where the policyholder insists on a precise figure. Today, policyholders will often no longer be satisfied with general assertions that the contractually required threshold has been exceeded, as they may interpret this as an evasive answer that, in their view, may merely reflect an erroneous position on the insurer’s part. Insurers can, however, cope well with individual enquiries, complaints or a handful of lawsuits. The more important question is what to do about premium adjustments in the future.<\/p>\n

When actuaries deal with legal questions for their insurer<\/strong><\/h3>\n

It is not only the Calculation Ordinance that works with undefined legal terms requiring the actuary to engage in depth with legal questions in advance, even though actuaries are not actually trained to do so. Corresponding papers — for example by the German Actuarial Association on actuarial methods — then often consist, to as much as 70 percent, of an in-depth discussion of legal questions about what the legislator might have meant by the Calculation Ordinance, and the like. The German Actuarial Association is not a legal entity. Alternatively, the actuary may rely on an outdated legal view, possibly without even reflecting on it because he does not recognise the problem, even following the motto: “Everything is permitted that is not expressly prohibited or has not so far been objected to.” The employed actuary is also permitted to give legal advice to his employer. Such advisers are all too happy to leave all responsibility unchecked, especially since, as the responsible actuary, they are already legally responsible for calculation in accordance with the law.<\/p>\n

Judicial appraisal exposes legal problems<\/strong><\/h3>\n

The position is different in the case of a judicial appraisal by an actuarial expert. Such an expert may not himself resolve in depth the unclear legal issues underlying actuarial methods. However, to the extent these are relevant to the actuarial assessment, he must point them out to the court and leave their clarification to the court. At the latest at that point, genuine lawyers address the potentially unclear legal foundations of the actuarial methods — sometimes with unexpected results, as here.<\/p>\n

For instance, courts up to the Federal Supreme Court have repeatedly ruled that actuarial methods used industry-wide for decades, assumed to be correct and never even objected to by the insurance supervisory authorities, were legally inadmissible. This too then led to the mass ineffectiveness of premium adjustments. For insurers, however, this remains almost inconsequential, because adjustments are judged ineffective by the courts only in the few cases in which an action is brought against an individual policyholder.<\/p>\n

Lawsuits over ineffective premium adjustments expose selected PKV management boards<\/strong><\/h3>\n

If selected members of a management board are not suitable as managers, BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht, the Federal Financial Supervisory Authority) can take action to remove them from office. This is probably BaFin’s sharpest sword, as it means the board member regularly forfeits his retirement pension from the insurer. Of course, BaFin receives all calculations in advance in any event, so the management board will at least be able to exculpate itself vis-à-vis BaFin by pointing out that BaFin raised no objection.<\/p>\n

The BGH (judgment of 20 September 2011, Case No. II ZR 234\/09<\/a>) describes the duties of a managing director as follows: “A member of a company body who does not himself possess the necessary expertise can satisfy the strict requirements incumbent upon him to examine the legal situation and to act in accordance with statute and case law only if, giving a comprehensive account of the company’s circumstances and disclosing the necessary documents, he obtains advice from an independent professional who is professionally qualified for the question to be clarified, and subjects the legal advice given to a careful plausibility check.” The fact that BaFin has not previously objected to anything is, of course, not sufficient.<\/p>\n

Repeated losses in proceedings concerning ineffective premium adjustments in private health insurance have already, to date, suggested that the legal departments of some insurers harbour certain doubts about whether sufficiently qualified advice was obtained beforehand. It is not uncommon for insurers to carry unrecognised risks in their portfolios from ineffective premium adjustments that have already been identified at other insurers — often amounting to more than a billion euros — with the risk that new problems will arise every year if the correct procedure is followed. If the suspicion of inaccurate accounting and tax misjudgements is confirmed — because these too are based on the premium adjustments held invalid by the courts — this also leads to the personal liability of selected board members, since they must ensure that the necessary expertise is available both internally and externally.<\/p>\n

Insured persons have not yet made use of the modern collective communication possibilities of the internet, which have already brought down more than one government. Yet insurers are particularly vulnerable here, given that they conduct mass business according to precisely the same methods and tariffs with up to hundreds of thousands of equally affected insured persons. For them, the matter can be existential. Only a few management boards have drawn the consequences and are seeking actuarial and legal advice in order first to assess the risk, to take countermeasures for the future and, in the case of ineffective premium adjustments in the past, to actively seek an out-of-court solution on a case-by-case basis together with their customers.<\/p>\n

However, policyholders may not always be amenable to ordinary common sense — in which case individual solutions are called for. For example, one of the first cases one of the co-authors had to handle involved a policyholder who, having been refused a benefit for psychotherapy, sued against the next premium adjustment. In another case, the parties agreed in a court settlement that future adjustments should be made only up to a certain average level, with recognition of the previous adjustments and payment of all procedural costs by the insurer. These are, of course, not models for a mass of contracts.<\/p>\n

by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm<\/p>\n","protected":false},"excerpt":{"rendered":"

OLG Cologne (Cologne Higher Regional Court) deems a procedure used for decades by private health insurers (PKV) to be inadmissible. In its judgment of 20 July 2012 (Case No. 20 U 149\/11), the court ruled that many premium adjustments since 1995 must be regarded as ineffective.<\/p>\n","protected":false},"author":3,"featured_media":30524,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":"","rank_math_focus_keyword":"","rank_math_description":"","rank_math_title":""},"categories":[28],"tags":[540,778,580],"class_list":["post-30526","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-health-insurance","tag-insurance","tag-private-krankenversicherung-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/posts\/30526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/comments?post=30526"}],"version-history":[{"count":1,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/posts\/30526\/revisions"}],"predecessor-version":[{"id":30684,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/posts\/30526\/revisions\/30684"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/media\/30524"}],"wp:attachment":[{"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/media?parent=30526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/categories?post=30526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fiala.de\/en\/wp-json\/wp\/v2\/tags?post=30526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}