Risk-specific transferable ageing provisions in private health insurance

Switching insurers within the German private health insurance system is currently associated with forfeiting claims on the accumulated ageing provision, which hampers competition in this sector. The German health insurance reform 2007 introduces transferability of the ageing provision within a new basic contract. The task is to develop a functional transfer scheme that increases the switching options and at the same time does not harm the individuals staying with the original insurer. The health insurance reform 2007 fails to protect those individuals who remain with the original insurer against premium increases if healthy individuals leave the pool. By combining trasfer rules for contract and insurer changes, transfer volumes will be too high. The proposal of risk-specific transfers entails that every individual who changes his insurer is entitled to the annuity share of the ageing provision, depending on current age and age of entry into the original contract. Individuals willing to change insurers whose health prospects have deteriorated substantially through the original contract period will get a supplementary transfer, being determined by a neutral risk-assessment agency.