PKV Premium Adjustments: Why Long-Term Care Insurance Will Be Most Affected
German health insurers demonstrate stability and have slightly improved their ratios compared to previous years, according to a solvency analysis by Zielke Research Consult GmbH. However, despite improvements in both risk margins and surplus fund shares, the analysis and consulting firm still identifies "weaknesses in the orientation toward a profitable and inflation-compensating investment policy."
The Investment Challenge: Fighting Inflation with Outdated Strategies
Analysts consider it a mistake that health insurers still prefer to invest in fixed-income securities. "Inflation effects cannot be compensated for in the short term with this," writes Zielke Research. A shift in investment thinking has begun—since 2019, the tangible asset ratio has been continuously increasing—but overall, the low share in tangible assets (7.8% in stocks, 5.9% in participations, and 5.1% in real estate) will hardly help compensate for inflation.
Against this backdrop, analysts doubt whether the insurers' capital investments are up to the challenges in the long-term care sector. This is a crucial concern for holders of German private health insurance (PKV), similar to how rising costs affect US long-term care insurance and certain aspects of Medicare coverage.
The Coming Pressure: Rising Costs in Long-Term Care
The salaries of nursing staff are set to rise significantly—as is the number of people in need of care itself. Initial premium increases in the care sector have already occurred. "In the future, an increase in contributions, especially for long-term care insurance, is to be expected," states Zielke. For policyholders, this means that premium adjustments (Beitragsanpassungen - BAP) in the PKV will primarily affect the care component of their coverage.
This trend mirrors pressures in the US system, where the costs of long-term care are a growing burden for both private insurers and public programs like Medicaid, which is the primary payer for nursing home care for eligible individuals.
Digitalization: A Path to Savings Amidst Hurdles
The PKV Study 2022 sees savings potential for health insurers through the Electronic Patient File, electronic invoicing, and digital prescriptions. These digital "achievements" have long been everyday practice in neighboring countries like Belgium. Analysts have identified "the exaggerated notion of data protection prevailing in Germany" as a brake on digitalization.
Additional Cost Risks: Climate and Politics
The study also names climate change as a cost risk. "It starts with summer heat deaths and doesn't stop with possible new pandemics," write the analysts.
The political risk (such as discussions around a 'Bürgerversicherung' or citizen's insurance) also remains for the industry as a 'Sword of Damocles.' After all, demographic change is hitting the statutory health insurance "with full force," according to Zielke Research. This uncertainty is akin to ongoing debates in the US about the future of Medicare and the Affordable Care Act (ACA), which create a volatile environment for private health insurance providers.
Key Takeaways for Policyholders and Advisors
- Focus on Care Coverage: Future premium increases in German PKV are expected to concentrate on the long-term care component. Policyholders should review this part of their coverage carefully.
- Inflation Risk: Insurers' conservative investment strategies may struggle to offset inflationary pressures, potentially impacting long-term sustainability.
- Systemic Pressures: Demographic shifts, rising care costs, and political uncertainty are challenges faced by both the German PKV/GKV system and the US healthcare landscape involving Medicare, Medicaid, and private insurance.
Understanding these dynamics is essential for making informed decisions about private health insurance in any market. Proactive consultation and regular policy reviews are recommended to navigate upcoming changes.