Private Health Care Insurance: Efficiency and Accessibility of Options in the U.S. and Germany

March 29, 2013

On March 29, 2013, AGI hosted a seminar entitled “Private Health Care Insurance: Efficiency and Accessibility of Options in the U.S. and Germany” with Ines Läufer, DAAD/AGI Fellow. Ms. Läufer discussed the effects of regulation of the private insurance market in the U.S. and Germany and the role of private health insurers in the health care system in light of rising premiums and a lack of integrated health care management.

The focus of the discussion on the comparison between the U.S. and German private health care system was on the relationship between private insurers and providers as determined by the insurance and provider markets.Ms. Läufer looked at the incentives on both sides to act in on behalf of the insured.

In Germany, most people are insured through Social Health Insurance. Those who choose to opt out and pay for private insurance are primarily high income, self-employed, or civil servants.

In the U.S., the Affordable Care Act (ACA, which introduced a step toward more government-regulated private insurance schemes, was a game-changer. Private health care is currently most often purchased as a group plan through the employer, and is still the fundamental insurance system for people under 65 years old. But in contrast to Germany, many people lack access to insurance mainly due to the lack of long-term protection of employer-sponsored insurance. To increase access to health insurance, the ACA guarantees individual insurance schemes and there can be no exclusion based on pre-existing conditions. The ACA also includes a requirement that many people be insured or pay a penalty (individual mandate).

The ACA bans risk-adjusted premiums in private insurance plans, but states should consider running a risk adjustment scheme to avoid risk selection on the insurers’ side.  However, risk adjustment schemes may result in reduced incentives for insurers to invest in slow disease progression treatments and disease prevention. Ms. Läufer explained the possible negative side effects of the ACA’s regulation of private health insurers and pointed out that increased access to health insurance could result in even further reduced access to patient-centered and long-term-oriented health care.

However, the current organization of the relationships between private insurers and health care providers in the U.S. is far from satisfactory. In contrast to Germany, where rates for private insurance premiums are set by the government and collective contracting is required, the American system of contract freedom currently has very low levels of anti-trust control. This means that health care providers have almost no bargaining power and private insurers have little influence on prices and payment schemes.

While in both the U.S. and Germany there is a need for better quality and long-term orientation of health care, Germany is focusing specifically on increasing payment flexibility and the U.S. must address the lack of government-regulated health care rates. In the light of these debates in both countries, the question remains whether competitive private health care systems could be organized in a way that is superior to government-regulated insurance systems.


Kimberly Frank