Health insurance advances

What it means

Health insurance advances are monthly health insurance payments that the employer withholds and pays over for employees, and that the self-employed and self-payers pay themselves. They are only advances; the actual premium for the year is set by the insurer's annual reconciliation.

For employees the advance is calculated from gross pay, with part paid by the employee and part by the employer. For a sole trader it is derived from the income in the previous year's tax return, but it may not be lower than the amount due on the minimum assessment base.

A self-payer, someone with no other source of insurance, pays advances on the minimum assessment base. Advances go to the health insurer the person is insured with, by the statutory deadline.

How it works in practice

For a sole trader the advance usually changes after the tax return is filed. The insurer announces or publishes the new amount, but paying the correct sum is the insured person's responsibility. A new sole trader usually pays the minimum advance in the first year.

In the annual reconciliation the insurer compares the advances paid with the actual premium based on the whole year's income. Any shortfall must be paid by the deadline; overpayments are refunded or offset. The reconciliation also takes account of combined employment and self-employment.

The employer must pay employees' advances on time and file monthly reports. Mistakes in registration or a missed change of an employee's insurer lead to payments going to the wrong insurer, which then take a long time to transfer.

What to watch out for

Unpaid advances create arrears with late-payment interest, which the insurer can enforce through a statement of arrears. A person in arrears may have the scope of healthcare covered by insurance restricted, except for urgent care.

When status changes, for example on leaving a job, starting or suspending a business or moving abroad, the insurer must be notified in time. Without notice it may charge advances for periods when no obligation existed, and correcting that is laborious.