Health Insurance Act

What it means

The Health Insurance Act is Act No. 580/2004, which governs compulsory public health insurance. It sets out who is insured, who pays contributions, for whom the state pays, how advances are calculated and how the annual reconciliation works.

The act also lays down employers' duties towards health insurers: registering and deregistering employees, calculating and paying advances, filing monthly reports and cooperating in the annual reconciliation. It likewise governs the obligations of self-employed persons.

Changes to contribution rates, minimum and maximum assessment bases and the levy-deductible item for low-paid employees appear in the act regularly. It is therefore important to follow the version in force for each year.

How it works in practice

Each month the employer calculates health insurance advances for employees and for itself and pays them to the relevant insurer. If an employee is entitled to the deductible item, the advance is reduced, which must be set up correctly in the payroll software.

After the year ends, the health insurer carries out the annual reconciliation, comparing advances paid with the actual liability. The result may be an underpayment to be settled or an overpayment the insurer refunds.

Sole traders pay advances based on income from their tax return, at least on the minimum assessment base. The rules for health insurance of sole traders differ from social insurance, because the obligation to pay health insurance arises as soon as the business starts.

What to watch out for

Late payments or incorrect reports can lead to late payment interest and fines. Health insurers can see payment records and may recover arrears through a statement of arrears, which serves as an enforcement title.

When an employee changes insurer or has several sources of income, it must be determined correctly to which insurer and on what base advances are paid. Errors often show up only in the annual reconciliation and can be administratively burdensome to correct.