Health insurance in Germany – Part 1: Why are there two health insurance systems?


Let us begin this journey where every good story starts – at the beginning. 

 One man to start it all


The roots of the German health insurance system(s) began in the late 19th century with a prominent figure who shaped a lot of the modern social security apparatus in Germany: Otto von Bismark. Chances are that you have driven by a Bismarkstrasse, lived next to a train station named after him or have even eaten the aptly named “Bismarckeiche”, which should show you the significance that this person had and still has on the lives of people living in Germany.


One of the many things he did was establish public health insurance in 1883/84, which had many aspects back then that it now has too: shared premiums between employer and employee, sick day payments, reimbursement of medications, etc. Bismarck’s main focus was on “workers”, i.e. people who were employed and worked for wages, mainly for big corporations. A major reason to do so was to enable the German state to keep a steady and productive workforce and to do that, he figured that the workers need to be able to work, i.e. not be ill and sick.


Taking matters into their own hands

But by establishing such a system only for workers (and only for specific sub-groups of workers at the time), many other people were left out, e.g. high-income earners, the self-employed, craftsmen & tradesmen, artists and the many agricultural workers. Since they were not considered workers, they were not eligible for social security (i.e. public health insurance) and were left to their own devices.


As often is the case in these circumstances where vast groups of people are left out of beneficial systems, these people took matters into their own hands and started to form private health insurance, usually specific to their profession. For example, one of the biggest private health insurance companies that focuses on “Beamte” called Debeka was established in 1905 as the “Sickness Benefit Fund for Municipal Civil Servants in the Rhine Province”.


 The roots developed into a multitude of flowers

Private health insurance plans were frequently tied to specific regions and professions, a characteristic that was mirrored by many public health insurance schemes as well. One of the most commonly known branches that are still with us today are the various AOK carriers (“Allgemeine Ortskrankenkasse”, loosely translated general local health insurance fund) or the various BKK carriers (“Betriebskrankenkasse”, i.e. company health insurance fund).

Up until the 1990s, where you lived and worked dictated where you had to be insured, still sticking with the old regional model established in the 19th century. There were more than 300 regional carriers plus a multitude of company-specific carriers, profession-specific carriers and many more. As you can imagine, it was a less than optimal setup.


 A (relatively) free market approach

In the mid-1990s laws and regulations started to loosen up, by 1996 you had the free choice of public health insurance carrier and a time of consolidation (often politically desired too) started, with many smaller regional carriers merging.


What was still left however is the system(s) that you are part of today: there are still public health insurances and private health insurances and the so-called “dual system” was never abolished, just incrementally changed here and there. Depending on who you ask, it is a blessing that keeps the health insurance industry competitive & strong or it is an unfair system that enables high-income earners to pay less money for better health care, leaving the poor and ill in an ever-more dissolving system.


The fact is that the dual system only exists in Germany, nowhere else in the world do we have something like this. The Netherlands had a similar system until 2006 but abolished it in favour of a singular system that included everybody (showing that it is possible). The fact also is that Germany has the third highest health expenditure in the world, yet only around 50 % of the people are satisfied with it.

As of 2023, there are still roughly 100 public health insurance carriers and more than 40 private health insurance carriers. Looking at the political landscape, it does not seem that much will change in the upcoming years, despite every-growing costs and a demographic change that brings more old people into a system that is financed by fewer and fewer young people.


Making sure you know the system(s), the pros and cons as well as the costs will become more relevant each year since changes will come our way in the very near future. We are of course happy to answer all your questions and discuss details, just check out our website and contact us in any way, shape or form you like:

Lastly, make sure to keep your eyes open for our upcoming posts about the intricacies of health insurance and many more topics.

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